A strategic financial head with IT acumen

B G Shenoy, who recently became the Vice President-Finance & IT, MTR Foods wants the company to sharpen its competitive edge. That ambition, said Shenoy, has spawned a number of IT projects in 2010. He is being elevated to his new position to take charge of IT aimed at supporting the transformation of MTR Foods. By Akhtar Pasha

Soon after completing his B.Com, Shenoy went on to become a Chartered Accountant and ICWA and got his first job with A F Ferguson & Co, a management consulting firm, in 1987. After gaining hands on experience in every facet of finance and accounting for four years, he moved on to Lipton India in UP and later joined their Delhi office and worked there for four years when Lipton India was merged with Brooke Bond India in 1993-94 to form Brooke Bond Lipton India Limited (BBLIL). He said, “It was a horizontal merger wherein companies manufacturing similar kinds of commodities or running similar businesses merged with each other. The principal objective behind this type of merger is to achieve economies of scale in the production process through the carrying off of duplication of installations, services and functions, widening the line of products, decreasing working capital and fixed assets investment, getting rid of competition, minimizing advertising expenses, enhancing the market capability and getting more dominance in the market.” He played a significant role in handling the merger of BBLIL with Hindustan Lever Ltd, (HLL) in 1995. When HLL restructured its businesses, it sold its Fertilizer and Industrial Chemicals business to the Group Company, Hind Lever Chemicals Ltd., and Shenoy had to move to the corporate office handling finance, treasury, and taxation along with other aspects of accounts.

Joining MTR

In December 2002, Shenoy joined MTR Foods to head the company’s finance function but he had already acquired business skills in managing IT and systems. He had worked on MFG Pro ERP at HLL and this came in handy at MTR Foods as they were grappling with the intricacies of managing the supply chain to generate a profitable rate of growth. He was responsible for evaluating SAP ERP R/3 back in 2003 as a Project Leader and won the distinction of completing the deployment and going live within six months, which was the fastest deployment by a processed food manufacturing company at that point. He chose five modules—Production Planning, Material Management, Quality Assurance, Sales & Distribution, and Financial Accounting.

Instead of sitting and customizing SAP R/3, which would have required further investment, Shenoy reengineered the business processes to suit the R/3 package. For instance, purchase negotiations used to be conducted at the Bangalore head office; this activity was shifted to the plant. The release of payments (invoicing and verification) was done at the plant; this task was shifted to the head office. The business process re-engineering exercise saw a tremendous improvement in the outflow of information along with the R/3 package.

It eliminated the inefficiencies that had existed in sourcing raw materials from across the country and helped become lean (inventories). The deployment also streamlined information communications, planning, and data availability on a 24x7 basis, which helped the top management to take business decisions faster.

Key IT investments in 2010

The investment in SAP R/3 was stabilized a long time ago and it has been solid in handling the transactions related business processes for quite some time. Shenoy said, “Our business has grown rapidly in the recent past and we want to ramp up quickly to get an early mover advantage and hence need the support infrastructure and business applications that can help in scaling seamlessly.” He added, “We are making Rs 20-25 million fresh IT investments in 2010 to meet our expansion plans [AMC and maintenance fees would be an additional Rs 12-15 million]. The core areas of investment would involve upgrading from SAP R/3 to SAP ECC 6.0, hardware support infrastructure (servers and notebooks) and additional business applications such as Secondary Sales Systems, and DMS.”

Upgrading SAP

One of the big initiatives that Shenoy has taken up is to upgrade from SAP R/3 to ECC 6.0 for which he has already purchased 125 licenses. He said, “To reach economies of scale and to meet our growth objective, we needed additional modules such as MRP, BI, Human Capital Management (HCM), Fixed Asset Management and Governance Risk and Compliance (GRC), which are available in ECC 6.0.” Shenoy added that SAP ERP was very strong in handling transactional systems, but today the company needed faster decision-making tools and analytical reports such as product-wise, category-wise, region-wise profitability analysis, budgeting and estimates based on historical data, reducing time for manufacturing, elimination of wastes, certification for processed foods, managing assets and people, to stay ahead of the curve.

Hardware and support infrastructure

Shenoy has bought three SunFire UltraSPARC T2 servers (Niagara 2) from Sun Microsystems running Solaris 10 for the additional modules.

Earlier six functional heads of MTR were using laptops. MTR is purchasing 20 new laptops (with Tata Photon USB connections) to equip zonal and territory sales managers so that they can capture key field data on the fly and provide key data points to the top management so that business decisions can be taken in the market place itself. For example, managers can track and monitor sales, targets achieved, stocks levels at SKUs, and stockists etc. Shenoy said, “Speed, agility and faster closure of customer orders are driving business to adopt mobile computing to automate the sales force and we see a big trend in mobile computing.”

Secondary Sales Systems

Another strategic business area that MTR is considering is a Secondary Sales System application to automate its secondary sales happening at the stockist level. Shenoy explained, “I saw the importance and functions of secondary sales data while at HLL and knew that we would also need to have one at MTR. The Secondary Sales Systems would help us replenish stocks at stockists, monitor sales there and service them better. We want to do order billing, region-wise and category-wise, monitor SKUs spread over India so that we can get a fix on profitability per stockist, best performing stockists etc.” MTR has over 100 stockists across the country and will benefit through this application.

Additionally MTR will also make investments in Wi-Fi enabling the entire office and factory. Shenoy explained that the company had regular visitors from Norway and wanted to give them secure access to its networks and needed a system that could give dynamic IP addresses to its guests. The wireless network would act as a redundant overlay network.

MTR is planning to spin off its IT under the leadership of Venkatraman [joined recently] who will be reporting to Shenoy for day-today-operations.

Top 3 technologies in 2010

According to him the top five technologies that most established business would be investing in would be mobile computing, document management system (DMS), unified communications, cloud computing and green IT.

Document Management System

Shenoy has already built the case for a DMS and said, “We have about 1,100 stockists with us and we are planning to digitize all their proposals, contracts and agreements including those with suppliers so that we can get visibility all across the enterprise including our parent company, Orkla. DMS will help to create templates of stockist agreements. It will help us in searching contracts and proposals faster.”

Cloud computing

Traditional IT cost reduction methods are not powerful or sustainable enough to respond to this recession. CIOs also need to address the structural components of the IT cost base and align IT more closely to the business by creating more flexible and adaptive cost structures. Successful CIOs will aggressively attack total and fixed costs, while partnering with business leaders to place smart bets on new technology and capabilities that are affordable today, will drive near-term profitability, and offer a payback period of 18 months or less. This is where cloud computing will play a significant role. Shenoy said, “Cloud computing is a reality and will have a far reaching impact on business and hence businesses cannot afford to ignore it. It will variabilize all of your fixed costs.”

The private model of cloud computing will appeal to SMBs. The advantages of this new model are huge. “It can move large parts of IT out of the enterprise, essentially converting CAPEX investments in hardware and software into OPEX monthly expenses, easing the pressure on CAPEX in today's market. It also allows IT to cut expensive staff, which although not good for the staff, is beneficial to companies that are hard pressed by the recession. It eliminates the need to guestimate what the business will need three or more years into the future, a constant issue in sizing hardware and committing to multi-year software licensing, and provides turn-on-a-dime response to unexpected changes in demand. This is particularly attractive to companies saddled with large, expensive computer installations that they now under-utilize because their business has decreased. Speaking of under-utilization, for many companies cloud computing can hugely increase overall resource utilization, thereby cutting the cost of access to computing resources, by sharing resources among multiple user organizations,” he said.

“Despite the advantage of cloud computing, most businesses are worried about security and scalability issues, which I think will be address and ironed out by vendors,” said Shenoy.

Unified Communications

Unified Communication (UC) is yet another technology that has emerged to help large businesses collaborate and cut their communications costs. It will change the way business is conducted.

UC would allow many people to join conference calls and share data (PowerPoint, Excel and videos) cutting down the travel time and associated costs significantly. It has already shrunk distance and borders. Though UC requires careful planning and CAPEX, we have seen the bandwidth and equipment costs coming down in the recent past, making it affordable today.

Green IT

Most large businesses are concerned about carbon emissions and they have started doing their bit to save the environment. Shenoy said, “Green IT is something which we are also concerned about and we are ensuring that we use resources optimally. For example, unlike large businesses that refresh their desktops every three years leading to issues of safely recycling, we think otherwise. We have HCL desktops and we tried to use this equipment as much as possible and not release it to the environment beyond five years. Additionally, HCL have their own path for retiring their products safely.” The company uses CFL bulbs and anti-static floors and walls that require less cooling. Additionally, it leaves the server racks half empty so that heat dissipation happens faster and evaluates all new products based on performance per watt.

akhtar.pasha@expressindia.com