Top Three Technologies

Technologies that matter

ERP, desktops and servers are the top three technologies among large businesses. By Akhtar Pasha

When we started analysing the large enterprise IT infrastructure survey findings, we knew for a fact that enterprise application software (ERP) and servers would be the top two technology areas where IT investments are happening and that things will continue in the same direction. What emerged that was of interest is the fact that the third technology that these enterprises favour is none other than desktop and notebook PCs. This could be due to the fact that many large enterprises are growing and expanding their production capacity. The report was prepared with inputs from 163 respondents in seven industry verticals with a turnover in excess of Rs 300 crores.

Let us go step by step in understanding how important these three technologies are for large businesses.

Micro-verticalisation and the expanding business

The survey indicates that for 20 percent of 163 respondents, enterprise application software (EAS) such as ERP, CRM, SCM and BI was their most significant IT deployment in the past year. Manufacturing/engineering, FMCG/consumer durables, Oil/energy verticals have taken a lead in driving the implementation of enterprise applications. Vertical-wise it is manufacturing/engineering that has set the tone for EAS spending. About 30 percent of these companies have already invested in EAS. After manufacturing, FMCG/consumer durables and oil/energy with 25 and 20 percent cite EAS as the most significant IT deployment of the past year.

121 respondents have deployed some kind of EAS. That’s 74 percent of the overall sample. Of this base, 83 percent have gone for ERP. It is understood that given the scale of operations, verticals such as FMCG/engineering, energy, manufacturing, and telecom cannot do business without an ERP system. The infrastructure required to compete in the marketplace be it domestic or exports has gone up significantly. Investments in ERP are strategic and required to support production expansion and growth.

Eruch R Batliwala, general manager, Tata Power says, “We were looking for an industry-specific solution as we felt that the verticalisation of ERP will help us reduce deployment time and cost; as a result, the realisation from investments in ERP would be faster. SAP offered enough flexibility and scalability to adapt its solutions to our needs.” Tata Power provides power utility services generated using thermal and hydro power. With SAP one of the immediate benefits that the company realised was better inventory control. ERP also helped align the processes and thereby brought down the process cycle time. These two benefits led to a third one—increased efficiency of the workforce. Tata Power also found the quality of its data improving. With the different offices working on a uniform IT system, it was much easier to retrieve process information and analyse the same. This helped the company make quick and effective decisions. “We did not want to be slowed down by our organisational weaknesses. The IT initiatives along with the ERP deployment have enabled us to maintain our customer focus. We have ready access to customer-focused information from various company touch points which can be used to create business strategies aimed at better customer service,” explains Batliwala. The company can now easily manage invoicing, billing and revenue. This helps integrate financials with customer billings. The customer information regarding aspects such as billing, consumption, and payment are extracted from ERP servers and uploaded to the portal server, almost daily. Customers can access this information and, if necessary, make enquiries or register complaints.

Additionally micro-verticalisation is driven by customer demand and large businesses are looking at micro-vertical specific systems because these solutions are 85 percent pre-configured. This means they can go live quicker and save money along the way. Large business such as Tata Power as trying to do with less and with a clear emphasis on TCO and expanding capacities and operations. Many large businesses are investing in a pre-packaged vertical solution because they have fixed time and budget for implementation as customisation can be risky, time consuming and the failure of implementation also runs high.

Aviva Life Insurance has integrated its customer-facing departments using Talisma’s e-CRM suite. The eCRM is integrated with its call centre operations, which no other vendor was offering. V Sivakumar, head-IT, Aviva Life Insurance says, “The eCRM suite promised a common integrated platform for different customer-facing departments such as for sales, marketing and customer services within the organisation. The eCRM suite has been deployed in marketing, sales and service as well in the partner and sales ecosystem (comprising bank assurance partners and insurance agents). Aviva has implemented several modules of Talisma e-CRM, such as marketing, sales, servicing, and contact centre. Shivakumar explains, “The implementation has helped us share real-time customer information across different customer-facing departments across locations. This has helped departments track customer details and respond to every query on short notice.” Additionally it has helped the company in facilitating quick analysis of its sales and marketing initiatives—to incorporate the same in its products and services. It has also helped Aviva develop multi-step marketing campaigns. Based on the type of response at each stage of the advertising campaign, appropriate processes can be triggered automatically in the e-CRM suite.

As far as business intelligence is concerned, large businesses that are through with their ERP deployments are using it. For example, SBI is using a BI tool, called Executive Information Systems that has been developed in-house to look into the past ten years data and give branch level information with different matrices such as daily revenues, targets achieved, high net worth accounts and the like up to the last account level.

Time to market and capacity expansion

Another reason why the ERP market continues to grow is that most large businesses are growing and expanding at a rapid pace, and there is fierce competition to bring products faster to the market. Explains Rajiv Rajda, vice president-Information System, Kodak India Pvt Ltd., “We were using enterprise applications from Sun Systems and there was no standardisation of business processes within the group, and we wanted to optimise the sales ratio and have speedy closure of balance sheets.”

Take the case of Tata Ryerson that manufactures hot and cold-rolled coils, strips, plates, sheets and blanks. The company has upgraded to SAP that has helped it improve its production cycles and streamline transaction processing. C S Murthy, chief of information management, Tata Ryerson says, “We supply a lot of raw materials and validate materials to Tata Power before it is dispatched to the customer. SAP ERP has helped in sharing the information about materials and customers. Investment in SAP has increased the efficiency of business processes, improved productivity, reduced costs, optimised workflow and reduced errors. Real-time information has helped speed up transactions manifold.” Having seen the benefits the company has extended its ERP system to include HRM (Human Resource Management). “We are also evaluating to have a CRM and full fledged SCM system in place. But it would large depend on the business processes,’ adds Murthy.

VISA Steel Ltd was using disparate systems to manage its operations in different plants and there were discrepancies in data as there was no integration of systems leading to inaccurate data and delays in getting reports based on assumptions. Additionally there was duplication of data. After going live with SAP the company’s inventory control and data control has been integrated and has led to timely decision making. Now every process is online and also linked to the corporate office in Kolkata.

Globalisation opens new markets

The global integration of Indian industry because of its continuous growth and emergence as an important offshoring and outsourcing centre has opened new opportunities, at the same time it has increased the challenges for large businesses, particularly those in the manufacturing (engineering/auto components), textile, pharmaceutical, FMCG and government verticals. Earlier, the primary challenge they faced was managing the cash flow; today, the most challenging task for large businesses is how to grow the top-line revenue as fast as possible in order to keep up with the competition and manage growth since they operate with thin margins. ERP projects are still top priority for most growing verticals, particularly manufacturing, and this will continue to bring in ERP revenues. They require systems that can help them forecast their production and accommodate changes at a faster pace. The pressure is more to do with improving efficiency, productivity and competitiveness. In a nutshell, the areas where large businesses want to improve are to bring down operating costs, increase productivity, increase sales by entering new markets, and raise production capacities. This trend has lead OEMs to stop holding inventory at their premises, which is why they are looking at adopting just-in-time (lean) manufacturing.

Desktop PCs as productivity tools

In the past year, 18 percent of the respondents said that desktop was second most sought after technology after EAS for large businesses. The government/PSU vertical gave the greatest importance to this product category with 60 percent of the respondents citing it as their most significant IT deployment of the past year. Most verticals exhibit cent percent desktop penetration.

As far as notebook PCs go, 94 percent of 163 respondents use them. Most large businesses have extended their enterprise setup giving remote access to their mobile workforce, mainly to decision makers. Vertical-wise government/PSUs and oil/energy have 100 percent usage. Thin clients are also gaining momentum as reflected in the telecom/ITES verticals, oil/energy and BFSI.

“People rely on PCs much more than they did before. As a result they are looking for quality products with greater reliability and a dependable support service,” says V Nanjunda Murthy, chief manager-Data Processing at SBI. He adds that, “In our case BFSI, the investment in desktops was more towards computerisation of branches to achieve Total Branch Automation (TBA). I would rate investments in desktops as one of the top three technologies because without TBA we would not be able to rollout our CBS. Similarly most of our executives particularly those in sales and marketing are equipped with a notebook PC as it improves their productivity. We see both desktop and notebook as productivity tools for any business.”

Even the top management cadre are equipped with notebook PCs because most of the bank data (sales, projection, achievement, revenue-wise break-up of braches) are available in the notebooks starting from the branch level going up to the customer level. They need information at their fingertips so that they can take decisions faster.

Additionally desktops have become support systems for applications that connect to the supply chains of larger vendors. Murthy of SBI says, “Investments in PCs are like raw materials. No individual/no branch can function without PCs. It plays an intricate part in increasing productivity.”

With the impact of Intel chip price cuts getting clearer, the large business registered a strong year-on-year growth in PC consumption. Additionally the market is characterised by the emergence of clear-cut segments, vendors running segment specific marketing programmes and is ceasing to be just price driven. Though in the case of large government banking/PSU deals, it is generally decided by DGS&D, which calls for tenders for various requirements and the lowest bidder (L1) bags the deal.

Computerisation will be a major focus area as this segment and about 67 percent are planning to invest in PCs. Telecom/ITES, oil/energy and services will be key verticals that will drive PC buying.

Commoditisation of the x86 server platform

Servers, the lifeline of any IT infrastructure as described by large business are fundamental building blocks for any IT infrastructure as they run most business critical applications for any business and much of the success of a business depends upon it. About 17 percent of 163 respondents cited servers as their most significant IT deployment last year. About 40 percent of the 5 respondents in government/PSU said the same and is the third most sought after technology after EAS and desktop. Other verticals such as services, BFSI, and oil/energy cited this category as their top priority last year. Within servers it’s the x86 market that dominates. 75 percent of the respondents have already invested in Windows x86 server market. Spending by DGS&D, banking (for total branch automation) and rolling out CBS, telecoms are the primary drivers for the growth of Windows x86 server market. Aviva Life Insurance and BPCL are example of server consolidation and virtualisation using VMware. For example BPCL has consolidated 34 Microsoft x86 servers to two x445 IBM servers.

Most large business have bought x86 servers because of their price-performance story. Additionally domain skills on x86 platform are easily available when compared to those on Unix systems. Explains Murthy of SBI, “We must be using more than 50,000 x86 servers throughout our 10,000 branches in India. If we include our subsidiaries the numbers will be even higher. We have about 50 data processing centres in the country and most them are using x86 servers. The x86 servers are preferred because of their better price-to-performance ratio and that the domain skills on x86 are also easily available. Additionally all our new branches will be on x86 servers.” Some of the large businesses we spoke agreed that they are investing in x86 servers because do not want to get glued to proprietary systems. Even the x86 servers have become powerful thanks to the emergence of dual-core and now multi-core x86 server processor are capable of taking some of the workload of Unix systems. Murthy of Tata Ryerson informs, “We have deployed SAP R/3 4.7 on a HP ProLiant ML570 with a Pentium III Xeon processor running Windows 2000 because of the price-performance. Our requirement does not allow us to look into Unix systems.” Within x86 servers it is predominantly 2-way and 4-ways that are dominating. Apollo Tyres, MTR, Reliance Retail and RPG Retail are using x86 machines.

Strong demand for Unix systems remains

Unix server market shows 39 percent acceptance among large businesses. This is because Unix machines have been used where application/infrastructure support requires very high (99.999 percent) availability, reliability and scalability. For example it could be a billing application or a CRM application for a telco or a CBS application in a banking case or ERP/SCM application for manufacturing/oil exploration. According to the survey, Unix systems shows very high penetration in BFSI and telecom where over 50 percent of the respondents are using them. For example Tata Power is using a HP ES-40 server running Tru64 at the backend, and a mix of Itanium and Xeon processors running other variants of Unix. All the IT infrastructure maintenance and facilities management is outsourced to a third party. Murthy of SBI explains, “When it comes to running our CBS and DR site we trust only Unix systems. We are using HP SuperDome systems to run our CBS in Mumbai and DR site in Chennai. The decision to run Unix systems is taken at the macro-level.”

Dr Reddy’s Laboratory has a mix of PA RISC, Xeon and Itanium servers inside its data centre and since SAP was withdrawing support on PA RISC, the company consolidated those servers with two p595 servers with 20 partitions. Similarly Madura Garments has consolidated its Sun Solaris servers running mySAP on to two IBM p570s. Indian Overseas Bank (IOB) was using three UltraSPARC machines to service 1,200 branches through its CBS. The bank has consolidated this onto two p570 machines and 60 percent of the capacity is still untouched. One p570 server is supporting 600 branches of IOB.

LG Electronics India (LGEIL) is using an IBM p595 and two p570 servers as its database, ERP and DR servers respectively with AIX. Daya Prakash Programme Manager, LG CNS Global, says, “The Oracle E-Business Suite that we are using sits very well on AIX systems and provides us with better reliability and the system off time and the whole of patch management is prompt and efficient.” LGEIL is also using two Sun Fire systems (6800 and 4200) with Solaris for its e-commerce initiative (LGeasybuy.com). It is providing the company with better scalability and upgradation.

Linux servers continue to be deployed in edge networks running mail/Exchange servers, security/firewall servers at the gateway level.

Top three: strategic decisions

Aviva Life Insurance is using Talisma’s e-CRM suite that has helped it launch new products and services to differentiate it from competitors. There has been flood of private life insurance companies in India after the liberalisation of the Indian insurance sector. When Aviva entered India in 2002, it was one of the last players to enter the market. Shivakumar says, “We need solutions that can give us technology edge in the market place and hence we deployed eCRM before launching Indian operations in June 2002.”

Rajiv Rajda, vice president, Kodak India Pvt Ltd says, “Today, the business case has to be a significant driver in any IT investment. It used to be ‘IT for the sake of IT,’ but it’s not the CIO’s job to come up with brilliant IT ideas; it’s to figure out where and how the IT model can facilitate business strategies.” Murthy of Tata Ryerson describes investment in ERP, servers and desktop as, “Being in an unorganised sector, the only way for it to differentiate ourselves was through product and service quality. As the various units across the country were not integrated, lack of real-time information resulted in inefficient management of working capital. It helps in better order fulfilment and increased customer satisfaction.” Batliwala adds “SAP has prepared us for rapid growth. We can triple growth in the next three years.”