Cover Story
Manufacturing Growth
 The dark horse has turned into a favorite, and VARs are betting that the manufacturing sector will move ahead at a rapid pace
By Ramdas S
An IT industry that is on the rebound after a severe recession, which saw the industry witness negative growth rates for the first time in two decades, seems to be betting heavily on the manufacturing sector now. At least that’s what over 53 percent of the country’s top enterprise VARs have indicated in the recently conducted CRN Channel Confidence Survey.
But how is the manufacturing sector which has not seen any spectacular growth rates over the past year expected to contribute so heavily to the growth in the IT segment? Why are channel partners so confident that they can ride their luck on this sector?
“The manufacturing sector has always been the earliest implementer of information technology. Earliest implementations of ERP solutions were in the manufacturing sector, and during the nineties it was often described as MRP—manufacturing resource planning,” explains Diptarup Chakraborti, Principal Research Analyst with Gartner India.
“While the large manufacturers have gone through multiple levels of maturity in their automation, second-tier and third-tier manufacturers are now going through their IT deployment cycles. Since these manufacturers are largely managed by IT channels instead of the vendors or the national systems integrators (SIs), the partners are experiencing a sudden windfall from the manufacturing sector,” he adds.
Anoop Nambiar, Country Manager, BPO, IBM India, agrees. “If you look at the large manufacturers, they are outsourcing their entire IT to a large national or global SI. However, the smaller manufacturers are going through various cycles of IT deployment and they are being addressed by smaller resellers and enterprise VARs. This is where we believe that our partners can rake in the benefits.”
Nambiar says that IBM is serious about its geo-expansion plans and has been identifying opportunities in smaller cities and industrial hubs across the country. “The new opportunities are almost always handled through partners. Our strong ISV relations, and programs such as Smart Business, give our partners ready-to-market-and-deploy solutions for the manufacturing sector.”
Selling solutions to the sector through partners is a top priority for HP India too. “Manufacturing is one of the focused segments which we address through our partner-ISV triangulation program. We have signed on several ISVs with specific solutions for the manufacturing sector, and enabled many of our enterprise partners to go-to-market with these solutions,” informs Faisal Paul, Head, ESS, Marketing and Growth Initiatives, HP.
The government’s role in defining policies that are expected to transform India into a manufacturing hub are also noteworthy. “The recent policies and announcements to create multiple manufacturing hubs and special export zones (SEZs) augur well for the manufacturing sector. The Indian IT industry should benefit from such moves,” says Vinnie Mehta, Executive Director, MAIT.
Regional flavors
The demand from manufacturing is uniform across the country, but depending on the geography there are different sectors that are looking up. “In Pune, over the past year or so, several new auto companies have set up base while existing ones are expanding. This is resulting in demand for core infrastructure solutions including clients, networking, servers and software. We implemented several 300-500 node projects in this sector,” says Chintamani Lele, Director, Vintech Electronic Systems.
Anirudh Shrotriya, Director, Shro Systems, also of Pune, agrees. “Apart from the auto sector, we are observing that manufacturing companies targeting the defense and aero sectors are also expanding. Besides the core manufacturing customers, Pune also has a number of design companies which support the manufacturing sector, and they are increasingly buying high-end workstations and new CAD/CAM software, and also investing heavily in storage.”
Government funding in public sector and quasi-government manufacturing entities has also resulted in demand for IT. “In Bihar, while there may not be much investment in the private sector, public-owned industries have funds for IT deployment. This is also true for Jharkhand, where a number of industries around mining and metallurgy exist,” points out Ajay Maitin, CEO, Graphic Trades, Patna.
Ishan Infotech, which operates in niche segments across the interiors of Gujarat, has also seen demand from manufacturing increase at a rapid pace. Explains Pinkesh Kotecha, Director, Ishan, “In Gujarat, it’s the chemical and engineering companies which are investing in a big way in IT. The trend has accentuated over the last couple of years. Though the investment is primarily around ERP implementations, while doing so companies are upgrading to new hardware and opting for consolidation.”
Down south, partners from Tamil Nadu feel there’s an industrial boom across the state. “In TN there’s definitely growth in several manufacturing sectors. There are a number of new auto ancillary units which have sprung up in and around Chennai. The textile industry is flourishing, with export markets looking good,” says TG Ramesh, director of the Precision Group, Chennai.
Even in Kerala, which is not known for its industries, there seems to be growth in the manufacturing sector. “We are seeing a number of small outfits focused on regional strengths coming up across the state, and they are all investing in IT. In addition, we have an export industry for processed food, spices and sea-food which is adopting technology very fast,” informs SR Nair, MD of Team Frontline, Kochi.
ERP
ERP continues to be the biggest driver in the manufacturing segment. “There are two specific trends here. We see a number of manufacturing vendors moving from an earlier version of software to a newer version, such as moving from SAP R/3 to SAP R/6. Also, smaller units are migrating from simple accounting solutions to full-fledged ERP systems,” explains Ganesh Mahabala, Director, Valuepoint Systems, Bengaluru. “Either way, this means buying more clients, storage, servers and networking.” Adds Shiv M Kumar, Associate Vice President, Tally Solutions India, “The small manufacturer is implementing ERP solutions, and at Tally we have equipped hundreds of our partners to go after the manufacturing sector.”
Besides ERP, CRM solutions are also in demand by the manufacturing segment. According to Girish Madhavan, CEO of Quadsel Systems, “In addition to automating their supply chains, many manufacturers are automating their sales operations. This has resulted in demand for CRM solutions in the space.”
Microsoft has been aggressive in pushing its Microsoft Dynamics platform for ERP and CRM solutions. “We have been offering ERP and CRM solutions, and there have been several wins among small businesses such as in the manufacturing sector,” notes Sushant Dwivedy, Director, Microsoft India.
Consolidation
IT consolidation using technologies such as virtualization has been yet another major driver. “Interestingly, a number of wins we have had have been in the manufacturing sector, where customers are preferring to use server and storage virtualization for better utilization of resources,” comments Ganesan Arumugam, Director, Partners, VMware India. “Since manufacturing has a strong engineering background, it has perhaps been easier for our partners to sell the tangible benefits of virtualization.”
“Many companies with 10-20 servers have gone in for consolidation solutions in places like Mumbai in a bid to cut real estate, infrastructure and manufacturing costs,” observes Ajay Sawant, Director of Orient Technologies. Rahul Meher, Director of Leon Computers at Pune, agrees. “Virtualization is top of the mind for CIOs in the manufacturing sector. An obvious advantage is the tremendous cut in costs, plus lower management overheads.”
Networking
Supply chain and ERP deployments are forcing manufacturers to invest in networking and communication heavily. “Over the past few months we have seen that small manufacturers are connecting their factories to their branches or head office. With lower bandwidth costs, there’s a networking boom in this segment,” says AL Srinath, CEO of Shell Networks, Hyderabad.
Networking vendor Cisco has set up, under its small business partner program, initiatives such as development funds to grow the market. There are also initiatives for educating partners about specific solutions for verticals such as manufacturing.
Explains Arun Dharmalingam, Regional Manager, Distribution Channels, Cisco India and Saarc, “Cisco is focused on building reliable, affordable technologies which small businesses can easily use to connect their business to the world, help secure their business, and communicate more effectively. By categorizing the Cisco small business portfolio into connect, secure and communicate, we’re helping small businesses to select the right technologies to meet their core business needs and even accelerate as the economy recovers.”
“With cheaper bandwidth available, the manufacturing sector can now easily connect between multiple offices and factories, and set up VPNs and other secure solutions. This is why we are betting heavily on our enterprise-class Internet connectivity solutions. We are expanding our enterprise channels to address such opportunities,” says Heramb Ranade, CMO of a Class-A ISP, Tikona Networks, headquartered in Mumbai.
Storage
Thanks to the deployment of ERP and supply chain management solutions, the data boom is further driving the storage boom. Besides, the engineering-focused manufacturing sector is heavily using CAD/CAM and digitization. “We have been focused on the steel plant market for long, and with heavy digitization and plant automation there’s a huge demand for reliable storage solutions,” informs Alok Gupta, Director of the Delhi-based Cache Technologies.
“At EMC, we do have solutions specifically for the manufacturing sector. These solutions allow customers to quickly share data across functions and locations, and increase productivity by giving engineers instant access to design information,” says Anil Zachariah, Director, Customer Support, EMC India and Saarc.
To further address opportunities in the segment, many partners are signing on specific vendors. “Since we address a lot of customers in the manufacturing sector, we added to our portfolio structural analysis and design software from Prokom,” says Gupta.
Partners are increasingly focusing on opportunities in niche sectors. Kochi-based Brahma Technologies, an SI and ISV, is focusing purely on the spice processing industry. “We spent almost a year developing an ERP system targeted only at the cashew nut processing and packaging industry, and are hoping to win at least 30 orders from a segment which has many factories that presently do not have even a computer,” informs Baiju Ambadan, CEO of the company.
Cloud
According to Anil Pant, Senior Vice President, Sify, sectors such as manufacturing are the automatic choice for selling cloud services. “While IT is critical, it is not core to the functioning of the manufacturing sector. It’s therefore easier for a partner to sell a cloud-based messaging solution than deploy a dedicated mail server on the premises of the customer. We see the manufacturing sector adopting cloud-based services very quickly.”
L Ashok, CEO of the Chennai-based Futurenet Technologies, agrees. “Non-core sectors such as manufacturing are eager to move on to the cloud. Sensing this opportunity, we are setting up offices in major manufacturing hubs across TN to deploy solutions that will help customers to easily move to the cloud.”
Apart from messaging, vendors are offering storage as a service to the manufacturing segment. Vendors such as the Mumbai-based Webnotes Technologies are also offering hosted ERP solutions to the segment.
With its balanced economy and huge internal market, India is poised to become a large manufacturing hub. With the manufacturing sector continuing to be a fast-deployer of IT solutions, growth from this sector is expected to stay healthy in the immediate future. Finally, since manufacturing hubs and SEZs are mushrooming across the country, vendors have no choice but to tap the market through channel partners. |