Hyderabad: A world of falling profits, declining bottom lines and increasingly hard-to-meet sales targets is driving many companies to change, to improve their quality of customer service and contain the costs of doing business. To accomplish this, companies are now looking at their IT infrastructure.
Global Trust Bank (GTB), for example, has found a way to beat the heat--e-transactions. For GTB, an e-transaction costs 65 per cent less than a physical one. That adds up to a lot, as the bank handles over 150,000 to 200,000 e-transactions every day among its 6.50 lakh customers.
P C Narayan, president of IT, retail banking and operations at GTB says, "We are 100 per cent virtual today. The ability to handle larger volumes at much lower costs is possible only by using state-of-the-art technology."
GTB uses Infosys' banking software Finacle in its Indian operations. In the Asia-Pacific it uses the Compaq Alfa GS320 server, which scales up to 20 lakh customers and has a capacity of 100 GB.
Cargo management major Gati has gone a step further. Having deployed a logistics management system and a tangible logistics system four years ago, the company is implementing Oracle's financial and CRM ERP packages to put best practices in place. The project is being implemented by Satyam Computer Services.
"Once the project is deployed, the process of business areas--pickup and delivery, vendor management or feed management, facility management and customer service--will become 100 per cent virtual," says Meera Madhusudan, senior manager Gati, and CEO and director Gati Intellects.
The Rs 260-crore company believes that the success of its business depends on logistics, which in turn depends on real-time information. Gati has a network of 340 branches and 10 centralised customer call centres, handling a customer base of 70,000.
Madhusudan adds, "Our focus is to provide all our services on real-time information." Gati's main objective is to sustain its compounded annual growth rate of 500 per cent for the last three years.
Similarly, the highly automated engineering division of Larsen & Toubro at Powai, Mumbai, is focusing on deliveries. Managing inventory has become very important because it is the key differentiator to ensure prompt business, says S R Gune, IT head at L&T.
He says, "We offer customers products in a substantially shorter time so that the buyer's investment becomes productive faster." If a competitor starts offering a 10-month delivery period, the company should be able to deliver in eight months, so that the purchaser feels the investment has turned productive two months earlier.
Surprisingly, these companies do not seem to be under pressure to cut IT expenses in these tough times.
"We will invest on technology based on our return on technology investment concept, which says the break-even should be in 18 months," says Narayan. In 2000, GTB invested Rs 40 crore on technology.
Gati's Madhusudan says, "We are certainly not under pressure. In fact, we are investing Rs 7 crore on our ERP project alone and Rs 15 crore--including the Rs 7 crore on ERP - to upgrade our IT infrastructure during 2001-02." She further states that the right time to invest in IT is now.
The slowdown has had some impact on L&T's spending on IT, but only to an extent. The company recently deferred its proposed investment on a WAN-based network management system. Gune says the company is focusing on investments where it can gain immediate dividends.
The company's implementation of its supply chain solution has paid off. The cost of implementation of the solution - Scheduler - for factory shop management, is a very small fraction of its ERP project cost. Gune expects to gain in multiples of the investment.
For several companies, high-cost ERP brands is not a priority. "We are using enterprise-wide applications for our dispatch services and web-enabled applications for our dealers' network. Since the current network serves our purpose, we are not looking at ERP as we cannot afford the huge costs involved," says D Deb, deputy GM systems at the Andhra Pradesh Paper Mills.
Many IT managers are faced with the challenge of justifying IT costs. M Srinivasa Murthy, deputy manager of information systems at Medicorp Technologies, says, "Justifying the cost of development of the IT infrastructure is difficult, especially when the results are not expected to show in a short time," he says.
Medicorp went for the SAP R/3 ERP package in January 2001, and it is still waiting for any positive results. Deployed by Oak Group Technologies, the project will enable the management to improve the quality and speed of the decision-making process by providing real-time management information. Though the company is using different modules for different functions - sales and distribution, materials management, finance and operations, and production and planning - it will see the results derived from ERP only after the financial year ends, adds Srinivasa Murthy.
"We invested Rs 70 lakh on this ERP project in 2000. If the investment was to be made now, we would not have gone for it," says BR Hariharan, VP of finance, HR and IT at Medicorp Technology. As Murthy puts it, "There is still much more to do in terms of moving towards a faster inventory turnaround and hence a faster delivery cycle."
The healthcare sector is no exception to the trend. Increased competition and decreased bottom lines are driving most of the corporate hospitals to adopt new technologies.
C Dayakar Reddy, chairman of CDR Hospitals, says, "Medical services costs will be reduced by 30 per cent if technology is used." CDR Hospitals is using Web-enabled applications in its labs. "We use technology to offer healthcare services at lower costs and to reduce our operational costs," says Reddy. "We are fairly successful in this."
"Though we are very cautious on technology spending, we have decided to spend on networking 25 hospitals through VSATs in Andhra Pradesh to offer 'eEmCare service' - a telemedicine project," says Reddy, adding that the estimated cost of the project is Rs 30 lakh.
Technology has been integral in Apollo Hospitals' initiatives. Sangita Reddy, MD of Apollo Hospitals, says, "We have implemented a third generation hospital ERP system in a couple of hospitals and intend to implement the same in other facilities too."
Currently, Apollo Health Street, part of the group, is implementing the hospital information systems in the Apollo facilities as part of the GE Medical Systems IT. Apollo has also initiated a technology venture to enhance its existing business using the internet. "We are aggressive in capitalising on the speed and reach of the Internet in networking and consolidating the healthcare delivery market in India," says Apollo's Reddy.
The challenge for companies is to ensure their IT investments bring in maximum benefits. Each company has their own way of ensuring this.
GTB's Narayan says, "The ROTI formula is valid for GTB totally even in times when the business is low. The bank's belief is 'use technology to run business and grow'." For GTB the current focus is on optimising the existing IT infrastructure. During 2001-02, the bank has plans to roll out 20 new branches and 150 ATMs, and increase the customer deposit accounts to one million.
Gati's Madhusudan says, "Our strategy is to invest on project-to-project basis. We believe that we can derive expected results from ERP." Gati's ERP project is expected to cut its operational costs by 30 per cent.
L&T hopes to see returns on its IT investments in 6-12 months. "We can justify such expenditure to the management in that time," says L&T's Gune.
E-commerce is also a focus area for L&T. "We already have an ERP platform. The e-commerce project will capitalise on this investment, and for about one-tenth of the expenditure, it is giving sizeable returns," says an L&T official.
There may be different compulsions for different companies, but they are all moving towards leveraging existing and new information systems for better control of their processes and a higher quality of their services. In other words, they are readying themselves for the future.