Digital Information Technologies Corporation

The pace of technological innovation in the IT industry is rapid, requiring continuous evolution of advanced know-how and development environments. The Group is proceeding with engineer recruitment/training and development environment improvements, but if significant environmental changes occur due to technological innovation exceeding expectations, this may affect business activities and results.

Against the backdrop of engineer shortages and rising labor costs, an increasing number of companies are utilizing offshore development, and companies from Asian countries have also begun entering the Japanese market, leading to expectations of further intensifying price competition. The Group plans to respond by strengthening sales and technical capabilities and improving productivity, but competition intensifying beyond expectations may affect business activities and results.

Changes in the external environment, such as international economic policy, trade friction, tariff measures, geopolitical risk, and capital market volatility, may affect customer companies' investment decisions and development demand. In particular, in export industries such as the automotive industry, changes in tariff policy could significantly affect the business environment, potentially impacting the Group's order trends and results.

The Business Solutions and Embedded Solutions businesses depend heavily on the capabilities and qualities of information processing engineers, with human resources positioned as the core of the Group's differentiation strategy from other companies. In a fierce competitive environment against domestic and overseas competitors, if the securing and development of human resources does not proceed as planned, the response system for orders received may become insufficient, potentially affecting business activities and results.

Contract forms with customers in the Software Development business include contracting arrangements and staffing (dispatch) arrangements, but staffing arrangements have restrictions preventing the use of outsourcing at customer worksites. If the proportion of staffing contracts increases, difficulties may arise in securing engineers, potentially affecting business activities and results.

In contracted software development, it can be difficult to estimate the scale of development at the time of order, and project profitability may deteriorate due to changes in various conditions after receiving an order. In addition, quality issues such as defects (bugs) in software products/services or service failures may result in additional costs or damages claims, potentially affecting business activities and results.

Labor costs for engineers, which account for the majority of cost of sales, are fixed costs, and profitability may deteriorate even if orders decline sharply and utilization rates fall, since labor costs will not decrease accordingly. In addition, if an industry-wide engineer shortage occurs, partner companies may request increases in outsourcing unit prices, and if these cannot be passed on to customers through sales prices, profitability may be affected.

Amid an industry-wide trend of increasing patent applications to protect proprietary technology, if it is discovered that the Group has infringed on the intellectual property rights of a third party, this may lead to damages claims and loss of credibility, affecting business activities and results. Conversely, if the Group's intellectual property is infringed by a third party, the Group may be forced to divert management resources toward defensive measures such as litigation.

In the course of business, the Group handles personal information and confidential information of customers and business partners, and has implemented measures such as establishing information management regulations and obtaining Privacy Mark certification. However, if a leak were to occur, it could result in a decline in sales due to loss of credibility and the incurrence of damages costs. Information leaks caused by outsourcing partners (partner companies) could also result in loss of credibility for the Group and claims for damages.

The Group may make investments or loans to customer companies, partner companies, and others for the purpose of generating synergies with its business and strengthening relationships. Although prior investigation and consideration are conducted, the expected effects may not be achieved, and if the performance of an investee or borrower deteriorates, impairment processing may become necessary, potentially affecting business activities and results.