The Hitachi Group’s Growth Strategy

Story of Value Creation in the IT Sector
The use of digital technologies such as 5G, AI, IoT and robots is essential for companies aiming to continuously raise their corporate
value amid dramatic environmental changes and a focus on digital transformation, or the revolutionization of corporate management
through digital technology, is rising even further. In Japan, where the birthrate is rapidly declining and the population is aging at an
alarming rate, IT-related market is expected to be necessary for improvement in productivity and work-style reforms.

Results and TargetsRevenues (¥ billion)/
Overseas revenue ratio (%)

Principal Products and Services
Adjusted operating income (¥ billion)/
Adjusted operating income ratio (%)

42%

FY2018 Revenues
Services & Platforms

29%

2,600.0

10.8%

338.0

2,121.6

35 %IoT platform

230.1

Data analytics
AI
Cloud service
Security
IT products (storage server)
Control systems

FY2018 (Results)

FY2021 (Target)

FY2018 (Results)

EBIT (¥ billion)/EBIT ratio (%)
12.5%

325.0

FY2021 (Target)

ROIC
Maintaining high level despite the investment
to expand global digital business

10.0%billion
Front Business65%

Financial systems
IT for banking, insurance andsecurities
Public systems
IT for public offices, municipalities
and educational institutions
Systems for social infrastructure
IT for power generation/energy,transport and communication carriers
Defense systems
IT functions commonly used for allcompanies
Application development,
engineering, operation andmaintenance, project management
and quality assurance* Defense systems are included in"others" for accounting

19.6%
15.0%

212.6

FY2018 (Results)

FY2018 (Results)¥2,121.6

13.0%

FY2021 (Target)

FY2021 (Target)

Note: Figures for each subsegment include intersegment transactions.

Vision and Targets under the 2021 Mid-term Management Plan

Growth Strategies under the 2021 Mid-term Management Plan

Accelerate customer innovation with advanced ITDigital transformation, which involves attempting to produce

In the IT Sector, we will meet the expectations of customers in Japanreforms in corporate management and business models, isand overseas with the power of digital technology, achieve areceiving an increasing amount of attention. Under these conditions,sustainable society and aim to become a top-class global solution

mobile payment systems utilized in mobile phone networks, which

provider. Moving forward, we will aim to improve social value throughhave a global penetration rate of more than 100%, are becoming

advanced digital solutions operations in the financial and social

commonplace in people’s lives and are becoming gigantic

infrastructure fields. At the same time, we will strive to create

infrastructures that generate large amounts of data every day. In

environmental value by raising environmental efficiency throughout theaddition, new discoveries and expansion are expected in a wide

lifecycle of our products and services.

range of domains within the X-Tech (crosstech) market, whereFinTech, HR Tech and other digital technologies are used todevelop new services in various fields and industries and transform
industry structure itself. Furthermore, we anticipate growth in theinformation and communication technology-related market moving

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Hitachi Integrated Report 2019

forward. Under these circumstances, we have steadily improved
profitability and created the cash necessary for growth investmentin the IT Sector by reinforcing front functions and manufacturing
capabilities through reorganization of SI businesses; withdrawing
f ro m o r c o n c l u d i n g l o w - p ro f i t b u s i n e s s e s s u c h a s t h ecommunication network equipment business; and reducing loss
cost through thorough and enhanced project management. Moving
forward, we will continue to expand the Lumada business, whichacts as the core of growth, and invest one trillion yen over the three
years covered by the 2021 Mid-term Management Plan toaccelerate global expansion.

Acceleration of Global Expansion
Previously, in the IT Sector, we established Hitachi Vantara in 2017,
followed by Hitachi Global Digital Holdings in 2018. Also, in 2018,
we acquired REAN Cloud, a cloud-related service provider in theUnited States, and, in 2019, we started collaboration in the digitalbusiness with Virtusa, a global IT service company in the UnitedStates. We have also established a joint venture with State Bank ofIndia, the largest state-owned commercial bank in India, and areworking to develop platforms for cutting-edge next-generation
digital payment services. Over the three years covered by the 2021
Mid-term Management Plan, we will invest approximately ¥830
billion into efforts aimed at further strengthening our overseas

Expansion of the Lumada Business
The Lumada business will serve as a growth engine for all of Hitachi

business and will target further business expansion through M&A
and other initiatives.

through the utilization of data and co-creation with customers andpartners. The digital tools and wide-ranging industry and business

Collaborative Creation of Value within the IT Sector

expertise used to make this possible are being condensed into
customer cases adjusted so they can be reused by many

Lumada plays a core role in our efforts to provide social, environmental

customers.

and economic value and to achieve social innovation. On the otherLumada’s customer cases have been accumulated as “workplace

hand, Hitachi cannot achieve objectives related to the SDGs andknowledge” of “OT × IT × Products,” which Hitachi has refinedSociety 5.0 on its own. We believe that these objectives can only bethrough its customer-centered policies. By using Lumada as aachieved through co-creation with a wide range of customers andstarting point, we can minimize customization and develop andpartners.

implement speedy solutions. Furthermore, the ability to expand

For example, since 2017, we have been supporting the digitization

Lumada into a wide range of areas, such as mobility, smart life,of subsidy payment operations and other financial services offered

energy and industry, is a major factor that distinguishes Hitachi fromby the state-owned Vietnam Post. In fiscal 2018, we expanded theits competitors.

scope of this digitization to include social security subsidy andWe worked to expand digital solutions using Lumada during thepension payment operations and are currently promoting further

three years covered by the 2018 Mid-term Management Plan,

expansion on a nationwide scale. Through this co-creation, Hitachi

launching the business globally in 2016 and investing about ¥100

will combine its technologies with Vietnam Post’s services to improvebillion into the launch of related businesses. Currently, we havethe quality of people’s lives. We aim to help improve convenience foramassed more than 650 customer cases (as of the end of fiscal

6 million subsidy recipients starting in 2020.

2018), which are examples of co-creation with users. On the other

Together with our customers and partners, we will form a Lumada-hand, we must refine Lumada’s customer cases and the solutions

centered ecosystem that enables expertise, resources and skills tothat embody them on an ongoing basis as the management andbe shared while further accelerating social innovation.

business issues facing our customers continue to change
constantly. As we move forward, we will strive to expand theLumada business by accumulating new customer cases andsolutions through co-creation with customers and partners.
Over the three years covered by the 2021 Mid-term Management
Plan, we will continue to invest ¥150 billion in the Lumada businessand related projects, aiming to expand the use of Lumada in othersectors and to develop and expand the digital specialists/humancapital essential to the acceleration of the Lumada business. In
fiscal 2021, we will increase our number of digital specialists to30,000.

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