Head to Head

Philips Electronics India Ltd.

Philips Electronics India, a lighting, consumer lifestyle and healthcare major, has been a pioneer in the area of technology adoption as far as its internal IT needs are concerned, with a view to leveraging IT for maximum impact. Its CEO, Murali Sivaraman and the head of IT for its lighting sector, Sanjeev Kumar believe in creating a robust technology platform within the company which acts as a business enabler and catalyst, ensuring the highest possible productivity.

Having worked together for nearly a year, the duo clearly articulate their business decisions and needs, where IT becomes a critical component in the growth process. While the most critical challenge is retaining people, the ideal way to address this, Sivaraman believes, is to have robust market intelligence and effective CRM which can ensure smooth flow of information in real-time, promoting a sense of ownership and belonging.
Kumar insists on developing synergy between the global and local market, taking cognizance of the local needs and changes when he implemented SAP. The company has moved methodically to mold IT as a value contributor which can ensure positive momentum for growth.

How do you foresee the growth potential in the segment that you operate in? Areas of growth?

MS: I see growth across the business lines-including lighting, consumer lifestyle and healthcare-that we are associated with. The industry has witnessed about three times GDP growth and is in the region of 20 percent. With regard to lighting, there is increased investment in infrastructure to create energy efficient systems, where growth is assured. Similarly, in consumer lifestyle products-where retail is driving the growth in a major way-consumer spending has increased substantially. However, healthcare is not growing at par with the other segments, owing to increased inflation, with lowest per-capita income.

SK: Philips as a organization has set an ambitious target for 2010 to leverage organic growth and acquisitions, cementing a place in the market as a leading brand. In India-being part of the emerging market and a prime focus for us-there are several growth-related challenges. We plan to grow by approximately 20 percent plus across all segments and sectors we operate in.

How has Philips' business performance been? What are the key growth areas?

MS: From a revenue turnover perspective, Philips group turnover is around Rs 3000 crore. We are growing at about 15 to 20 percent, though the slow down has had some impact on this. However, continued consumer spending and investment on infrastructure is driving growth. We see good opportunity for growth-both organic and inorganic-across business segments.

SK: We are growing across segments owing to an upsurge in demand. Due to inflation, managing supplies has been a challenge. However, investments are opening up in the consumer lifestyle and lighting segments and we are promoting the concept of 'Green Lighting'.

Can you give us an instance of how information availability will make a difference in your business?

MS: I always advocated having robust market intelligence and an effective CRM database for smooth communications. A full-blown ERP with focused customer service is a pre-requisite, which ensures real-time information flow to the sales force and product heads, who need to have information on their finger tips.

SK: At Philips, the Business Intelligence deployment-with simple, real-time analytical slice and dice capability-makes a big difference. Employees empowered with the right information are able to make informed decisions. It ensures that the right approach is taken every time and limits unintentional revenue leakages. We eliminate rework, repair, re-direction of funds and investments which otherwise may happen because of incorrect decisions. IT enables all our 40 locations to have a unified view of information.

The information flow has created 'Process synergy', which helps the team work in a global environment with great fluidity. Importantly, we have the opportunity to compare and compete, making continuous progress with the right benchmarks. Leveraging operations, resources and sourcing facilities scattered across the globe is the biggest advantage for us. IT plays vital role in connecting these resources seamlessly, keeping things tightly knit and under control.

Collaboration and instant information sharing is a reality across our locations. IT also makes a difference in fostering business agility with the changing market dynamics, government policies and global regulations.

What are the significant business challenges you as CEO/CTO of the company face?

MS: The most critical challenge is human resources, starting from attracting talent, motivating them and rewarding them from time to time for business sustenance. Unlocking team potential by providing extra professional skills and training is a challenge. Sustaining growth, retaining brand image and managing change are significant business challenges. Constantly changing demographics, a competitive landscape and evolving product lines to attract consumers are also key.

SK: The challenge is to make the elephant dance, which means changing existing systems with new IT implementations, without any adverse influence. Migrating to new systems without any changes in extant working styles becomes a challenge. Keeping customers loyal, in tune with globalization and market challenges are vital tasks.

Please highlight certain IT projects implemented at Philips.

MS: A best-in-class IT program for implementing out-of-the-box, scalable, standard solutions is key. For instance, to move to Utility mail from a proprietary system, we partnered with Microsoft and HP. SharePoint was implemented for collaboration.

SK: We believe that in the near future, a majority of the people connected on the Philips network will be connected from the outside. The current ratio will be reversed completely. Todays's 80 percent insiders and 20 percent outsiders will switch roles, with ten times the connectivity we have today. For growing companies, it will be mandatory for innovation to happen in all the areas. Eventually, the gates will be opened for partners and customers to have full transparency so that they can participate in our growth agenda more aggressively. The challenge is to guarantee safety with no compromise on IPR, security etc.

Our critical deployment is on our global SAP template, with an advanced solution to address sales and operations with the help of SAP APO and BiW for business intelligence and the CRM suite. The vital task was to do away with existing solutions such as Baan, Oracle, MFG Pro, JD Edwards which were being run across business operations. We have rolled out SAP in ten sites in the Asia Pacific region, taking specific country requirement into view.

We are in the process of simplifying and bringing global synergies with a mix of the right benchmark from local markets. When we say global synergies, we take into account aspects like cultural, administrative, governmental and economic factors and their impacts. In an effort to integrate with our main distributors, we tied up with Tally to implement their ERP point-of-sale solution and inventory management solution.

So how does IT help in meeting these challenges? Kindly be elaborate.

MS: IT provides the hygiene factor and is a business-enabler, which helps us achieve competitive advantage. Standardization of IT tools and solutions becomes a differentiating factor by itself, which will increase our operational efficiency. We invest about two percent of our revenue turnover on IT deployments.

SK: With our growth targets being very high, all IT projects support the meeting of our goals. As stated earlier, we see our growth targets being achieved by expanding organically and inorganically leveraging our global SAP program. People, processes and technology come on board instantly. An Internet-centric approach brings in a lot of sense and simplicity; out-of-the-box solutions can easily be extended and deployed cost effectively. For customers and partners -who number in the thousands-interaction also becomes simple and effective, as they are clued into our system.

How has the role of IT changed over the years in your organization? Kindly throw light on its role and influence.

MS: IT has influenced the transactional part of the business, which is completely centralized. Our business is aligned with IT which influences growth as well. We re-engineered our business processes to integrate with IT and leverage its advantages. While it has made a positive impact on our business, taking it a step forward, it is expected to do more. As a support function, IT enables our business partners and we see IT as a value contributor that can be enhanced to bring in process efficiency, customer satisfaction, improved people productivity and better utilization of resources.

SK: People can do more with less resources if IT is used as an enabler in all functions.

Business partner relationships is another area where we see IT playing a major role. IT-driven innovations have great returns, which we all need to tap. A lot more needs to be done in this space.

"Disruptive innovation"-a catchphrase-can be steered effectively with the help of IT. Our solution 'Same Time Connect' which is based on IBM's Lotus Domino is an effective tool at Philips which connects everyone and enhances productivity.

Change management is usually top-driven. How difficult was it to convince business users about the advantages of IT or any application such as ERP?

MS: Any change that we make in the form of an IT implementation does require some amount of convincing of our front-ending teams-be it product or sales. We need to impress upon them the input and output ratio possible through IT. It calls for a lot of deliberation to elaborate on the implications of the new solutions while explaining why the old systems need to be done away with. It is imperative to provide a larger picture in terms of the advantages that the change brings in.

SK: True-ownership lies at the top. The key mantra is "communicate, communicate and communicate", which makes makes things simple and manageable. A collective decision is taken and feedback is sought based on valid arguments. Demo, training and reasoning through any change in a project is a regular exercise.

Can you recall any major IT deployment where you have been the pioneer?

MS: I have had great involvement with the ERP implementations in my earlier roles, which involved aligning them with global ERP systems. At every stage in a process, the working environment is packaged in a certain format and customers are used to that procedure. ERP introduces a standard platform. At Philips, we recently implemented SAP in the consumer lifestyle segment and now the Philips lighting segment is going through the ERP implementation, which will go live soon. While our users have an open mind, there are several internal controls, legal priorities required to make it a successful implementation.

SK: Ordys' SOA based on BaaN is where we have been an early adopter. The need to was to quickly integrate with systems as the advantages were numerous. Many batch-based processes running as layered applications on ERP were eliminated, system maintenance burden came down and speed and agility went up manifold. New BPM enables easy deployment, monitoring and maintenance. With this, many transactions on the periphery are handled in real-time and this has major business impact when targets are stretched and people have to wait for system latencies. Bringing in SAP on a global format is the major IT deployment at Philips as all the applications migrate to SAP.

Was there any kind of skepticism about the new system?

MS: Of course, certain frustrations within the team crop up during the process as they are used to certain way of working. This calls for investment in terms of cost and time.

SK: As of now, we are rolling out our SAP template that is targeted to replace a decade-old ERP implementation, which has gone into the roots of the company and its way of working. Though the advantages of new processes are many, we sense skepticism while driving new initiatives. Functional heads-like finance, supply chain, inventory-who are part of the commercial business, are trained and informed in advance about the benefits of such a system.

How do you evaluate each IT project?

MS: Before initiating any project, we demand a pay-back which is not necessarily in cost savings or return on investment, but in terms of improving productivity. The IT department head works in tandem with the management and decides on projects.

SK: We evaluate or rather trigger each IT initiative as part of broad business agenda. IT projects are fully embedded into our business plans and find complete congruence with forward flow. RoI is not the only factor for us. It could be part of a disruptive innovation cycle that we initiate as a strategy.

Do you outsource all your projects?

MS: We have outsourced all our IT projects and implementation processes to IBM, which also decides on business applications for Philips. We also involve varied partners for our infrastructure projects and development work.

SK: Being a vast global enterprise, we work with many partners. For infrastructure initiatives, we have SingTel, IBM, CMS. For applications, we work with Accenture, IBM, Systime, EMC etc. Our entire SAP implementation has been outsourced to IBM.

What kind of advantages does outsourcing offer?

MS: I find it provides a great advantage over doing it all in-house. There is someone who is doing it better, smarter and quicker and helping us avoid the manpower hassles.

SK: We have generic IT and Business IT setup. This forms a typical IT supply and IT demand organization to support profitable growth. IT strategies and business alignment aspects, we keep to ourselves. Generic IT-infrastructure, applications, security, BCP-are done through collaboration or with partners. Outsourcing brings a lot of advantages in terms of bringing in market insight, learnings and setting the processes into self-propagating mode by gaining access to innovation happening in that space. Partners are able to extend this to us.

How does your company view IT? As a cost centre or as a catalyst for growth?

MS: IT is viewed as a critical enabler and not as a cost centre. IT definitely improves our productivity and enhances the global benchmarking and brand image, if deployed effectively.

SK: Recently, IT has proved itself and the value it brings to the business. At Philips, IT has morphed into a function, works as catalyst for growth. However, the core value is in securing the entire system in the process of business enablement. We have implemented security solutions to the hilt.

Are there any situations where you two have disagreed on a particular issue?

MS: The disagreements and differences pop in with regard to speed of execution and cost transformation. In principle, I advocate IT systems as a business process. We demand building systems around our applications such as CRM and APO in a limited time. I don't want the CIO community to just aim at fulfilling customer expectations, but champion IT to bring about a major difference in doing business.

SK: We engage in a healthy dialogue on any IT deployment or investment need and arrive at a logical conclusion. Disagreements do occur, but lead to enhanced knowledge. How sharply we communicate business sense is something which is tested. As a result, honing and toning of skills is necessary.

How do you address technological challenges?

MS: The critical challenge is to enable technology to bring in competitive difference and enhance my opportunity in the market.

SK: We keep a close watch on new technology emergence, particularly given the rapid pace of obsolescence in technology. We try to be early adopters of technology, selecting the right choice out of many. Keeping the future roadmap in mind, experimenting with technology and its nuances gives us confidence. We have developed an internal IT policy where we already state expiration date during deployment. We plan our infrastructure deployments based on this policy. We welcome ideas, we assess development but are frugal and thorough in internalizing them.

What are your priority areas going forward as far as the business is concerned?

MS: The priority is the growth of the company. What more can we give to the customers and his preferred choice of products and solutions? Investment will be part of the ecosystem, which will revolve around branding-both above the line and below the line-spreading the product range and widening the channel reach. We will focus on judicious investments on various verticals that we drive.

SK: The SAP Program, Business Intelligence, Advance Planning Optimization for sales and operations are key focus areas as of now and parallel to that, a best-in-class IT program that we would like to run. Data security standards are also our priority area, which is an on-going area of deployment as a part of process and governance.

What kind of new IT deployments do you have in mind?

MS: ERP roll out is new and in the pipeline, which is about to go live and we are working on connecting our distributors to our central database. A robust CRM package and internal supply chain management solution with good features for effective forecasting is on the cards.
SK: Green IT in our lighting business segment is on the cards. A complete range of virtualization solutions for server, network, OS, desktop etc. is in the pipeline, as by 2009, we intend to consolidate our infrastructure.

What kind of trends do you think are emerging in the IT space?

MS: With more consumer goods emerging in the market, I would look at technologies offering more transparency in tracking material movement. Robust CRM with professional data points in the B2B space is the need of the hour. Mobility solutions to provide data on the fingertips is very much in demand for all our sales force and to connect to our 4000 employees and two manufacturing plants.

SK: Utility computing and grid computing is a trend we see happening. We anticipate consolidation at the OS and desktop level in the industry and will try this out as well.

- Interview by N Geetha