Special Focus
Leveraging IT to weather the storm
Despite the current economic uncertainty, Indian enterprises continue to invest in IT solutions that not only help save operational costs, but more importantly, drive growth
 Markets change, expectations change. For instance, last year, when consumer demand was at its peak in India, IT functions across organizations were struggling to match the speed of expansion with adequate infrastructure and support. Everything was in short supply: land, power, infrastructure, and people—this list can go on and on.
Cut back to the situation now. With dampened consumer demand, the tide has reversed. The same IT function which was hard pressed to match the growing demands of business is now being asked to look inwards, and suggest ways to cut operational costs, without sacrificing the efficiency of the business. While the strategic vision of what IT must do remains, the immediate focus is to cut down waste, and justify every ‘rupee’ spent on IT.
CIOs are being called upon to identify projects that deliver returns quickly, improve decision-making ability, and target markets or customers more efficiently—all at lesser costs than what has been budgeted. The increased expectations from the IT function can be best seen from the IT vision of HDFC Bank’s CEO, which has set high standards for the IT team and expects the function to continue to deliver best-in-class customer services, with a minimum of 100 process improvements annually, and 30 percent cost reduction on an annual basis.
“Do more with the same, and then do more with less, is our mantra for efficiency,” says Munish Mittal, Executive Vice President for Information Technology at HDFC Bank, echoing the thoughts of other CIOs who are being asked to do the same in their respective organizations. To bring down operational costs, Mittal’s team is working on significant virtualization initiatives, including redeploying IT resources from within, rather than hiring from the market. Mittal says that consolidation and virtualization will help in pooling an average of 20 percent to 30 percent spare capacity available in various standalone systems and application solutions, which in turn can support seasonal and peak capacities for some businesses without specifically locking capacity for these applications.
At Thomas Cook, where IT budgets are down by 20 percent, Sohrab Dave, the Associate VP for IT, is using this opportunity to co-create strategies with business leaders. “This recession is an excellent opportunity to innovate, as it is relatively easier to get quality time from business leaders, and look at how IT can be used to build competitiveness,” says he.
While recession has affected the budgets, some CIOs believe that irrespective of recession, business requirements must be the only criterion for taking a decision. Cautions Arvind Tawde, Mahindra and Mahindra's Senior VP and CIO, “CIOs must avoid making knee-jerk decisions. Business value must be the only barometer for any investment in IT.” Tawde believes that continued investments in IT will ensure that organizations are ready to take advantage of any upturn, whenever it happens.
Cutting the fat
During the boom phase, when every major Indian company was expanding fast, there was little time to look at inefficiencies which had crept into the system. Today, as CIOs have been forced to look inwards, they are finding immense opportunities to cut costs. The common tools in the “Swiss Army” knife of CIOs for cutting costs include technologies, techniques and initiatives such as virtualization, open source, video conferencing, Software as a Service, and automation of manual processes.
Virtualization is a big attraction for CIOs and almost every CIO we spoke to had already started some type of a virtualization initiative. With virtualization, the payback on ROI is much faster, and easier to justify. One of the best examples of the power of virtualization in saving costs is demonstrated by Reliance Capital. The firm has consolidated 94 development, UAT and production servers on just 15 servers using VMWare. Operational cost savings from rack sever space and power, OS license, backup media, and database licenses turns out to be a massive Rs 100,347,099 (approximately $2 million). If one needs a business case for virtualization, one needn't look beyond Reliance Capital for a great example.
In addition to virtualization, many organizations today are actively looking at using videoconferencing or unified communication (UC) tools to cut costs. Take for example, the $600 million Raymond Group, the textile major. With a network of more than 500 retail shops across the country, the costs related to communications are huge, and Raymond has been quick to take advantage of UC.
“Today, most employees actively use features such as chat, videoconferencing and whiteboard to share and review documents using Microsoft’s Office Communication server (OCS) platform. We have also encouraged third-party auditors to do their document review using this platform,” says Raymond’s GM-IT, Vinay Hinge. With savings of over US $0.45 million, amounting to 86 percent saving on travel and marketing related bills, it is clear that the effort has paid off handsomely. With the curtailment on travelling, and business units having to budget for every single rupee spent, the ‘push’ from the IT function to use UC tools has now transformed into a ‘pull’ from the business teams.
Raymond is also using UC for saving costs on expensive phone calls, especially when its executives travel abroad. By providing an Office Communicator client on the mobile, an executive traveling abroad can set his status, and be reached through voice or chat, using the public Internet. “Voice calls can be expensive when you travel abroad. Through this feature, our executives can hook up to a public hotspot, and collaborate with their colleagues effectively,” says Hinge. The team at Raymond is also using the power of virtualization to retire 35 servers and approximately 70 applications by the end of March this year.
With electricity bills turning out to be huge money guzzlers, power saved at every single node, desktop, or datacenter matters. Accordingly, consolidation of applications and datacenters is another top priority, as huge cost savings can be gained from maintenance and electricity bills. A case in point is Raymond, which has decided to consolidate three datacenters into one. Besides hardware, CIOs are also checking thoroughly on existing software licenses and their usage, before they decide to purchase a new software license.
Automating manual processes too has helped in cutting costs. For example, IT firm Cincom Systems replaced its manual travel system with an automated application, giving the firm complete visibility into the travel plans of every executive. “The current recession period is a double-edged sword. We have to not only cut costs, but also find ways to boost efficiency. And the only way to boost efficiency is to automate processes as much as we can,” says Pantulu Avasarala, Director, Cincom Systems India.
Renegotiating with service providers
The need to keep business coming in has made vendors more willing to offer huge discounts. With vendors facing immense pressure to push sales, some CIOs have been able to excellently negotiate to get deals that would not have been possible a couple of months ago. “Today, there is an opportunity to reduce service provider costs, without sacrificing the SLAs,” says Pendse of HCC.
Pendse’s counterpart in Raymond, Vinay Hinge, has been able to do just that, by getting a BI vendor to sign a flat fee per month deal. “I told the vendor to walk the talk. If the solution delivers as promised, I am ready to pay for the license,” says Hinge. The team at Raymond has also managed to sign another deal with a solution provider of HR software, using a hosted pay per month model. The performance of the application will be evaluated and continuously monitored for a period of two years—with the onus of delivering efficiencies on the vendor. This model is apt in the current times, where cash needs to be conserved and the focus is on reducing capital expenditure.
Boosting competitiveness through innovation
Taking the current recession as an opportunity to innovate, Indian CIOs are using this period to demonstrate the ability and potential of IT to transform business. Take for example India’s second largest private sector bank, HDFC Bank. The bank has used this period to sharpen its focus on improving the quality of its assets.
The IT team at HDFC Bank has worked very closely with its Credit Risk department to grow the Retail Credit business while maintaining the portfolio quality through a stringent credit policy administration. HDFC Bank has used technology effectively to make this happen. To standardize norms of providing credit rating, the bank has decided to template the credit policy implementation which will impact credit underwriting and credit buying by more than 300 credit officers supporting over 1400 plus locations.
Mittal, the bank's Executive VP for IT, clarifies that while loan origination workflow and retail credit and credit cards application processing systems already had interfaces with internal positive and negative De-duplication systems and credit bureaus for bureau reports, the decision to use a template will remove the dependency of 'different interpretations by different credit officers of the same bureau' by making the 'bureau score' available in a straight through manner to officers at the credit underwriting stage.
In the next couple of months, the team will improve this process further, by giving an internal application score available to this process, followed by a behavioral score in the months to come. The asset quality of HDFC Bank, which is said to be one of the best in the Indian banking space, is set to improve further, with these initiatives.
Another example of innovation by HDFC Bank is a feature called ‘Customer Power’, which allows the customer to choose and register any specific withdrawal transaction as their favorite transaction. This has reduced the number of screens and clicks from the earlier nine to five now for an end-to-end ATM withdrawal transaction session. Says an excited Mittal, “This initiative has made our ATMs 40 percent faster, and will result in our ATMs creating more transaction capacity without investing in more ATMs in the same location.” This feature will be available at over 1600 HDFC Bank ATMs by the end of March 2009. With these initiatives, Mittal believes that the bank can maintain the retail credit growth at 24 percent and upwards.
Reliance Capital is another example of a company that uses technology effectively for driving innovation. With the objective of creating a paperless office, the IT team at Reliance Capital introduced self-service portals. The introduction of these portals has helped in reducing the number of customer service queries at the branches. As a result of this, Reliance Capital has been able to rollout 500 new branches with just one customer executive each, compared to two employed earlier. The associated impact is huge as the firm has been able to reduce the office space, which in turn has helped in saving investments related to space, and power requirements in branch offices.
Leveraging the power of the Internet
With Internet connectivity being more reliable today, CIOs are looking at leveraging the cost advantages and reach of the Internet over other communication mediums. Says N Nataraj, CIO at Hexaware Technologies, “We are reinventing the Internet usage model in the business context, as majority of the customer delivery can happen over the Internet over secured tunnels. The Internet is a great leveler, and I am sure that irrespective of any need, smart and effective usage of the Internet throws enormous opportunities to leverage it more cost effectively.” Accordingly, the firm is looking at making Internet the backbone for running critical applications, and avoiding expensive IPLC lines.
Raymond too is betting on this reliability, as the firm has replaced standalone Point of Sale Systems (PoS) at every shop, with a Web-based version. With every PoS having its own server, there were huge hassles of upgrades and maintenance, especially as Raymond has more than 200 self-owned shops across India deploying the standalone PoS. The Web-based PoS has cut down the number of servers from more than 200, to just two. The firm now has just one central server, with another server for load balancing. Apart from the huge cost savings, application maintenance has become simpler.
Using IT to boost market share
In the current sluggish environment, every IT team is being increasingly asked to come up with ideas and suggestions that will help in boosting sales. Analytics will play a key role here, and can be of critical importance for targeting and fulfilling customer demands accurately. For example, the Mahindra and Mahindra group, which has multiple lines of business from automotive to financial services to hospitality, is looking at leveraging its huge base of customers. Explains Tawde, “We have built a common customer database for the entire group, and will leverage this for providing a consistent customer experience, and for cross-selling and joint promotion of products.” Similarly, Tawde’s team has built a solution that enables the dealer to tell the customer the exact date for the delivery of the vehicle. It is through initiatives such as these, that ‘IT’ can help ‘business’ build a better relationship with the customer.
With spends on a downward spiral, improving MIS for better and intelligent decision making is a must today. Says N Nataraj, CIO of Hexaware Technologies, “We have deployed MS CRM to accurately feel the pulse and heartbeat of the market, and improve our opportunities and pipeline.”
Thomas Cook, for instance, has started an initiative to collate data with respect to customer preferences. Based on the preferences, offers are sent to customers.
Similarly, HDFC Bank is betting big on its analytics to enhance its decision-making capability. “Anticipating early, in the first quarter of 2008-09 fiscal, we ran a pilot to take database and analytical marketing to the next step, through event based marketing. We generated double the committed actual revenue from the pilot,” explains Mittal, on how the bank has successfully used technology to drive market growth. The bank has now successfully commercialized 40 such event-based marketing triggers, which run multiple programs during the day. With the immense success of this campaign, the team is now expanding this capacity to 200 triggers, which will result in approximately 500 daily event-based campaigns to reach specific customers. Buoyed by the success, the bank will now allocate at least 25 percent of the fresh investment budget to create business or revenue growth through innovative solutions such as event-based marketing, text-mining-based intelligent call or e-mail routing for supporting customer service groups.
As the initiatives of these technology savvy organizations show, it is important to keep on investing in technology to improve efficiencies—which is avoided by most organizations in a slowdown. IT is a catalyst for growth, and any investment made in IT is bound to help organizations navigate the choppy waters of the current environment with more clarity and direction. |