ITSO Inc. Announces Capital and Business Alliance with DENSAN Inc., Involving Share Acquisition by DENSAN

ITSO Inc. (HQ: Minato-ku, Tokyo; CEO: Shinichi Kitagawa; CTO: Yasuhiro Fukano; hereinafter "ITSO") announces that it has entered into a capital and business alliance agreement concerning the AI business with DENSAN Inc. (HQ: Nagano City, Nagano; President: Kazuta Todoroki; hereinafter "DENSAN").

■ Background and Purpose of the Capital Alliance

In Japan, against the backdrop of a declining working-age population, labor shortages, increasing business complexity, and accelerated digitalization, the need for business transformation using AI and automation technologies is growing ever more critical for local governments, financial institutions, regional enterprises, and SMBs (*).

In the market for services aimed at local governments, where functional differences are shrinking due to system standardization, the source of competitiveness is shifting from mere system provision to proposals that significantly boost operational efficiency and hands-on services that support business reform.

Under its mission to "provide end-to-end hyperautomation (*) to support change for individuals and organizations to achieve greater results," ITSO has been combining cutting-edge technologies centered on AI to assist with everything from business process visualization and improvement to implementation and adoption.

Moving forward, ITSO plans a future stock market listing and intends to expand the AI implementation track record, product development capabilities, and business transformation know-how cultivated with large enterprises to the markets of local governments, regional financial institutions, regional enterprises, and SMBs.

Meanwhile, DENSAN has provided foundational systems to local governments, private companies, financial institutions, and medical/welfare organizations for many years, building a solid customer base through its accumulated achievements. Collaborating with DENSAN, a leading Japanese company rooted in regional areas and supporting public and regional industries, is highly significant for ITSO in expanding the social implementation of AI to workplaces nationwide.

By combining DENSAN's customer base, sales network, creditworthiness, and business knowledge in the public and regional industry sectors with ITSO's cutting-edge AI technology and implementation capabilities, the companies believe they can offer customers speed and value that is difficult for others to imitate. Through these considerations, the high potential for synergy creation was confirmed, leading to the decision to execute this capital and business alliance to strengthen the collaborative framework and further deepen the relationship.

*SMB stands for Small and Medium-sized Business.
*Hyperautomation is an advanced business automation concept that combines multiple cutting-edge technologies like AI, RPA, and machine learning to automate and streamline entire business processes.

■ Significance of this Alliance for ITSO's Growth Strategy

For ITSO, this alliance is not merely a capital tie-up but a significant step in its growth process towards a future stock market listing, greatly expanding its business domain, customer base, and social significance.

- Synergy with DENSAN's Customer Base and Credibility: Collaborate with DENSAN's long-established customer base, sales network, business expertise, and credibility in the public and regional industry sectors to accelerate the speed of AI implementation.
- Addressing the Societal Challenge of a Declining Working-Age Population: Support workplaces facing labor shortages and increased workloads by improving operational efficiency, enhancing resident/customer services, and shifting staff/employees to more creative tasks through AI and automation.
- Strengthening Growth Foundation for IPO: Enhance expansion capabilities into the public, regional industry, and SMB markets, leading to medium- to long-term business growth and increased corporate value.

■ Vision for Joint Business

① Promoting DX with a Joint LLMOCR Business for Municipalities
To address issues faced by municipalities such as labor shortages and increased workloads, we will provide solutions centered on the specialized LLM "LLMOCR (*)" to promote front-yard reform and municipal DX.

- Streamline input and verification tasks by reading, extracting items from, and creating structured data from paper forms.
- Enhance counter and screening services by using a specialized LLM to understand the context of applications and support the verification of incomplete or missing information.
- Support front-yard reform towards realizing "no-writing, no-visit" counters and automate back-office tasks for staff.

*A proprietary ITSO product that uses LLM to achieve high-precision document reading, data extraction, and structuring.

② Creating New AI Businesses by Fusing DENSAN's Services with Generative AI
By combining DENSAN's proprietary products/services for local governments, financial institutions, and private companies with ITSO's advanced AI implementation capabilities, we will create new, high-value-added AI services.

- Differentiate from competitors by integrating AI functions into package systems.
- Enhance inquiry handling, form processing, document creation, screening, and data analysis using generative AI.
- Deploy AI implementation know-how cultivated by ITSO for large enterprises to the public and regional industry sectors through DENSAN's customer base.
- Establish a next-generation BPO by expanding the automation scope of BPO tasks through hyperautomation, creating an environment where people can exercise creativity.

③ Expanding Hyperautomation Support to Regional Enterprises and the SMB Market
ITSO has so far supported the introduction and implementation of hyperautomation x AI mainly for Japan's leading large enterprises. Through collaboration with DENSAN, we will expand locally-focused AI utilization support to address issues faced by regional enterprises and SMBs, such as "labor shortages," "task dependency on specific individuals," and "shortage of digital talent."

- Provide hands-on services to support everything from the initial design of AI introduction to its adoption in business operations.
- Automate entire business processes by combining LLMOCR, generative AI, and AI agents.
- Develop AI utilization menus and templates that are easy for small organizations to use.
- Support productivity improvement, new business creation, and the shift of employees to high-value-added tasks in regional enterprises and SMBs.

④ Building a Track Record of DENSAN's Internal "AI Native" Transformation
Through collaboration, we will promote DENSAN's AI-native transformation, resolving the concentration of specialized knowledge and task dependency. Furthermore, we will achieve task automation, advanced decision-making, and the creation of new ideas, aiming to improve the entire organization's productivity and competitiveness.

- Resolve the concentration of specialized knowledge and task dependency by introducing AI into internal operations.
- Reduce man-hours in development and support processes using AI.
- Turn successful internal experiences at DENSAN into use cases.
- Plan and develop customer-facing services based on these use cases.

⑤ Next-Generation Utilization of Data Centers
By combining DENSAN's data center infrastructure with ITSO's AI technology and implementation capabilities, the two companies aim to provide a secure AI utilization platform for the public, financial, and regional industry sectors.

- Provide a secure AI platform using DENSAN's data centers to municipalities, financial institutions, regional enterprises, and SMBs.
- Consider next-generation data center utilization to meet the rapidly growing demand for GPUs.
- Integrate AI products, business automation solutions, and data utilization platforms.

■ Future Outlook

In the medium to long term, ITSO aims to expand its business through joint LLMOCR business for municipalities, creation of new services using generative AI, establishment of next-generation BPO, expansion of hyperautomation support to the regional enterprise and SMB markets, and provision of a secure AI platform.