Hitachi Digital Services recently held an Advisor & Analyst event in London. The company is rolling out its communication plan to increase client and industry awareness. It goes to market, selectively, with the larger Hitachi Group in the U.S. and U.K., targeting a few industries.

So, who is Hitachi Digital Services? The mid-sized IT and ER&D services vendor spearheads Hitachi Digital’s international business with a NelsonHall estimated headcount of around 6,000. Its sister companies include GlobalLogic (product engineering services) and Hitachi Vantara (enterprise storage). In Japan, Hitachi Digital has DSS, a significant business, with ¥ 2.6bn (USD $19bn) in revenues (we assume this includes some hardware and software).

Hitachi: an ERP Background

The company’s sectoral background, reflecting its Hitachi Group ownership, is asset-intensive industries, with offerings ranging from enterprise application services and software development to data, analytics, AI/GenAI, and ER&D services. It tends to target the mid-market. i.e., companies with revenues of $2bn to $3bn, though it also has some large enterprise clients, such as the North American operations of a tier-one Japanese automotive OEM.

Hitachi Digital Services’ initial core offering was ERP services (Oracle and SAP), adding Salesforce, ServiceNow, and Workday to its portfolio over time. We estimate enterprise application services today account for around one-third of its global revenues.

The company’s Hitachi Group heritage is also shown in its ER&D services activities, spanning product engineering services (e.g., embedded software, command & control systems) and Industry 4.0/IoT. Hitachi Digital Services takes a Hitachi Group-wide approach to Industry 4.0 (‘Industrial IoT’), with Hitachi Group providing industrial automation and manufacturing software (e.g., a Flexware MES product popular among Japanese automotive OEMs). The company has a Factory Lighthouse with a greenfield factory set for Hitachi Rail in Maryland. With Hitachi Group having ~800 manufacturing plants, HDS’ potential activity in this area is immense.

Expansion to Software Development, Data & AI, BFSI

Outside those two offerings, Hitachi Digital Services is also active in software development (‘Cloud ’Engineering’), data & analytics, and application maintenance & support (Managed Services). The company emphasizes its Hitachi Application Reliability Center (HARC) methodology, which it has deployed in three delivery centers (Hyderabad, Dallas, and Tokyo). HARC provides best practices across processes, people, and tools and promotes a combined software development and support team approach. HDS highlighted several times the importance of SRE and FinOps in its HARC methodology.

Hitachi Digital Services has expanded from Hitachi’s asset-intensive industries to asset-light sectors such as BFSI, where the company has several specialized niches, helping, for instance, a closed books reinsurer deploy data processing and analytics. The client wanted to formalize its expertise to help it scale the business through M&As but is impacted by having its business logic and expertise residing in Excel spreadsheets and the heads of employees.

As you would expect, Hitachi Digital Services is investing in GenAI, which is part of Hitachi Group’s investments there. Internally, the company has deployed several GenAI use cases, e.g., converting Fortran code to Python, taking a reverse engineering approach. Externally, Hitachi Digital Services focuses on sector-specific GenAI use cases, such as generating user manuals for automotive OEMs and designing predictive models (based on a combination of ML and LLMs).

Another offering that Hitachi Digital Services promotes is sustainability around carbon emissions and the circular economy (the three Rs of the lifecycle: reuse, refurbish/repurpose, recycle). HDS has consulting capabilities (with an expertise center in Lisbon) and several IPs. The IPs go beyond carbon emissions accountability and include identifying the scope three emissions of a supplier or a product. HDS highlights that depending on the vertical, clients have different sustainability needs. Manufacturing is about the supply chain and product traceability. Financial services, telecom, and data center/colocation vendors focus on data center emissions. The hospitality, retail, and real estate industries favor building energy management.

The Priority Is Client Recognition in U.S. and U.K.

A primary objective of Hitachi Digital Services is to expand its client recognition in the U.S. and U.K., its two largest markets. The company believes it can continue its current momentum (double-digit revenue growth in a slowing market) by rolling out its capabilities with existing clients in its core markets, keeping its vertical and service portfolio approach. HDS favors the creation of technical accelerators and, selectively, software products (e.g., sustainability). GenAI continues to be a priority.

NelsonHall expects further collaboration with the larger Hitachi Group, primarily for GTM. Accelerators and products are also an essential element of Hitachi Digital Services’ growth strategy, with the larger Hitachi Group spending ~$5bn annually on R&D, of which Hitachi Digital Services is a ‘significant recipient. Expect the company to do more of the same to accelerate its growth with Hitachi Group funding innovation.