E-biz, The New King

A few years from now, e-business will be an integral part of business

strategy. With this though in mind, the sixth edition of the DQ CIO Series 2001,

organized jointly by Dataquest and Citrix, discussed threadbare ‘E-biz

Initiatives in Enterprises’. Akin to previous panel discussions, this one also

threw up several interesting points–for one, who should drive the e-biz

initiative, the business heads or IT departments? Panelists agreed that IT

should be part of a company’s internal strategy and they should leverage IT to

contribute to the company’s bottomline. Of course, if the benefits are not

quantifiable, the IT department, along with units, needs to devise metrics to

prove the efficacy of the system. This has become imperative in the times of

slowdown, where getting IT spend is not easy. But slowdown or not, enterprises

need to stay at the cutting edge of technology to stay ahead of the competition.

These were some of the findings of the panel discussion held in Mumbai on

September 18. The panelists (from left): Satish Pendse, GM (information systems)

at Marico Industries; MSV Rao, director (department of IT) at Air-India; Rajbir

Singh, regional consultant at IBM; Prasanto K Roy, chief editor of Dataquest and

the moderator of the discussion; Arvind Tawde, CIO at Mahindra & Mahindra;

Gobind Lulla, CIO at Blowplast, and LN Sunderrajan, V-P (corporate information

technology) at Birla Management Corporation. We present some excerpts from the

discussion.

On e-biz INITIATIVES...

Satish Pendse (Marico Industries): The FMCG industry

traditionally has a very long supply chain on the sales side–from

manufacturing, sales and distribution moving up to the retailers and end users.

We are launching a new B2B initiative to strengthen our existing SCM system.

This would enable us to move on to the next phase of automation. It would also

link up our next level of partners and distributors. The information will be

collated and linked backwards with SAP using a web based technology.

People are more focussed on top line growth than efficiency

when business is growing. However, efficiency assumes prime importance the

moment top line takes a beating. This is where e-biz plays an important role.

Infrastructure is not a problem anymore. Software can be bought at one fifth its

earlier cost and its easy to source all kind of hardware. We have ample of

talent in the country and I don’t see a reason why India should not be

optimistic on the e-biz front.

MSV Rao (Air-India): We have had an online presence

since 1996-97. Besides giving a lot of static corporate information, the site is

connected to our backend systems. This helps users access to information like

arrival and departure of flights, passenger booking and availability of seats

dynamically on a real time basis. The site also gives frequent fliers

information about the mileage they have accrued and what can be redeemed. While

Internet and e-biz have come to vogue in recent years, we have been implementing

similar concepts for quite some time. It has been a global phenomenon in the

airlines sector. Ever since 1970 when airlines’ started operating on a

cooperative competitive spirit, systems for interconnecting airlines across the

world was standardized by the IATA. Air India started its data communication

project way back in 1979-80. Today we have a completely closed independent data

network across the country connecting all our stations and airports. We are

connected to all the other airlines via host-host communication. All airlines

have global distribution systems, which are essentially mainframe systems

connected to the travel agents across the world. The airlines are connected to

the hotel host systems and car rental host agencies. So the ‘airline Internet’

has been in existence for quite some time.

Rajbir Singh (IBM): IBM, being in a knowledge-based

industry is enamoured by certain key applications. The first one called the ‘Global

Campus’ was started a year and a half ago. We moved a lot our instructor-led

courses online and encouraged our students to first go through these online

courses before we actually invite them to the instructor-led programs. This has

led to increased access of programs and huge cost savings. Another area where we

derived significant value has been our ‘Knowledge Management’ applications.

We have a huge database of intellectual capital generated across the

organization and everyone in IBM looking after services or relevant product

sales or support have access to that knowledge management database. The value we

have got is that we can provide world class deliverables based out of any

geography and at very competitive prices.

Tawde (Mahindra & Mahindra): Way back in 1997, we

implemented SAP and it was one of the largest installations on the NT platform

at that time. As for our SCM initiative, our supply website for both tractor and

auto divisions was launched recently. It is called mahindrasupply.com. We had

the dealer website called the www.mahindrakisanmitra.com

for the tractor

division. Already, about 70% of our dealers do business online. Across the

Mahindra group, we have initiatives like steelmartindia.com, an exchange for the

steel community, automartindia.com and

officemartindia.com.

Gobind Lulla (Blowplast): Though we have evaluated all

the ERP solution’s available in the market, we have not implemented ERP as

yet. We feel that the value proposition given by ERP vis-a-vis our current

system is not cost effective enough to decide in ERP’s favor. So we have

shifted focus from the ERP to the e-biz initiative in a big way. One of our live

sites is the Intranet for VIP vendors where all our vendors are informed online

about orders, schedules and payments on a daily basis. For our other product

line of plastic molded chairs, a business of cutthroat competition and low

margins, we have again deployed e-biz initiative with 80% success. Three more

projects are in the pipeline, which will be rolled out by next month. One of

them is in the HR front and aimed at empowering employees to test them where

they stand so they can interact with the company in a much better way and tackle

issues like training and loan management.

LN Sunderrajan (Birla Management): We realized about

two years back, that for undertaking any e-biz initiative in a diversified group

like Aditya Birla, we need to have fundamental infrastructure in place and this

was the communication infrastructure. Without this in place we were doomed. So

the first key investment went in building a robust communication infrastructure

called the ‘Aditya Birla Information Highway’ and it cuts across all our

diverse companies. Today, we are connected to 87 physical locations and 140

offices. In terms of usage, we had about 100 users on the Adityabirla.com e-mail

id one-and-a-half years back, and today we have about 5,000 users with almost 75

gigabits of data moving on the highway per month and about 10,000 emails per day

flying on this.

Key issues and challenges in e-biz initiatives...

Birla Management: The key challenges we faced were

that of a robust communication infrastructure, buying in of users and finally

the issue of slowdown. In fact, slowdown is a bigger issue, not so much from the

user’s point of view but more from the management’s perspective.

Air-India: Fortunately for us we have the basic

infrastructure in terms of the backend systems. We have couple of huge mainframe

systems in three locations that are connected globally. So as far IT

infrastructure is considered, I think we are adequately placed. Also all our

e-biz initiatives have been in-house. Also, between 100 software and hardware

professionals we don’t find it a major problem as such. We do invest Rs 25-50

crore annually on hardware and we spend another Rs 40-50 crore on communication.

So for the size of our airlines and the number of aircraft we have, we really

don’t see much of a challenge on the e-biz front. Infrastructure is also very

important in our kind of business. While we can quickly take care of internal

infrastructure issues like LAN, external infrastructure can become a problem.

Despite our best efforts at building adequate redundancy, we still have to face

occasional outages.

IBM: Customers finds organizing themselves a key

challenge these days. The biggest problem for an IT manager today is how to

sensitize management to raise funds during critical times. The other important

issue for IT managers is getting the senior management to take ownership of the

projects. While senior managers would like the IT managers to own such projects,

the IT managers are aware that they cannot deploy it all by themselves.

Obviously they needs the support and ownership of the users. However if the IT

manager can clearly identify the business benefits that are likely to accrue and

then get the users to own those, then user involvement becomes easier and so

does the implementation. So the real challenge for the IT department is to

actually get these projects implemented to move them from a cost-based view of

IT implementation to a value-based view of IT implementation.

Blowplast: In times like these when there is a

shortage of funds and there are other organizational priorities, our company

would like to put funds into brand building rather than IT. So it is important

to extract the maximum from the existing infrastructure. Also since technology

is changing, it is important to keep costs low so as to minimize the input and

get the best leverage out of the existing systems and not get carried away with

the IT hype.

On assessing success of e-biz initiative via some

measurable parameters like Return on Investments

Air-India: Since the last couple of years we have

frozen our recruitment in all areas. The fact that we have been able to handle

more passengers without additional help shows that there has been a ROI. However

we have not measured the same.

IBM: I guess what we are really seeing in case of Air

India and its IT perspective is the shift in priorities. They are not so focused

on enhancement of revenues, rather in the last few years emphasis has been on

cost reduction. If you look at their e-biz initiative, they already have a

website for ticketing, status information, and loyalty programs. So the key

issues for companies like Air India is whether they are adding to cost or

reducing the cost and not so much as to contributing to the revenue.

Marico: Our philosophy towards investments, IT or

non-IT, has not changed. Return on capital employed (ROCE) has been the

underlying corporate philosophy and continues even in current times. At Marico

we do not get permission to go ahead with any initiative unless we gave tangible

quantifiable business benefits which are equivalent to any other business

initiative. For example if I intend to invest Rs10 crore in a Web initiative, it

has to give me a return which is tangible and quantifiable and not less than an

investment of say Rs10 crore in a factory.

Mahindras: I think that in the current situation the

issue is not of getting returns rather its the availability of funds. Basically

we need to prioritize IT projects aligning them with business. Right now we are

trying to assess the returns of our earlier implemented projects like ERP. We

have a separate core group from IT and business looking into this issue.

Quantification of benefits

Blowplast: Quantifying the benefits is always

desirable so that all the issues can be discussed before the start of the

project. The fact that you are putting figures and assigning weights to

intangible benefits will itself bring to the fore whether a project is an

esoteric or realistic exercise to begin with. Then the user and IT department

can decide whether to go ahead or move slowly on the project.

Marico: In the recent SCM initiative, we faced the

dilemma of justifying the tangible and intangible. While the tangible benefits

were not as acceptable as per Marico’s corporate norms, there was a high

degree of intangible benefit accruing from the project. So we listed all the

intangible benefits and convinced the top management about the benefits of the

project. We then confirmed with the business experts whether these benefits

could generate more sales or contribute to the top and bottomline two to three

year down the line and by what percentage. Through with the vote from the senior

management we decided to make the most conservative estimate. This process can

be used to measure everything.

Air-India: While quantification is good, there may be

many a case where one cannot work out an ROI justification of the project. For

example when Jet Airways started out, they did not think of the ROI of using a

reservation system. But without a reservation system they could not have had set

up their shop. So at times we need to incorporate technology without looking at

ROI. Secondly, what happens when an infrastructure increases beyond your

control? Such contingencies also need to be taken into account. Tomorrow if

everybody is using the Internet and it becomes all-pervasive, then even the

grocery store would have to have a online presence. The ROI will suddenly became

measurable.

PKR: I guess we are not talking about the exact rupee

and paisa, but about the metrics and whether you can get to those metrics like

reduction in transaction time or reduction in some time to get to the best

practice level.

On driver of e-biz — business or IT

Marico: While years ago it was more of a golf club

initiative, today IT initiative has become purely business driven. Sensing the

benefits users have started measuring such deployments, which have evolved over

the last 5 years.

Mahindras: At M&M, all IT initiatives are owned

and driven by the businesses and comes out of their own strategies. As far as

the IT department was concerned, we acted like a facilitator or a catalyst for

the same. Also as IT justification for any budgetary provision is done by the

business people, it’s easier for them to get the approval from the management.

Also one of the major tasks for the IT department is to track the technology

trends and present the relevant opportunity to business people.

Blowplast: Giving the project management to the user

community head does not mean that the IT departments let a junior guy to do the

project. The reason is that the user does not know how to translate his dream

into action and it is imperative that the user drives the project.

Air-India: While its is good that the users drive the

project, typically it happens that the IT people take the initiative because

they are an impatient lot .So they would get the prototype of something and try

and sell it to the consumers. Also if not this way then it’s difficult for

things to take place at a quicker pace.

B2C component in e-biz

Marico: Considering the type of products in our

portfolio B2C is certainly not as strategic as B2B. Our products are available

within 5 minutes of walking distance of your residence and PC booting and going

on to the site will take 15 minutes. So I think that selling FMCG products over

the net is still a long way to go. However I am ruling out B2C at all. Since for

the FMCG organization brands are the core competency and most coveted strength,

we could use B2C as a brand building channel. It can be one more media for brand

building like TV advertisements, radio or mass advertisements. So while it

cannot come as first priority but it definitely can’t be ignored. For example,

our brand Saffola is closely associated with heart. So one can have a lot of

things revolving around the heart and not necessarily revolving around selling

Saffola.

Air-India: Our B2C objective is aimed at customer

satisfaction and handing information to them. But there are certain issues for

service industries like ours. If we start selling tickets online, then the issue

is not just the ticket of your own airline but the various other airlines that a

customer might want to travel in. So are we in a position to give connections

for all the airlines?

Marico: Frankly I believe we have not exploited the

full potential of the Internet. Also, it is a new channel available to develop

relationships with the customers. We see B2C in another field–after-sales

services. Since most customers are in remote towns, if we could address most of

their queries and problems online, it will go a long way in enhancing customer

relationship.

Quotes

IBM: The real challenge is to get projects implemented

to move them from a cost-based view of IT implementation to a value-based view.

Marico: When the topline is taking a hit, efficiency

comes in to the picture, and this is where e-biz will have a larger role to

play.

Blowplast: In current times of shortage, we would like

to put funds into brand-building rather than IT. So, it is important to extract

the maximum from the existing infrastructure.

Mahindras: IThe issue is not of getting returns,

rather it is availability of funds. We need to prioritize IT.

Air-India: IT people take the initiative because they

are an impatient lot and get the knowledge across the industry of what is

happening.

Dataquest Report