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