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Fuel For Thought

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DQI Bureau
New Update

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:

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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.

KV Krishnamurthy



V-P (IT), Castrol India

“Heavy

insistence on RoI in the planning phase often impedes a

project that has future potential”

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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."

Prabhakar Sethi



senior V-P, Reliance Industries

“An automation plan is a must for distributing control systems or advance process control”

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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."

K Chandra Bhushan



assistant V-P, Satyam Computer

“You need to look upstream first, at seismic, reservoir analyses, and then at downstream, the refinery process”

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."

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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."

NM Thombare



chief manager (IS), Bharat Petroleum

“Most of our petrol pumps are being IT-enabled, and that’s the first step in our deployment plan”

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."

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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.

KL Vindal



CTO, Orient Infotech

“We’ve always believed that technology is



for business, not business for technology”

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."

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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.

Best Practices

Build IT systems from the beginning, along with the other processes, to avoid integration problems later
The future needs of the organization should be taken into consideration while planning
A modular approach or open systems’ strategy allows you to incorporate changes or expansion needs that may come up
If you are going for a major IT drive, first focus on improving your internal processes such as production and operational efficiency. Once you have achieved that, you can gradually expand to deal with the external world – distribution, sales, etc
ROI can be a useful tool for deciding on new initiatives, but it may not be applicable to all projects. For instance, some decisions are essential for long-term development, but may not show immediate returns
Focus on your customer, understand his buying preferences and find ways of attracting him for repeat buying
Retailing is moving beyond just bending petrol and collecting money. In addition, you can provide value-added services like security or any relevant information about the movement of goods
While converting existing retail outlets into bigger service centers, you need to create supporting infrastructure of that size so that you can reach out to the remotest of locations

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."

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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

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