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.
users come to me and say their machines have become slow, I tell them
clearly: the machines are as fast as they were the day they were bought by
Rajesh Kharbhanda, chief of IS, New Holland Tractors
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
|“We used to recruit|
MCAs, and they’d keepÂ leaving…outsourcing has come as a relief to us. We have even outsourced 10 of 60 major apps”
SK Dwivedi chief of IS (north), BPCL
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.
|“We don’t outsource coding and program jobs as that is tantamount to letting outsiders into your home. We prefer to do all of it in-house”|
Upal Chakraborty chief information officer PepsiCo IndiaÂ
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.
|“We have frozen Pentium-class PCs, but we didn’t junk the old ones. We still have some 486s, though SAP forced us to upgrade most”|
Vijay Sethi GM, business solutions, is Ranbaxy Laboratories
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.
|“In terms of sales, all vendors are good; in terms of service, they|
are all bad. Once you pay up, the honeymoon is over”
Sunil Kapoor head of information technology Fortis Healthcare
Sudesh Jain (Transport Corp of India–TCI)
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.
|“As an AMC can cost more than new PCs, we usually replace all our desktops after three years, instead of going in for a new AMC”|
Sudesh Jain assistant vice president, IS Transport Corporation of IndiaÂ
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
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.
|“We spent Rs 40 lakh on a server four years ago and need more out of it today, but it can’t be upgraded. Even a buyback proposal has failed”|
Pradeep Gupta AGM, MIS, Daewoo Motors
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
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
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.
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
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
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
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
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
TCI: Since the last year, we decided on Wipro, PCS and HCL. Around 60%
is with Wipro and the balance with other vendors.
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
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