The Hindu Business Line : Are these your returns?

TRY asking for a piece of stationery in your office and, if it is not available, there is a good chance that would have to raise an "indent" for it. Meaning, every piece of such stationery bought would have to be accounted for. If a piece of paper or a pencil could be that important, wouldn't you want to "account" for purchases in technology? And does that not mean that such accounting would lead to questions on how useful it is to the company? Does the company get more out of the purchase than it did spending on it?

You bet these questions come up. And these questions lead us to the concept of "return on investment". eWorld had, for some time, posed queries to several chief information officers as to the returns they see from their technology investments. But responses had been less than specific. So, when the National Association of Software and Services Companies (Nasscom) offered a roundtable discussion with CIOs on an issue of our choice, we immediately picked the topic closest to our hearts: RoI. After delivering their respective addresses at the Nasscom@Manufacturing meet that happened recently in Chennai, L. Sundarrajan, Senior Vice- President, corporate IT, Birla Management Corporation Ltd, and CRN Vairavelu, General Manager, IT and e-business, Ford India, got together with eWorld and Kiran Karnik, President, Nasscom, for a chat. Excerpts:

We understand that companies in manufacturing invest in IT because it apparently helps increase productivity. But have you been able to put a figure to that? Such as productivity increases X number of times because technology or automation or digitisation came in?

L. Sundarrajan: We have a practice of clearly documenting all our expenses and all that we will derive out of those investments. The match need not be 100 per cent all the time. There are some intangibles. In those cases, the benefits are a given, even though you cannot put a number to them.

CRN Vairavelu: What you also need to ask is, "do those solutions support operations?" Information technology definitely contributes significantly. It is an integral part of the manufacturing process. In present times, basic IT infrastructure such as PCs, laptops, peripherals, file and print servers has become mandatory and investments need to be made in these. For implementing an enterprise resource planning project, you need a good IT infrastructure in place. In today's scenario, ERP (big or small) has become a mandate to support integrated operations. Here, one should not look at RoI alone. Here technology has to be integrated with logistics and business processes. IT provides an opportunity to rework processes for the benefit of the organisation. That is why we at Ford have made the technology provider group responsible for processes too and call it the process and technology group. When you invest in newer concepts, then RoI plays a major role for measuring success. Knowledge management (KM) or business intelligence (BI) or datamining are examples of relatively newer investments. Then there are other factors such as customer satisfaction. You cannot clearly explain why revenues went up in a particular quarter, even though technology investments might have aided the rise. But, you do know why customer satisfaction went up.

Kiran Karnik: RoI must be looked at separately. Users must realise that IT is a defensive tool in today's age when retaining market share itself is a problem.

What are your corporate IT budgets like?

LS: We have invested a substantial amount of money in our knowledge management initiative alone. The award for good usage and contribution is in addition to this and is quite significant. With more users being convinced, the total cost of ownership comes down. This has been true, for example, even in e-mail implementation. At the same time, additional budgets are planned for to sustain the earlier investments for better service and, as users see the benefits. IT solutions also need to be looked at as Business solutions. For instance, a call centre should not be looked at as an IT-enabled service alone. Its end result is that of customer satisfaction, resulting in customer loyalty, increased business, etc. In effect, a business requirement should speak up for technology investments rather than the technologist. Also, to look at budgets as a percentage of gross turnover or NPS is a misnomer as in new businesses you need to invest in IT keeping the business plan in mind. In some other businesses, it will be need-based; sometimes it may be a corporate initiative for some synergistic gains. Also, what comprises an IT budget will be different depending on businesses, the maturity level of IT within an organisation, what is being considered as IT and what not. For instance, whether computer stationery or printer cartridges is a part of the budget or not could differ from company to company. In our case, this in itself is a substantial amount. Any automation in these areas (such as paperless office or workflow processes etc) will yield significant cost savings.

It is important to have a process in place for any IT initiative just as you would for any other business proposal. The returns on investment may be intangible sometimes but putting them on record will enable us to stay focussed, set expectations right and, in turn, IT usage will be valued.

Have you had to abort projects because they were found unviable?

CRNV: Aborting a project is not preferable but inevitable. So a pilot approach is advisable. In order to evaluate a project, you have to be able to measure it continuously, which means you establish metrics that help you measure. Also, you need to have an alternate solution if the intended one does not work. The problem that is more frequently encountered is that of migrating, rather than retiring a project. Because technology changes, platforms have to change as frequently to take advantage of additional features. For a project to remain viable, prudent decisions on migrating are critical.

LS: The timing of a project is as important as the project itself. For instance, we had a business intelligence project that was way ahead of its time but we were successful in its implementation and usage as the correct process was followed, expectations were set right, user buy-in was there, mapping of the product to the business need was done, and, roles and responsibilities along with a detailed project plan were in place. So, if a proper process is followed, the chances of a project failing go down. Also, with with the need for information increasing, a tool which was good enough may not be the right one as we move along. Hence we need to re-look and re-invest or change our plans as per business needs. What could be done earlier by Excel for a business may not be true in future.

As CIOs, how important is data accuracy to you? After all, however well a system has been designed, if data is inaccurate, you can only get inaccurate results thrown up, resulting in poor decision-making.

LS: There are two types of data. One is catalogued data. For instance, an item code should apply to each item that goes into manufacturing. For a big company, the items may number one lakh. The company might end up spending Rs 40-50 lakh on cataloguing alone, in its entirety. The second type of data is user data. Here, the user has to specify what is accurate and what isn't. Organisations should have an internal control or audit team that ensures data accuracy. So, a thorough and rigorous testing exercise is essential to a new system or when an upgrade comes in.

CRNV: Data is "the" most important factor in any IT solution. With increased dependence on IT systems for decision making, the importance of data accuracy has increased manifold. Periodic checks and balances are needed to ensure data accuracy so that business users can confidently use the system for their decision-making. Mistakes resulting in inaccuracy could kill the usage of an IT solution.

KK: It's simple: the more data you get into your system, the more chances that it is accurate.

Do you foresee a point in time when the post of CIO is made redundant? After all, if there is so much outsourcing happening with an eye on costs, then a CFO could well fill in.

LS: I do not thinkthis will happen, as he is the interface and more than an internal consultant for an organisation. At the end of the day, he is supposed to be guiding the organisation and is accountable for the success of his decisions. This is true even in organisations where it is 100 per cent outsourced. I am not too sure if even vendors will be comfortable dealing with an organisation without a CIO, as somebody has to talk their language. The role enables him to interact with all the functions, giving him a better perspective of the business. This makes him a key member of the decision-making team.

CRNV: It depends on what the company wants out of the CIO. The CIO is no more a pure technologist. Typically, he does not just drive decisions on investments in technology.

On the other hand, he interacts with business divisions, understands their needs and then proposes a technology investment. This means that he needs to understand the business of the company he works for, more than the technology that could come in handy.

Recently, there was a case of an American shoemaker pointing fingers at an IT solutions provider for the shoemaker's poor profits. The point was that the IT vendor's solutions directed the company to move stocks of an unwanted design thinking that that was the design in demand. Does this mean that IT is truly critical to a company's operations or that it is now easy to point fingers at service providers?

KK: It shows the growing importance of IT in operations, that IT is critical. It is important to have a dry run before going live. That helps you determine how good the system is.

CRNV: It is true that IT is becoming critical for a company's operation. There is hence a real need to create exhaustive test scenarios and then document test results to ensure a no error situation in the future.

The IT solutions provider, the IT division of the company and business experts need to work as a team to achieve the above. In addition, all stakeholders must work together to create a service level agreement that will stand the test of time.

LS: Audit trials within the system help in such cases where the client is not sure of the quality of the offering.

It is easy to determine if the problem is due to a systems error or an operations error. Also, as mentioned earlier, if one follows a good process, these things do not happen. One has to do parallel runs, dry runs etc. before going live on any system.

bharatk@thehindu.co.in

Picture by Bijoy Ghosh

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