DATAQUEST: CIO Panel Discussion

With businesses moving quicker than ever, it is technology that is driving

and enabling the need for speed. And with IT applications propelling business

growth, it is chief information officers (CIOs) who are being increasingly

called upon to



take on leadership roles–spearheading the implementation of new products,
services and capabilities. How does a CIO approach his task? How does

technology, in his hands, not just transform the way business is done, but also

the returns from that business?

To learn this and more, Dataquest organized a panel discussion on ‘Obsolescence

and Standardization’, featuring chief information officers from seven leading

companies. The venue: Cyber House, Gurgaon. The participants (from left): Rajesh

Kharbanda (New Holland Tractors), Pradeep Gupta (Daewoo Motors India Ltd), SK

Dwivedi (Bharat Petroleum Corp Ltd), Prasanto K Roy, (chief editor, Dataquest

Group), Upal Chakraborty (PepsiCo India), Vijay Sethi (Ranbaxy Labs), Sunil

Kapoor (Fortis Healthcare) and Sudesh Jain (Transport Corporation of India). The

result: For two hours, seven CIOs went from cherubic to acerbic…the mood swung

the way the flow of conversation did. Excerpts:

Outsourcing: The whats, hows and whys

Rajesh Kharbanda (New Holland Tractors–NHT): We have outsourced our

entire facilities management to Wipro. This leaves us with time to ascertain our

needs and develop specifications. We think specification development is what the

in-house team needs to concetrate on. Of course, there are some issues here–an

outsourced consultant will cost you two-and-a-half or three times in terms of

salary. Add their overheads and one really spends much more on outsourcing. But

how can you fight your own manpower obsolescence? With outsourcing, I can.

SK Dwivedi (Bharat Petroleum Corp–BPCL): In our company, we have

come a long way from manning a help-desk to facilities management. For BPCL, it

was Melstar for this, now it’s Wipro. So far, it is working better for us than

it was when we had our own staff– we would recruit MCAs, who would stay for

some time and then move off. In this backdrop, outsourcing has come as a relief.

In terms of outsourcing of applications maintenance, we started that three years

back. We are moving forward, having now outsourced maintenance of ten of our 60

legacy applications.

Upal Chakraborty (PepsiCo India)

Upal Chakraborty (PepsiCo India): We have also outsourced our

facilities management. Earlier, the contract was with Microland, now we have

Compaq. On the whole, it is a satisfactory arrangement. There are no major

issues with outsourcing, and we are definite that we will not bring it in-house.

In remote locations, further outsourcing is being done to local parties there.

As for our software development and maintenance divisions, the strategy that has

worked for us is to divide our six-strong IT workforce to monitor core

applications like SAP, data warehousing, sales and distribution. They act as

project leaders and manage and maintain the applications. Also, they can code

and write programs, especially on the maintenance side, which one can’t give

to outsiders. We don’t encourage that and do 90% of that job ourselves.

Vijay Sethi (Ranbaxy Labs): In our case, hardware maintenance is

entirely outsourced. In our hardware policy, we have two vendors across the

country and sites are allocated to each one of them. What we do is define

standard operating procedures, including expectations from vendors, and service

level agreements are signed. The job of the organization then, is one of

monitoring. As far as strategizing and planning are concerned, I would not say

100% is done within the organization, but we do talk to our outside partners and

get inputs, especially as they are also suppliers and channel partners to IBM or

Compaq. In terms of application development, we follow three different routes–we

either let freelancers do the job or tie up with a couple of vendors to gain

access to their resource pool. As a third option, we go in for in-house

development. On the application maintenance side, we are thinking of

outsourcing, especially for key applications like SAP.

Sunil Kapoor (Fortis Healthcare)

Sunil Kapoor (Fortis Healthcare): Admittedly, outsourcing allows you

access to the knowledge pool brought in by the vendor. Nevertheless, there is a

lot of time wasted, as a new person would not know the network, users or

seniors. You have to teach them to communicate at all levels. A company needs to

have a basic in-house core team, controlling the facilities management

functions. I am expecting around 300-plus users to work on systems in my

company, most of them nurses and doctors–because of this, I am starting out

with a handicap. We have to worry about the user profile, which is specific to

one industry. So I am going to invest in a smaller team.

Sudesh Jain (Transport Corp of India–TCI): We have learnt from

experience. We had outsourced a critical software development project and the

project manager, project leader and some others were working at our premises. A

year down the line, they left the job and walked off. When we asked for the

finished software project, all we got was confusion...and whoever used it at our

end said this was not what had been asked for. We were stuck with software we

had no use for...the contract had to be cancelled. We lost a year and a half. We

decided to build our own team and did the project in-house. It works, and it

works well. Now, we don’t go for software outsourcing.

Sunil Kapoor (Fortis Healthcare)

Sunil Kapoor (Fortis Healthcare): There is one thing I must say here–anything

that is a one-off job should be outsourced. Something that needs to be done on a

continual basis should be in-house; for instance, core competence should be

in-house.

Pradeep Gupta (Daewoo Motors India–DMIL): Whether to outsource or to

work in-house is debatable. Nevertheless, any organization’s core operations

should be taken care of internally. So you have to have a basic team of people.

Outsourcing should only be for new developments, some applications you need to

be developed as a one-off job.

Rajesh Kharbanda (New Holland Tractors): I think the answer is to

standardize——whatever is standardized can be outsourced. If we could

standardize our applications, even 50% of them, one could depend 50% on an

outsourced agency and minimize the need of in-house support. But the promise of

outsourcing is certainly there...the big advantage–continuity. While people

continuity is key for any company, the work continuity that a company enjoys

after outsourcing is a great benefit. And the onus is on the external agency,

not us, to take care of continuity. The other advantage is access to knowledge;

companies that outsource have their resources of knowledge. The companies can

then demand knowhow and access the knowledge pool and benefit; no more starting

from scratch. Last but not least is the issue of processes——internally one

does the process management and thinks of new processes to run the

infrastructure, figuring out, for instance, how every task can be carried out in

a standardized manner. Again, access to the knowledge pool helps, as the

external agency has the experience and has processes in place. Continuity is

there, so is access to knowledge resource, which is crucial–thanks to

outsourcing.

On Obsolescence: How legacy systems and upgrades are handled

On Obsolescence: How legacy systems and upgrades are handled

NHT: My company is five years old and I guess this is the time to

address the issue of obsolescence. There are three kinds of obsolescence. One,

financial, which is when the depreciated value of any equipment becomes zero and

the product becomes obsolescent. The second is technological obsolescence. The

third and the most important is perceptive obsolescence–how we perceive our PC

or other equipment, is it obsolete or not when there are newer versions

available in the market?

TCI: In 1999, we decided to scrap all PCs up to the 486 level. We went

in for whatever was the latest at that time. It was this way that we upgraded

across the board to Celeron machines.

Ranbaxy: We have not been as liberal as TCI and have PCs right from

486s upwards. However, due to SAP, we have had to upgrade a lot of machines. As

an organization, we decided not to upgrade with any non-standard part, so it’s

always with our vendor. Just five months back, we had around 70-80 486s. There

were two options at the time–either put in a Citrix solution and use the

machines for smaller SAP applications like Word and Excel or to conduct a

cost-to-benefit analysis. It was cheaper and better to grab the buyback facility

offered by both IBM and Compaq through their channel partners.

BPCL: We had a lot of dumb terminals and 386 machines right up to

1997. After the standardization policy, we junked all dumb terminals and 386

machines. All 486s were upgraded to conform to our desktop architecture of 32 MB

RAM and 2GB hard disk. After the standardization policy, we have not faced much

obsolescence issues.

PepsiCo: In my previous job at Reckitt Benckiser, we had a policy of

disposing PCs after every three years. We felt that AMC charges were such that

it worked out to the same cost if we stuck with the old machines. It was wiser

to buy new machines and pay less for AMC than to pay more for AMC for old

machines. So at the end of every three years, we junk the old ones and go for

the latest ones.

DMIL: In this area, I have a key point to make. In terms of

application servers, we had HP servers installed about four years back for an

ERP package. Now, as usage and traffic has increased, we find that performance

is deteriorating and throughput has crashed. We put in about Rs 40 lakh four

years back, only to be told now that we can’t add RAM or have additional disk

carriers. We tried to opt for a buyback scheme but that too has failed.

CIO tips

NHT: Whenever you buy a PC, make sure there’s an upgrade path.

People start accumulating more data or want to put in more RAM chips. Get as

long a warranty period as possible upfront.

TCI: As the AMC can cost more than what you are paying for the

machines, we usually replace our PCs with new ones after three years.

Fortis: Before taking any buy decision, I always like to keep two to

three vendors interested. The interest of two people has to be there–clear

preference for any one should not be made known. This keeps vendors on their

toes and gives us the best possible price and after-sales commitment.

PepsiCo: In-house employees who are technically savvy and understand

business processes will always be of more help to the company than outside

agencies. At any point of time, you can find six to seven of our employees doing

coding and programming. We encourage them to understand the business processes

as it makes it easier for them then to code and debug. It also gives us a wider

pool of in-house talent.

Fortis: Anything which is one-time should be outsourced. Something

that needs to be done on a continual basis should be internal. Core competence

should remain in-house.

NHT: To handle the problem of perceptive obsolescence, the best bet is

counseling. When users come to me and say my PC has become slow, I have only one

reply for them–your PC is as fast as it was when it was bought! The problem of

perceptive obsolescence needs to be tackled on a vigorous scale in any company

to convince employees that their PC is not obsolescent, but as fast as when it

was first used.

On how they standardized

Ranbaxy: To begin with, we standardized on Pentiums. All machines will

be now Pentium-based, starting with the Celeron. Other specs of an average PC in

Ranbaxy are 32 MB RAM to 64MB RAM. As far as applications go, Office 97 is a

major one, though Office 2000 is also used. The basic standardization is minimum

32 MB RAM and Pentium.

BPCL: Till 1997, we didn’t have any standards for hardware or

software. But all that changed when our general manager chalked out a

standardization policy...we have a standard desktop architecture–Windows 95,

Office 97 with SR2 and Outlook 98, since it has more security features.

PepsiCo: In terms of software, both PepsiCo and Benckiser Reckitt have

been extremely standardized. For example, the day we moved to Office from

Smartsuite in 1997–it was with a bang–done within 48 hours, with 30

locations migrating all at once. As far as standards and specifications go, both

Pepsi and Reckitt have been sticklers. On the hardware side, at Reckitt, we used

to junk PCs after three years and buy new ones, re-deploying according to

individual requirements.

DMIL: On the hardware side, we are not rigid, but on the applications

side, we are very clear about the standards driven by our head office in Korea.

In the case of hardware, all our decisions are based on price-performance.

NHT: We are in our fifth year and are still to scrap a single PC.

Also, we don’t have a set of specifications based on which we buy any new

machines. On the contrary, we say whenever we buy, we buy the latest because

experience has taught us that for a given value of Rs x, you should get the

latest at any point of time. And this latest means your GBs rise, your RAM

rises.

Fortis: So far, we have standardized on two key specs for our desktops–no

floppy drives and NIC cards. Then we are open to Celerons or P3s or any other

spec depending on the usage of the machine or the user and location. The same is

the case with vendors. The best price-performance option gets the order. On the

application software side, we have our own hospital information system and that’s

standard. Beyond that, there is Exchange for mail and MS Office.

TCI: Like we did two years ago, we will junks our machines next year

and go in for new ones. We don’t have any set standards, but we buy the latest

ones.

On standard brands they prefer…

Ranbaxy: Four years back, we decided that we would deal with only two

vendors–at that time, we decided on Digital and IBM. Along the way, Digital

lost out to Compaq. Today, it is just Compaq and IBM we deal with. The same is

the case with servers, we have two vendors–Digital and Compaq.

NHT: A single dominant brand for both desktops and servers–IBM. All

NT servers are IBM and Unix ERP servers run on RS 6000.

DMIL: As a standard, we have Compaq with about 80% of our hardware

requirement coming from them. The remaining is a mix of IBM and HP.

BPCL: Dominant desktop brands are Acer and Wipro. For servers, Compaq

has the lion’s share. However, SAP is on ten HP L Class servers and four N

Class Servers.

PepsiCo: The dominant brand is Compaq as far as desktops are

concerned. Laptops are IBM. Servers are a mix of Digital, HP and IBM.

Fortis: We would like Fortis to dominate...rather than say Compaq or

IBM is dominant. The strategy is to get the best vendor service at the best

price.

TCI: Since the last year, we decided on Wipro, PCS and HCL. Around 60%

is with Wipro and the balance with other vendors.

The challenges…

PepsiCo (on application development): There could be

two ways to talk about this–the first is total project outsourcing, where the

company says this is the system, this is what we want developed, here are the

specifications, go ahead and do it within a given time-frame. The issue is that

the end-product could well be below the mark. The other challenge of such a

model will be subsequent nitpicking on what should have been defined and other

such confusion. The answer is the body-shopper’s model, which has worked well

for us.

Ranbaxy (on whether outsourcing can hit security):

When you have outsourced your entire hardware and then you outsource

applications as well, what happens to security? These guys, the outsiders, end

up having access to every record in the company. They are there in the office

after 7 in the evening, when no one else is around, and have access to all your

hard disks, servers, all passwords…In all sectors, but specially in

pharmaceuticals or knowledge-based industries, this is a major issue. Perhaps

not today but certainly a threatening issue in the near future. As we outsource,

there will be threats to security.

VendorS: Who’s good, who’s bad…

TCI: We have tried all vendors–MNCs and Indians.

Because of our geographical vastness, we have 800 locations across the country,

and we found that the services of the MNCs are the worst. Even IBM and Compaq–once

sold, all’s forgotten. It ultimately boils down to one thing: you have to be

careful and choosy while you sign the deal.

Fortis: In terms of sales, all vendors are good. In

terms of support, they are all bad. Once you’ve bought the equipment, the

honeymoon is over.

A Dataquest report