Whether it was the impact of the global downturn, an overall slowing of
capital inflow or just a cautious approach, most companies cut down on IT
spending this year. While some of the large IT projects that had been already
initiated continued, there was a general tendency to cut costs and withhold
investments wherever possible. The petroleum sector was among the few that
continued with IT deployment. The opening up of this sector has created
awareness about the use of IT for streamlining internal processes, creating
business efficiency and focusing on customer needs in a much bigger way. The
Dataquest-Satyam
CIO Series discussion held in Mumbai recently focused on challenges faced by IT
managers in the oil and petroleum segment. The panel comprised KV Krishnamurthy,
vice-president (IT) at Castrol India, NM Thombare, chief manager at BPCL,
Prabhakar Sethi, senior vice-president at Reliance Industries, KL Vindal, CTO at
Orient IT, and K Chandra Bushan, assistant vice-president (IT solutions)
at Satyam (Oil and Gas division). The discussion was moderated by Prasanto
K Roy, chief editor of the Dataquest group of publications. Apart from sharing
experiences of IT implementation in their organizations, the
panelists spoke of the increasing focus on RoI, changing business needs and
upcoming challenges. Some excerpts:
Integration issues
While petroleum companies have been using technology in a big way, most of
the implementations are scattered across organizational processes. There is a
need to integrate existing processes, deal with legacy systems and create a
common platform to implement the latest technologies more easily. Leading global
oil company Castrol India for instance, is grappling with integration issues.
Castrol has implemented an ERP system and has an exclusive distribution system
for Castrol products across the country. "We have provided solutions to all
our distributors and their data is integrated with the rest of company’s data.
Now we are trying to figure out how to get visibility further down the channel
and how to integrate the data that we receive with the suppliers’
systems," explains KV Krishnamurthy of Castrol India.
Integrating suppliers and dealers with the company’s central system could
be an arduous task, as they are external agents and need not conform to the
system in use. Says Kishnamurthy, "It was a difficult journey given that
most suppliers and dealers were extremely apprehensive about disclosing their
financial data, pricing practices and details about other agencies they were
dealing with. But gradually, we managed to convince them about the advantages
they would have.
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Reliance on the other hand, has a fairly advanced and automated refinery
having extensively used IT since its early days. "You have to actually
build in the automation right at the time of design. For a refinery like the RPL
Jamnagar, one needs very advanced systems. Whether you are talking of
distributing control systems or advanced process control for their optimization,
you need to actually plan from the beginning," explains Prabhakar Sethi of
Reliance Industries. "Subsequently, we would obviously look at the
automation of the entire supply chain, starting from the refinery gate and right
up to where it reaches the customer."
Build for the future
Building IT systems along with the rest of the processes requires a clear
understanding of the organization’s needs. Assessing the present and future
requirements at the time of planning could be a rather challenging task. How did
Reliance manage it all? "It’s indeed a challenge," agrees Sethi of
Reliance explaining the approach adopted by the company, "The IT solutions
that we establish today may or may not work tomorrow because you don’t know
the market yet. So, the real challenge is to build for the future. I don’t
want to use the term ‘open systems’, because there are several connotations
of the word. But I would say one should build a ‘modular system’. The
integration tools or platforms that you deploy should be able to accommodate the
changes as you go along."
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Speaking on the core activities and issues specific to the oil and petroleum
sector, Chandra Bushan of Satyam says, "There is technical data and
production data. To begin with, you need to improve your internal
processes-production and operational efficiency. Then you can deal with the
external world – distribution, sales, etc. In order to improve your internal
systems, you
can start with ERP implementation and then move on to SCM and CRM
solutions at various stages. But in the petroleum industry, you have to go
beyond this. One needs to go upstream–seismic and reservoir analysis– and
then downstream, that is the refinery process. Unfortunately, none of the IT
companies has built competence in those areas."
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Elaborating on BPCL’s expansion plans, NM Thombare says, "Today, we
have around 225 locations connected through VSAT networks. We are planning to
expand this to connect pumps on networks so that unique customers can swipe
their cards to fill petrol. We are looking at CRM and using IT for
security."
The RoI factor
Several companies have started investing in the latest technologies. While
some of these investments are essential, many times, it gets difficult to assess
the long-term tangible benefits. KL Vindal, a consultant with extensive
experience in the petroleum sector, says, "We have always believed that
technology is for business and business is not for technology. We deploy
technology for customers and it adds value to business. You need to have a good
business direction, look at customer service and employee satisfaction."
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Krishnamurthy agrees, "I would like to introduce another dimension here.
I think IT projects are not standalone projects anymore. They are actually a
part of a larger business purpose. I think we should measure the ROI of the
project and then choose the best technology to make it happen. We are here to do
business, make profits and give returns to shareholders."
ROI is fast gaining popularity as an important tool to take business
decisions. Many companies now insist on strong ROI calculations and use it as a
yardstick to decide on new initiatives. Measuring the business value and
expected gains from a new project is quite justified. But at the same time,
companies should not lose the focus on fundamentals. "Customers always ask
consultants to justify the money being spent. I always say that I can show the
returns but if the internal processes are not right, then no ROI calculation
will work," says Vindal.
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Krishnamurthy points out, "ROI can be misleading in many scenarios.
People go for ROI because they want to look at various factors like
accountability, quality and improving service. But sometimes, the demand for ROI
measurement is so strong that it could impede a project. If the management
always insists on ROI for such decisions, then it could hamper the overall
long-term development."
Retailing gets snazzier
Another area that is becoming more and more significant with increasing
competition is retailing. There is tremendous pressure on businesses to find
ways and means of keeping the customer happy. Sethi of Reliance says, "It
is all about focusing
on the customers’ needs. Market forces are driving this need and business
strategies have to be formulated accordingly.
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Today, many companies are looking at organized retailing and it is happening
in a big way. IT can be a good enabling tool in this scenario."
Sharing his experience in retailing Krishnamurthy says, "Castrol is now
part of British Petroleum, which is one of the largest retailers of
non-petroleum products in the UK. It is not just about how you service the
customer after he has come in, but how do you actually make him come there in
first place. It has to be more than just filling petrol and collecting money.
You need to understand the customer’s buying preferences and find ways of
attracting him for repeat buying. For instance, in addition to providing fuel on
the highway, you can provide additional services like security or relevant
information about the movement of goods."
Chandrabhushan points out, "We have been studying retail automation for
the past three years. You obviously can’t compare India with the US or Europe.
The outlets you have there are meant for the kind of vehicles that run there and
the kind of people who come there are very different. Companies that are
entering the segment now will certainly have an advantage because they can
choose their space and infrastructure according to future requirements. But the
existing ones that want to move on will have to face a number of
challenges."
Public sector companies like BPCL are on a major drive to make their retail
outlets look more snazzy and modern. "We have introduced petrol cards and
smart cards. We are also upgrading our petrol pumps and deploying technology in
various places," informs Thombare. But there are a number of issues that
need to be addressed. Some of the old-time petrol pumps are not equipped to take
on the changes. Most petrol pumps are so small that there is not even enough
space to park vehicles and fill petrol. However, some large pumps are trying to
develop such facilities.
Converting the existing retail outlets into full-fledged service centers
would involve the creation of supporting infrastructure. Supporting such an
enormous retail network could be a mammoth task. IT could play a significant
role in integrating the dispersed systems that exist. Although India is being
touted as one of the biggest destinations for retailers, it has been very slow
in adopting global standards such as self-serving, automated petrol dispensing
systems or credit card authentication.
Apart from availability of cheap labor that prevents the use of such
technologies, the people’s mindset needs to change.
A Dataquest Report