Rakus provides cloud cloud-basedbased mid/back office SaaS solutions to Japan's SMEs.
Rakus' FY3/20 Revenues hit ¥11.6b, +33%YoY, driven by strong growth in its mainstay subscription-based Cloud Business (77% of Revenue) and its IT Outsourcing business(23% of Revenue). These growth rates appear set be maintained, if not accelerate under the ongoing DX shift.
CUSTOMER VALUE. The Cloud Business, consists of five major cloud-based SaaS offerings, adds value to businesses across all industries. The segment’s key sales driver, Raku Raku Seisan, adds value by improving the efficiency of settlement of travel and other expenses. Other services include digital documentation and systems to share and manage email inquiries among staff. Three-year CAGR Revenue growth for the Cloud Business was 36.7% The IT Outsourcing business operates on the model of hiring inexperienced personnel, training them to be IT engineers, primarily as Java programmers and Infrastructure engineers, then dispatching them to customers. Revenues have been growing for this business at a three-year CAGR of 22.6%.
MARKET. With 4 million SMEs in Japan, there are rich pickings for the specific target market for the company’s cloud-based expense settlements systems. The target segment is companies with between 50 to 1000 employees, which number 100,000. Most of these companies use paper-based or spreadsheets to manage their expenses. The primary subsegment market estimate is ¥70bn, a fraction of Rakus’ current subsegment revenue, implying a significant opportunity to expand.
MANAGEMENT. President/CEO Nakamura started at NTT in 1996 and eventually established Rakus in 2000. He has built a strong and experienced management team whose incentives are aligned with the long-term success of the company. OUTLOOK. Rakus its set to maintain its high growth with the acceleration of DX in Japan, and given how far Japan’s SMEs need to go to catch up vs. other developed economies. The impetus from the new Japanese PM Suga, to digitize the public services, is one tailwind. The other is COVID-19 triggered, Japanese companies accelerate the online shift and seek to get more efficient in their operations.
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