Daiwa House Industry builds a new future for Japan's construction industry using Microsoft Azure

Adopting a new company standard with Azure as the perfect cloud for corporate use

Under its Seventh Medium-term Management Plan announced in 2022, Daiwa House Industry is building a sustainable growth model that evolves revenue models, streamlines management efficiency, and strengthens its business platform. DX is a key aspect of these goals.

“Our department tailored our medium-term IT plan to the company’s medium-term business plan,” says Ryuzo Matsuyama, who heads the Information Systems Department at Daiwa House Industry. “We identified our goals and worked backwards from there to set seven themes spanning the organization. We officially disclose progress in our annual DX report.”

Daiwa House Industry's DX initiatives started in 2019, with the company upgrading IT infrastructure even earlier.

“We operated on-premises IT systems, but it was expensive to replace those systems as they aged or their maintenance support ended,” says Masaki Kawaguchi, General Manager of the Information Systems Department. “We needed to plan resources in anticipation of capacity five years ahead of lease expiry, and workers involved in on-premises operations faced heavy workloads.” To solve the problems, Daiwa House Industry began migrating systems to a private cloud in 2006, cloudifying all systems in 2014.

The provision of public clouds subsequently matured. Since it was possible to flexibly add resources at low cost, the company started to consider shifting to a hybrid cloud. In 2015, it experimented with a virtual machine on a major cloud service. Naoki Sakurai, Manager of the Information Technology Management Group, recalls the experience.

“This public cloud had some specific management methods and required much more maintenance work than we expected. We realized there weren’t any advantages to using a public cloud instead of a private cloud.”

Daiwa House Industry therefore continued to operate around a private cloud, but introducing Microsoft 365 in 2018 changed the situation dramatically. The deployment of Microsoft 365 coincided with that of Azure ExpressRoute, which provides a secure connection to Azure. Consideration of Azure began.

“When we tried Azure, we discovered more companies to whom we could entrust maintenance and plenty of managed services offering greater flexibility,” says Sakurai. “Microsoft delivers services aligned to our various needs.”

Daiwa House Industry decided to adopt Azure as standard in 2019 and launched full-scale DX initiatives leveraging the public cloud.

A DX project to attract young workers to the construction industry

Daiwa House Industry laid its first DX foundation with the Digital Construction (DigiCon) project. Hiroshi Kono, company Executive and Deputy Head of the Technology Coordination Headquarters, explains the background of the project. “The construction industry in Japan has low productivity and an aging workforce, so there are fears over securing engineers and technicians in the near future. We launched DigiCon in 2019 to solve this problem.

“With DigiCon, we want to completely transform the way the construction industry works to attract more workers. “We’ll change the public image of the construction industry from being difficult, dirty, and dangerous and alter the structure of the industry to make it more appealing to the younger generation, who are responsible for our future. We can’t accomplish this transformation by ourselves, so we want to involve the entire industry.”

The first step of the DigiCon project was to identify and prioritize design and construction challenges at work sites. The company solved high-priority issues first. According to Takehito Hayashi, Manager of Construction and BIM Promotion Department, the focus was on data collection, aggregation, and integration.

“It’s impossible to predict the future in the current climate, so data use is essential. Our emphasis with DigiCon was to safely collect data split across processes and organizations to apply it to work operations. This raised awareness and improved the efficiency and quality of work. We call this conservative DX.”

Daiwa House Industry applied its conservative DX philosophy by leveraging Microsoft Power Platform, Azure, Microsoft 365, and other Microsoft services while working with Microsoft consulting teams to implement an assortment of measures. Hayashi cites a dashboard for construction site management as a prime example.

“We used an operational analysis conducted in 2020 as the basis for a dashboard tailored to on-site needs. The tool aggregates essential information for construction managers and visualizes it on screens. This easy access to data increases the managers’ productivity and enables them to gain fresh insights from new combinations of data and information on similar projects.”

This ability to view previously scattered information instantly has improved the efficiency and quality of work. And with features such as automatic notifications, compliance awareness is also higher. The dashboard can also combine weather and disaster information with construction site locations and schedules on a map, making it faster to obtain emergency information.

“These efforts have produced workers who can cope with today’s digital transformation,” says Kono. “This is the biggest achievement of the DigiCon project so far. We’ll soon start on assertive DX, which includes strengthening supply chain management using AI. So far, we’ve been enhancing management platforms and efficiency through DX, but we plan to evolve our revenue model moving forward.”

Many measures for accelerating DX, a new approach to information systems

Daiwa House Industry is working on a collection of DX projects following its pioneering DigiCon DX initiative.

In 2020, the enterprise started building a data integration platform—a foundational DX solution—with the help of its Technology Coordination Headquarters. After standardizing the increasingly complex flow of data integration, it defined data integration protocols and data models using APIs and created an environment for users to access the data sources they require. “Users can access and apply the data they need as easily as connecting to a power outlet,” explains Matsuyama.

The company is also converting D-Smart, a mission-critical portal, to Azure. The solution originally ran on a private cloud, but moving it to Azure provided the opportunity to modernize it with microservices.

Core systems have also migrated to Azure. Daiwa House Industry had been running SAP ECC on a private cloud but shifted to Azure when switching to SAP S/4HANA.

The company is also engaging in generative AI, releasing an internal chat service using Azure OpenAI Service in October 2023. Although its application to business operations is still in the trial stage, Daiwa House Industry wants to use the service to automatically create environmental proposals and convert drawings to structured data.

In November 2023, Daiwa House Industry established a mechanism for sending information to contractors’ mobile devices. Using Microsoft Entra ID Premium (formerly Azure Active Directory Premium) and Microsoft Entra B2C technology, contractors can directly and securely connect to in-house business systems via the internet from their personal devices. This is a boon for supply chain DX and could be an important first step in expanding DX from Daiwa House Industry to external workplaces.

“Azure enables us to quickly prepare the infrastructure necessary for our projects and flexibly scale up and out, which shortens service launch lead times,” says Kawaguchi. “Azure is constantly adding new services that are ahead of the curve. Without Azure, our DX efforts would’ve taken much longer.”

“Azure has shifted the Information Systems Department from a process-oriented way of thinking to a speed-focused approach,” adds Matsuyama. “And we no longer try to extract value for as long as possible after building a system. We’ll abandon the system when it’s no longer necessary and focus on more valuable areas of investment.

“We’re aiming for sales of 5.5 trillion yen in the final year of our medium-term plan, including one trillion yen from overseas. “We also have great expectations for Microsoft’s support in establishing global IT governance. We’ll continue to use Azure as our standard public cloud to modernize existing systems and drive DX.”