WiredScribe: The Business of IT

Seven tips for recession proofing your data centre

2012-01-02T16:42:00.000+05:30

The credit crunch and recession have put value-for-money at the top of the business agenda. IT budgets, and more specifically data centre operations, have been among the first to bear the brunt of the cost-cutting axe.

Operational expenditure on top of high initial capital investment means CIOs must now cut cost and increase return on investments. However, reducing investment can damage an organization’s smooth functioning so how do you find initiatives that are cost-effective with a relatively quick payback period but not at the expense of disrupting the business?

Know your Cost-Cutting Sweet Spots:

Maintenance and support accounts for more than 50 percent of an organisations IT budget. In the initial phase, an audit team should identify all DCO assets deployed. This will enable analysis of annual spending on servers and storage devices, network components, software licenses, applications, databases, and operating systems.

Overspending on under-used assets can then be cut without threatening business continuity or asset performance. Doing more with existing resources and becoming more effective, or rationalizing existing resources and improving efficiency, are the goals here.

Consolidate Everywhere:

Enterprises can leverage consolidation opportunities in various areas - servers, applications, storage, networks, people, resources and processes, and even entire data centers. This leads to economies of scale, less complexity and better manageability.

Consolidating multiple data centers can have a significant impact on the budget. In addition to regular overheads like real estate cost, and maintenance and upkeep, it can save on operational costs such as energy and personnel.

At the other ends of the scale, application consolidation can reduce management complexity and cost significantly. By deploying multiple applications on fewer, larger servers, the organization can reduce the instances of the operating system it runs thus reducing the total cost of ownership.

Implement Virtualization:

Instead of deploying multiple servers to host individual applications, virtualization equips enterprises with the capability to host a number of virtual servers on one physical server. It also enables reuse of resources for varied purposes and maximizes use of each resource. Enterprises can thus defer purchase of new servers and shrink costs by reducing the amount of hardware that must be replaced.

Automate Services:

Process automation replaces manual execution of repetitive functions, reduces errors and allows administrators to focus on value-added functions that ensure continuous high-quality service delivery. Services like patch management, server provisioning, configuration management, security alerts, password resets, etc can be automated to reduce the number of man-hours spent dealing with these tasks and thereby lower human resource costs.

Standardise Tools and Processes: Data centers leverage a variety of tools to manage activities like clustering, replication, backup and recovery, and other critical aspects of the infrastructure. Each of these tools generally provides its own user interface or management framework. Standardization ensures that devices have consistent interfaces and protocols. This means simplified systems management, maintenance, and lower labour costs.

Opt for an Adaptive Data centre:

New generation data centers need to be flexible enough to address near-term infrastructure requirements and also account for future business growth while continuously reducing overall infrastructure costs and complexity. Organisations can address these objectives by purchasing services like servers, software, storage or network equipment as a fully outsourced entity.

Such services are generally billed on the basis of the amount of resources consumed. Hence, aside from the higher flexibility, the usage-based pricing model allows customers to pay as they grow, Along with the advantage of leveraging the latest technology to achieve faster service delivery and time-to-market without incurring the associated incremental investments.

Target Cost Containment through Global Delivery:

Studies have proven that a CIO administrating the entire data centre from a particular geography can potentially save anywhere between 35-40% in a year by embracing the global delivery model. Thereafter, the company can expect year-on-year productivity gains of 8-10 percent. Thus, in a period of three years, the organization can save 45-50% assuming that all kinds of services are being delivered out of a single geography at the moment.

Conclusion

The objective of any IT initiative is to drive continuous profitable growth while lowering capex and opex. To effectively maintain their businesses, enterprises should streamline, automate, and standardize processes to reduce data center-related costs, improve business efficiency, increase innovation, and drive profitable business growth.

As we have seen, enterprises can leverage virtualization and consolidation opportunities in various areas including servers, applications, storage, networks, people, resources and processes, and the actual physical locations of the data centers. However, internal stakeholders need to be involved in this process to understand which resources applications use and its usage patterns. Comprehensive planning is required to leverage the full benefits of consolidation or virtualization.

This article first appeared in datacentermanagement

IT imperatives to improve business effectiveness in the Insurance Sector

2012-01-02T16:28:00.000+05:30

The economic turmoil we witnessed over the past two years has left no industry untouched. Nevertheless, the global insurance industry has continued to post growth, thanks partly to newly emerging markets like China and India among others in the Asian subcontinent. The first quarter of 2009 witnessed a drop of 3.8% in net written premiums. The momentum accelerated in the second quarter of 2009 during which the net written premiums declined by 4.8%, the biggest drop in decline ever since ISO began recording quarterly changes in premium. The economic turmoil we witnessed over the past two years has left no industry untouched. Nevertheless, the global insurance industry has continued to post growth, thanks partly to newly emerging markets like China and India among others in the Asian subcontinent. The first quarter of 2009 witnessed a drop of 3.8% in net written premiums. The momentum accelerated in the second quarter of 2009 during which the net written premiums declined by 4.8%, the biggest drop in decline ever since ISO began recording quarterly changes in premium.

In mature markets like the US and most of Western Europe, the sector is showing signs of saturation. Major insurance products have been available for a long time and thanks to the stringent regulatory requirements in these countries, the degree of market penetration is also quite high. Hence, it is unlikely that underlying demand will increase.

Recent regulatory requirements have only added to the woes of insurance players in these markets. Relaxation of entry requirements have seen the entry of several new players unshackled by the baggage of legacy systems and an array of old product offerings that need to be serviced despite the changing economic scenario. For instance, several banks have already gained considerable market share in the sale of insurance products, particularly annuities and life insurance. This competition is only set to intensify in the coming years with more and more non-insurance players entering the fray.

Impact across the Insurance Value Chain

The global insurance industry is being shaped by external drivers like increasing consolidation, convergence & globalization, changing consumer buying patterns, rapidly developing technology, multi-distribution trends, and more stringent regulations. In addition to this, there is increasing pressure to reduce costs due to declining returns on investment portfolios. Changes in the risk markets has resulted in the markets hardening and reinsurance markets becoming less attractive. Insurers can leverage technology to positively impact each phase of the Insurance value chain. This necessitates the need to first break down the insurance lifecycle into its key components to understand how technology can be leveraged to enhance the process and understand its impact across the insurance value chain.

• Product planning & development: Insurance companies are experiencing declining sales in this turbulent times, facing competition from other financial products as the population ages and boomers face retirements, and are challenged to improve business transparency. There is a clear shift in customer preference. For example, customers opting for fixed annuities products vis-à-vis variable annuities products. Insurers need to introduce new products to market within a given window of opportunity to drive top-line growth.

• Sales & Marketing: Traditionally, insurance companies have leveraged career agents and independent brokers/agents to market their new products and services. The tech savvy generation prefers direct marketing channel that currently accounts for over 11% of net written premium. To drive cost efficiency home, insurers are embracing the digitization of paperbased sales and application processes.

• Underwriting: Underwriting profits are down. Global warming has led to frequent catastrophes or natural disasters. Insurance companies have been paying a lot lately to the policy holders.

• Policy administration: The recent M&A activity, centralization of IT operations from various subsidiaries, and purchase and sale of business unit are the driving force for consolidation and modernization of policy administration systems.

• Claims management: Another area for cost optimization is claims processes. One can start with the digitization of paperbased claims. Claims systems offer insurers multiple avenues to improve operational effectiveness and deliver growth. Insurers are eyeing claims systems as a springboard for innovation, citing claims-related initiatives among their top 3 projects. Insurers that fail to address their aging claims administration systems will find themselves unable to rapidly adapt to cyclical markets, reduce claims leakage, and provide superior customer service by paying claims quickly, accurately and cost-effectively.

• Risk management: The current regulatory climate remains challenging and uncertain. Underlying policy, claims, billings & payment systems are disconnected and the individual information data sources are in silos. These disconnected business process are the inhibiting factors for the effective enterprise wide risk and compliance management.

Potential impact of IT

The insurance sector has been among the biggest exponents of technology though most persist in continuing with their mainframes and other legacy applications. Going forward, insurers, with a view towards the future, need to strategically deploy technology such as core application modernization, Internet and ecommerce, and channel management to cater to the demands of a dynamic market. Technology can not only ensure speed-to-market in product development but also enable innovative, customer-centric thinking. This is also a necessary step to make the business more efficient and resources more productive. Web services, for instance, equips insurers with the ability to simplify the integration of product definitions with legacy applications while simultaneously eliminating manual processing. This, in turn, makes it easier for insurers to consolidate product information, manage products, and leverage existing enterprise applications. Some of the key benefits that can be accrued by leveraging technology effectively are outlined below:

• Cost optimization and Operational efficiency Over the years, the Insurance industry has embraced M&A approach for inorganic growth leading to multiple policy administration and claims systems within the organization. In addition, some of these legacy systems are expensive to maintain and support. Insurers are leveraging well established legacy modernization tools and SOA & Web services based solutions to integrate their internal and external systems. Effective implementation of STP triggers digitization of core processes which in turn leads to operational efficiency. Claims processing software helps insurers automate claims management and enables real-time processing and reporting on the administrative and revenue generation activities while reducing claims leakage. Infrastructure consolidation results in reduction in energy footprint in data centers by means of server consolidation and enhanced operational agility through automation.

Increase customer collaboration and reach Career agents and independent brokers/agents are the distribution channels to market new products and services. High performance user interfaces, self-help portals, and extranets provide the means to up-to-date and 24/7 access to content and inadvertently improve relationship value, provide integrated view of products and customers, and expedite cross-sell and up-sell opportunities. More and more end customers are now relying on the Internet to compare various offerings and choose the one best suited to their requirements. Insurers can leverage the online medium to streamline the costs of selling new policies and create content that outlines the compelling value proposition for each product.

• Maximize revenue generation opportunity The current economic environment has reset customer preferences and expectations. Complex financial products are out and simple, guarantee income products are in demand. The preferred customer products must be quickly replicated through new product introduction cycle. Existing customers buying patterns is a platform for better up-selling and crossselling opportunity. Insurers need to invest in systems that facilitate effective management of these opportunities and relationship among broker, agents, customers, and prospects. CRM solutions help integrate sales, service, and marketing for all channels and products, and provide a unified view of the customer and all relevant business partner relationships. Systems that enable two-way flow of information between the insurer and the channel partner will play a key role going forward in effectively packaging the right products and services for clients and leveraging new opportunities.

• Integrated risk and compliance management As a result of financial services fall out, insurers are anticipating greater regulatory invention and control. Well defined risk and compliance management solution provides integrated alignment of loosely coupled risk management activities and information data sources, emphasis on areas of streamlining the credit process, strengthening claims analytics, enforcing risk monitoring/control, and enhancing liquidity risk activities within asset/liability management functions. Some of the functional areas covered by the risk and compliance management solution include financial reporting, business intelligence & analytics, assets & liability monitoring, and actuarial modeling.

Eight Tips to Ensure Test Automation Success

2012-01-02T16:21:00.001+05:30

Increased productivity and effectiveness, reduced time-to-market, enhanced product quality, lower spending on testing, and faster test cycles are some among the many allurements offered to entice organizations to invest in test automation tools. Test automation, if executed judiciously, can streamline the testing process, and deliver high returns on investment (ROI). It can speed up testing to accelerate product releases, improve test coverage and reliability, ensure consistency, and offer significant financial savings.

Nevertheless, studies indicate that globally close to 50 percent of all test automation projects fail. The test automation outcomes either fail to deliver on financial expectations or do not satisfy stakeholder expectations. There have been several cases in the past where organizations have abandoned their expensive test automation tools and have resorted to manual testing to get the development project back on track. Reasons for failure are many—lack of a clearly defined and appropriate automation framework for project execution and delivery being the most common. This generally stems from a skewed understanding of the subject. This paper will look at the common reasons for test automation failure, and measures that organization can take to ensure success.

Problems Plaguing Test Automation:

Automating the testing process improves bug discovery, compresses testing cycle time, enhances productivity and testing effectiveness, reduces time-to-market, and delivers very effective QA. It directly impacts organizational top line as well as bottom line by providing organizations a first mover advantage and thereby a virtual price monopoly till the competition enters the market.

Yet, billions of dollars are lost each year due to failed or abandoned testing automation projects that invariably lead to product release delays and bugs seeping unnoticed into the post production environment. Why do so many test automation projects fail to achieve their potential? What are the common pitfalls that organizations regularly fall prey too? And how can organizations avoid these issues to extract the full benefits of automating the testing environment? Before we proceed to the best practices application developers can leverage to ensure testing automation success, listed below are a few of the most common reasons for failure.

Unrealistic Expectations

Most organizations consider automation the panacea for all their testing ailments. The common belief is that automation will eliminate the need for all manual testing and is the perfect answer to time and resource crunch. This compels the need to automate all tests, which is not a practical solution. Automation, in itself, does not improve testing. It may seem more reliable than humans in detecting and reporting bugs. However, a test script does not have the intuitive ability to analyze the impact or usefulness of the final output. It can repeatedly run the same non critical tests, without providing any real value, as the basic premise of the script creation is flawed.

Another common reason is expecting immediate payback. This again is not practical as usually the payback occurs only after conducting several rounds of testing using the test scripts in question. Automation is also not the solution to cutting down testing costs. Setting up the facility involves significant startup costs. Also, it involves regular maintenance cost during the lifecycle of the project. In the short term, it can free manual testing from mundane and laborious testing work to focus on value-addition. However, immediate cost reduction is a fallacy. A few key reasons for failure are mentioned below:

Unclear Objectives

Stakeholders might have differing expectations from the project. For the management the goal might be improving time-to-market for new releases by reducing test cycle time; for the IT department it might be cost reduction, and for the development team it might be improvement in quality while simultaneously reducing manual effort. This divergent set of goals often leads to disappointment. Also, many organizations fail to share the objective of the project with the automation team leading to lack of sync with the business objectives of the organization.

Lack of Focus

Most organizations do not give testing its due credit and priority. Instead of engaging full time resources to automate tests most organizations involve their developers to work on test automation as a back burner project. Some organizations also look at it as a means of building employee skill sets.

Not Choosing Right Test Cases

Test automation is not an alternative to manual testing. However, many organizations indulge in vacuous automation without distinguishing between tests that can benefit from the same and those that need to be conducted manually. It is necessary to clearly identify the tests that can most benefit from automation viz repeatability of the test case over releases, execution over multiple datasets, etc, and the return on investment that can be expected from the same.

Wrong choice of tools

License fees for commercial automation tools tend to be quite expensive. There are a multitude of vendors offering myriad test automation tools with various different capabilities and features. Organizations need to exercise care in selecting the tools best suited to their requirements before planning and implementing automated tests. Not all tools are suited to the needs of all organizations. Many projects fail due to choosing inappropriate tools or not having the capabilities or skills to efficiently utilize the same.

Ambiguity in Cost Structure

Most organizations are left floundering when it comes to understanding the various cost components of a test automation project. Lack of clarity of the actual costs involved in automation often lead to sudden surprises and budget overshoots. Testing automation involves certain fixed costs on hardware, software licenses, software maintenance and support, tools, and training. License fees for automation tools are expensive and perpetual. An automation testing project involves script development, which needs to be planned, estimated, and managed like any other software development project. Also, creating test automation scripts require specialized skills, which come at a cost. Organizations need to look at all these cost components in this entirety to gain a clear understanding of the returns on investment.

Steps to ensure success

Decisions made based upon expected return on investment is probably the first step towards ensuring that the organization is moving in the right direction. The benefits accrued should have a direct impact on top line or bottom line or it should offer significant advantages over other options available like manual testing. Listed below are eight best practices that organizations can leverage to ensure the success of their test automation projects.

1) Clearly define automation objectives

First and foremost, get management support for the project. This can be achieved by clearly demonstrating the short-term as well as long-term financial benefits to be accrued by investing quality resources and time in the project. Once this stage is crossed, ensure that all stakeholders are in agreement on the end objective of the project. Different stakeholders-- top management, the IT team, the developers, the tester, and the automation team--may have different requirements from the project. However, success will be elusive unless they all agree to a common goal.

2) Treat automation as software development

Treat the testing automation project like any other software development project—plan well in advance; set realistic goals; assess existing skill sets and resources; evaluate the testing tools; perform automation feasibility; identify appropriate frameworks, and finally study the applications to be tested to ensure their suitability. Dedicate quality resources to test automation, and put in place a clear cut development plan and governance procedure including detailed documentation procedure. Prepare a plan to track bugs and rectify them. While developing an automation solution, identify reusable functions across automation scripts to increase returns. This is key to ensuring the success of the project.

3) Design and develop a framework

This should be the natural progression from the previous best practice i.e. developing a framework that supplements the automation effort. Design and document an extensible automation architecture, which clearly outlines the foundation and rules for the project. Incorporating features like flexibility and scalability into the architecture right at inception ensures that the automation system is able to cope with growth in the requirements of the applications being tested. Also, provide the testing team with a proof-of-concept test suite and make test case maintenance a top priority. Ensure that these test cases run across supported platforms and are not machine-dependent. Frameworks should be scalable and best suitable for application under test.

4) Evaluate testing tools

As discussed earlier, choosing the right automation tool plays a critical role in ensuring the success of the project. Validate the tools and approach at the earliest and evaluate its compatibility with the organization’s requirements. This might require the guidance of an expert. If the expertise is not available internally, it would be advisable to engage the services of an external consultant towards this end. While assessing the various options available in the market it is necessary to understand the learning curve of the testing tool in comparison with available skill set. Also, check whether the answers are in the affirmative to any of the following questions. Does existing resources have necessary technical knowledge to use the tools without humungous investment into training? Are the test scripts easy to maintain? Is the tool well supported for “Application under Test” technology? Can components developed using the script be reused later? In addition to this, also evaluate whether the test tool supports all the required platforms on which the application is being executed. In fact, the proof-of-concept test suite would be an excellent way to evaluate a test tool.

5) Decide what needs to be automated

Resist the temptation to automate all the existing manual test cases. Not all test cases can benefit from automation. Identify the ones that stand to benefit the most from automation. For instance, if automating a test consumes more man hours than doing it manually it makes more sense to continue with manual testing. Good test cases for automation include short and simple transactions and tests that are executed regularly. Test cases being executed with multiple datasets are also candidates for automation. Refrain from automating tests where it is difficult to predict results or are not going to be repeated. And unless there is a strong business case, avoid automating long or complex transactions, and those that cross multiple applications.

6) Spend time on preparing automation test plan and strategy

Prepare automation test plans containing the list of activities that need to be performed. A plan should be created for every phase of automation testing i.e. identification of appropriate automation framework, framework design, development, scripting, maintenance etc. Prioritize activities like identification of reusable component libraries development. Over all planning is the key to success.

Test plans should be structured around the organization’s test objectives, as this ensures more efficient automation. Plans that do not provide adequate structure lead to automated tests that are long and complex. Also, ensure separate scripts are available for different functions. Using the same script to perform multiple functions is not advisable. Instead, design test cases and test scripts to be modular and generic. This will also ensure reusability.

7) Run automation as full time effort

A half-hearted attempt at automation is a sure-fire way of ensuring that the project ends in complete failure. Executing tests includes running the test scenarios, debugging failed scenarios, maintaining the automation platform/scripts, under test. Effective automation demands disciplined focus. Dedicate qualified, full-time resources to the project. Understand the complexity of the project and ensure requisite skills are available on demand. In case skilled resources are not available internally, engage the services of an experienced external testing service provider.

8) Look at it as a long-term investment

Look at the investment in testing automation tools and resources from a long‐term perspective. Unlike the common perception, automation involves high startup costs. And while immediate pay-offs are a possibility usually it can take anywhere between 1‐3 years before the organization sees any returns. This necessitates the need to clearly analyze the RoI the organization stands to gain from the investment including the various intangible benefits associated with automation. The focus should not be on just getting the automation to work. Rather, it should be on building an extensible automation solution that remains relevant as new product releases are developed. Plan for the future by ensuring thorough documentation, standard hand-off procedures, and well planned knowledge transition procedures.

Conclusion

In addition to the above best practices, organizations can also work on improving the product itself to make it easier to test. Automation testing identifies defects, which, in turn, help improve product quality. Automation frameworks, if properly implemented, will accurately identify failure. Develop automation standards to ensure faster, more efficient coding, and lower maintenance costs.

Careful planning, disciplined execution, meticulous maintenance procedures, and a dedicated, skilled staff are the key to increased RoI and cost savings. Expecting immediate return on investment is, however, tantamount to expecting miracles. Nevertheless, if carefully planned the total cost will prove significantly lower than the cost of manual testing in the long run and help achieve quality testing. This will help detect defects earlier and reduce the possibility of it spilling over into production.

This article first appeared in IT Next

Move to Managed Testing Services to Reduce Cost, Control Quality, and Shrink Time Line

2012-01-02T16:18:00.000+05:30

Globally, software defects cost the economy hundreds of billions of dollars each year. At a more micro level, it costs organisations anywhere between US$ 5 million to US$ 30 million annually in lost sales and customer goodwill depending on the scale of its operations. Even a single high profile outage could irreparably damage a business. Increasing the overall defect detection efficiency in an application during the software development lifecycle could shrink application maintenance cost considerably and have a direct impact on an organisation's top as well as bottom line. This makes rigorous and comprehensive testing of applications prior to go-live a critical business imperative.

While organisations have been conducting in-house testing and even outsourcing certain segments of the
testing process to external service providers, market dynamics demand faster test cycles, testing earlier in
the life cycle, and improved software quality at lower costs. Achieving all three key objectives simultaneously
has generally proved an ambitious task for most organisations. For instance, according to various analyst reports, testing can account for 20 to 40 percent of the overall application development time and if delivered onsite can account for a significant chunk of the total cost. This results in either quality being sacrificed at the altar of cost and speed-to-market or vice versa. Competitive organisations, therefore, seek ways to improve the performance and quality of applications, reduce testing costs, and boost productivity.

Outsourcing testing requirements to a managed testing service provider is known to reduce costs by up to 50 percent compared to managing the same in-house. Continuous improvement in quality, however, demands a delivery model that engages the service provider in a more collaborative relationship that will ensure long term benefits for the organisation. This is where the managed testing services model can make a difference. Managed Testing Service (MTS) providers offer a longterm commitment to improve software quality by optimising the application testing process, driving higher resource utilisation, building and maintaining a knowledge base equivalent to the actual user or in-house domain experts, and introducing enhanced levels of quality control.

Managed Testing Services
Outsourcing the software testing function to a MTS provider will enable organisations to focus on business development activities while concurrently ensuring significant improvements in product quality. Advantages include testing centers of excellence that add value across the software development lifecycle, centralised testing with standard tools & processes, flexible on-demand staffing, better governance, and greater transparency through management dashboards.

A Testing Centre of Excellence (TCoE) comprises testing specialists with a deep knowledge of testing methodologies, skilled resources trained in multiple domains, proven testing automation techniques, and standard, reusable tools to deliver comprehensive testing services. This ensures uniform output quality from the testing function and can help organisations reduce their testing costs by as much as 50 percent. Also, a TCoE is involved in the application development initiative from the design stage and performs testing across various stages of a development project thus ensuring higher product quality.

Centralised testing improves consistency of testing efforts, enables more objective assessment of software
quality, and provides more flexibility in deployment of testing resources. Centralised testing capability helps utilise scarce test resources much more efficiently and effectively. It reduces the need for organisations to send skilled operators to remote locations to set up test equipment and run test routines. Centralisation provides economies of scale that permit focus and specialisation on such areas as processes and tools. The testing methodologies and tools are designed to improve software quality and help organisations achieve higher application stability. Centralisation helps in defining standards and conventions across all projects ensuring cost, quality, and cycle time benefits through reusability, process efficiency, and elimination of wastage.

MTS also addresses issues like scarcity of skilled software testers and limited testing resources through a centralised team of highly experienced testers cross-trained in multiple technologies. Flexible staffing enables optimal resource utilisation and delivers greater cost benefits through economies of scale. The testers have exposure to a wider range of applications, tools, and techniques enabling on-demand allocation of resources based on project requirements.

Program and project level dashboards offer the management greater visibility and transparency into
the testing process. At any point, an enterprise can measure the performance of the testing team and
ascertain the quality of the software being tested.

The MTS model offers a business-driven structured testing methodology, well-defined governance procedure, comprehensive documentation on test processes, test approach, and test strategy, standardised processes, and clear service level agreements. This helps mitigate expensive post delivery errors by identifying and correcting the same earlier in the software development lifecycle. Services provided by MTS vendors cover the full lifecycle of testing services including requirement analysis; planning; design and development; execution and reporting, development testing, system testing, acceptance testing, system integration and functional testing, non-functional testing, performance testing, security testing, packaged application testing, and also consulting and advisory services on how to best introduce and conduct testing within an organisation. The three core benefits that organisations should expect from a MTS engagement, quality control, cost reduction, and reduced time lines, are discussed in greater detail below.

Control Quality
MTS providers have a clearly defined defect management and resolution process in place to assess the readiness of the application throughout its lifecycle. The goal is to remove maximum defects at the development stage, and in some cases the requirements stage itself, and prevent it from creeping into the production environment. This gains greater significance as defect removal in the production environment can otherwise prove an expensive and time-consuming experience.

Automating test scripts reduces cycle time and enables providers to run more tests during a test cycle. The additional testing ensures significant improvement in quality, as it enables detection of errors that might have escaped the initial rounds of testing and thus decreases the number of post-go-live defects. Additionally, testing automation provides tangible benefits like 24x7x365 availability of test scripts, and issue discovery early in the SDLC. It provides a repeatable process for verifying functionality and scalability.

The aim of any managed testing service engagement should be to continually improve process and methodologies across the application development lifecycle to provide a superior end product. To ensure adherence to this objective, organisations should ensure that clearly defined service levels are finalised prior to commencing the engagement. It's understandable that setting SLAs prior to the engagement could be difficult as the service provider would not have a view of the as-is quality of the applications and hence commit to it. The focus of the SLA should be defect density reduction within a single test cycle and enhanced Defect Removal Efficiency (DRE). To ensure this, certain penalties and rewards could be defined for a drop in quality or exceeding expectations respectively.

The MTS provider should offer metrics and dashboards, which provides the organisation's management a clear understanding of the quality gains at any stage of the engagement. This will help estimate and guide process improvements and thereby drive software quality. Metrics-based tracking and resources skilled in the latest tools and technologies ensure superior defect removal during each phase of testing.

Reduce Cost

As mentioned at the beginning of this paper, the reduction in overall defect density during the course of the software development lifecycle invariably leads to reduced maintenance costs and improved bottom lines. While IT budgets generally account for 4% to 5% of an organisation's turnover maintenance can account for as much as 70% of that budget. Rigorous testing during the development cycle can reduce this to less than 40% of the maintenance budget thus directly impacting margins positively. Additionally, outsourcing to a managed testing service provider offers significant cost savings while providing in-house staff the leeway to focus on strategic business imperatives. Opting for the MTS model provides organisations the option of maintaining spending at roughly the same levels while leveraging the lower cost of resources to increase the level of testing and thereby the reliability of the products and services.

Unlike in-house IT teams MTS providers have access to greater levels of technology skills, which the organisation can access on a needs basis. This does away with the need to hire expensive testing resources leading to considerable reduction in resource costs. The model also resolves the challenge of resource utilisation, as it can be ramped up or pared down to meet project requirements. Another intangible benefit is the reduction in process ramp up time. Since a common set of resources manage multiple testing projects they are internally cross-trained in multiple technologies thus ensuring quick ramp-up on the knowledge curve. This in turn reduces cost and increases productivity. Interestingly, a similar logic applies when standardised processes are followed.

Test automation too plays the dual role of improving quality while reducing costs, as fewer resources
need to be allocated due to increased testing coverage and rigorous regression testing. Another key cost area is investments into tools and technologies. An in-house test team or a vanilla testing outsourcing model would require investment into expensive application testing and load testing tools. An MTS provider, however, takes on the onus of ensuring the organisation access to the latest tools and technologies.

Shrink Timelines

Process standardisation and the proven frameworks and methodologies offered by MTS providers ensure a significant reduction in testing time lines. Effective use of automated testing tools and continuous service improvement also goes a long way in ensuring quicker time-to -market with a superior product. Automation can reduce test cycle by as much as 50%-75% compared to running the same manually.

The follow-the-sun global delivery model offered by MTS providers can significantly accelerate test cycles. Companies can reduce test cycle by as much as 50 percent, and the improve quality by adding more test scenarios.

In case the organisation faces pressing time-to-market deadlines, it can leverage the quick resource ramp up option provided by service providers to buy more testing resources and thereby meet that deadline.

What to Watch Out for

The MTS provider should have demonstrable experience across diverse industries, especially regulated sectors such as finance and pharmaceuticals. It should ideally have core verification and validation experience and a clear track record of successfully delivering multiple testing engagements backed by a robust and mature testing process framework.

Additionally, it should offer the flexibility of providing services both onsite and offshore across the SDLC. In case the organisation's application development work is managed by a third party service provider or the organisation has outsourced its testing requirements to multiple players, it should ensure that the service provider has the capabilities and skill set required to work with other providers.

SLAs should clearly define the minimum level of service that would be delivered and should be objective and measurable. While SLAs will vary based on scope and scale of the project, factors like on time delivery, volume of work delivered, and error containment should be clearly laid out. The organisation should collaborate with the service provider to establish clear rewards and penalties to provide the right motivation.

Testing engagements should have inbuilt flexibility and scalability to ensure fluctuations in scope and timescales can be met. Also, the service provider should have access to the infrastructure and resources to meet unforeseen demands that may arise during the course of the engagement.

Conclusion

Though the core focus of aligning with a MTS provides is cost reduction, organisations should not get carried away by the large cost benefits that may be offered. Instead, the focus should be on seeking testing services that help organisations reduce total cost of ownership and time-to-market for products and services with high levels of quality, stability, and reliability. Delivering without quality and performance places the business at risk and increases operation costs. Also, as the testers become more familiar with the applications being tested, they can add immense value to the engagement by conducting root cause analysis thereby shifting the focus from defect detection to defect prevention. However, testing should be synchronised with the SDLC right from the design stage. This will mitigate the probability of expensive defect repairs later on in the cycle and ensure adherence to delivery deadlines.

This necessitates the need to select an experienced testing partner with proven industry expertise and structured processes that will ensure best practices are consistently applied. The testing provider should have deep technical expertise and experience across multiple industry verticals in addition to the capability to work with multiple vendors across geographies. Organisations that are new to the concept of outsourcing can also look at Managed Testing services as a risk free way to mature outsourcing skills while simultaneously benefiting from improved testing efficiency, reduced time to deployment, and lower costs.

Minimize inventory liability across supply chain echelons

2012-01-02T16:02:00.000+05:30

Examine the balance sheet of any manufacturing firm, and one would notice that inventory
accounts for 20 percent to 60 percent of its total assets. True, inventory has a definite financial
value; a comprehensive and effective inventory management policy can result in increased
revenues and enhanced efficiencies. Nonetheless, is inventory really an asset or could it toll the
death knell for an organization?

Factors like demand volatility, shorter product lifecycles, rising customer service expectations,
increasing global competition, diminishing brand loyalty, shrinking margins, and globally distributed
supply networks have made quick response to marketplace changes critical to a company's
success. This has led to different echelons within the supply chain network resorting to safety stock
accumulation to maintain customer satisfaction levels. While inventory is necessary for the smooth
functioning of business, high inventory exposure could mean financial losses due to high carrying
costs including warehousing costs, and even worse, product obsolescence. Unforeseen events like
natural disasters, disease outbreaks, terrorist attacks, etc can change market dynamics almost
instantaneously. The current decade itself has been witness to several such instances - 9/11,
SARS, equine flu, the Tsunami, and now the H1N1 influenza outbreak. Market research, however,
shows that more than 50 percent of companies in the FMCG sector take over a month to sense
shift in demand while more than 80 percent suffer opportunity costs due to inability to sense and
respond to these changes.

This can have significant financial repercussions including opportunity costs or inventory write-offs.
While these external factors cannot be controlled, today, tools and technologies are available that
can effectively manage supply chain complexities and reduce inventory while simultaneously
increasing customer service levels. This paper discusses the various inventory related challenges
organizations generally face and the measures they can take to respond to the same with minimal
bottom line impact.

Factors that Hinder Effective Inventory Management
Traditional planning systems forecast demand based on past performance. It does not take into
account deviations that can occur as a result of various internal or external influences. The system
lacks the ability to predict the impact of an unforeseen occurrence on the supply chain. Products with
extremely short product lifecycles, perishables, and those with long lead times stand the greatest risk
of lost market revenues and write-offs. And in a global environment where an organization's supply
chain network comprises multiple echelons a static system cannot disseminate critical information in
real-time. By the time organizations can recognize the problem, analyze its impact, and take counter
measures, the inventory at obsolescence risk has generally already built up within the network.
First, let's look at the various aspects under the direct influence of a manufacturer that an
organization can control by leveraging available technology.

Demand Shifts: To respond to demand shifts resulting from launch of newer, better products by
competitors, manufacturers may in turn make changes in their own product design. This could result
in obsolescence of certain components leading to dead inventory.

New Launches: This is closely connected to the issue mentioned above one. However, here the
threat is from internal sources in the form of cannibalization of a successful product through the
launch of updated versions.

Supply Shortage: Lack of multi-echelon visibility could lead to situations where a particular
component on the supply chain network might foresee supply shortage and so increase safety stock
levels to hedge shortfalls. This could lead to unnecessary stock build up especially is that component
is available in another echelon in the network.

Increased Lead Time: Globalization has led to geographically dispersed, highly complex supply
networks with multiple touch points from the handling of raw materials to the delivery of finished
goods resulting in longer and more variable lead time and increased inventory risks. On the other
hand, increased competition and fickle customer loyalty has placed pressure on organizations to
reduce time-to-market and fulfill market demands instantaneously.

Disconnected Internal Systems: A single, integrated view of the organization is necessary to
anticipate change and take measures to respond quickly to it. The lack of system integration can,
however, lead to a scenario where organizations are incapable of predicting demand and supply
situations. Organizations should have the necessary tools and technologies to sense changing
demand and quickly take necessary action to reduce inventory exposure.

Overcoming the Challenges
Accurate evaluation of inventory risk and liability is a complex process. Traditional supply chain
solutions focus on inventory as a post-performance metric leading to huge liabilities during demand
fluctuations. What is, however, required is a solution that measures and evaluates the potential
inventory risks lurking in the supply chain rather than the actual inventory, a solution that ensures
near real-time detection of inventory risks and liabilities, a solution that can sense changes in
market demand and help companies adjust inventory targets accordingly. Such a solution should be
able to track and trace inventory throughout the supply chain and make the network more flexible to
market changes.

Inventory in balance sheets do not reveal committed components, sub assemblies at supplier
locations and potential product returns from retailers and distributors. To evaluate the actual
exposure, organizations need to first know the exact location of the entire inventory within the
network i.e. an Inventory Liability & Risk Management Dashboard that provides real-time / near realtime
financial value of inventory liability across the supply network.
Enterprises can take two approaches for inventory liability analysis; namely 'Inventory Exposure' and 'Valuation of Multi Echelon Inventory Obsolescence'.

Inventory Exposure
A simple way of gauging inventory exposure is by understanding the amount of money at risk at any
given point in time. The inventory exposure metric should provide a near real-time view of the
amount of committed inventory within the network based upon expected demand and the cumulative
lead time associated with the current supply chain.

The design and engineering teams should have visibility into standing inventory levels. Better coordination
between operations and design could mitigate inventory obsolescence due to premature
introduction of a new product thus saving significant financial losses due to write-offs.
Prior to increasing safety stock levels or ordering from another supplier to hedge shortages at the
preferred suppliers' end, organizations should look at inventory within the network. This will help
curb unnecessary inventory exposure and alleviate financial risk when a product reaches the end
of its lifecycle.

Valuation of Multi Echelon Inventory Obsolescence

Companies need to look at the whole supply chain and take decisions that are appropriate for the
entire network and not just a single echelon. If each echelon holds a certain level of inventory as
safety stock there is the possibility of an inventory build up across the supply chain. This is nonworking
capital which is not contributing to the bottom line, and worse, is at risk of obsolescence.
A multi-echelon view of inventory helps cut down on excess inventory in the form of redundant
safety stock, reduces stock-outs and end customer service failures, and provides more accurate
demand projections.

Valuation of Multi Echelon Inventory Obsolescence judges the benefit of inventory analytics in
postponing the accrual of inventory in the supply chain downstream by aligning production schedules
of components manufacturers and suppliers to the demand for the finished good. Companies should
shrink the product manufacturing lead time by relooking at the entire production process to identify
opportunities to reduce lead time and improve inventory exposure.

In Conclusion
Thanks to globalization, supply chains across industry verticals have become highly complex in
nature. Market conditions, however, do not permit organizations to wallow in its size or the global
nature of its business or its technological prowess. Today's supply chains have to exhibit a high
degree of adaptability and responsiveness to changing market conditions, and proactively respond
to shorter, more dynamic product life cycles.

Inventory liability puts companies at financial risk. A comprehensive valuation, in monetary terms,
can provide a more accurate picture of the financial implications of a company's inventory exposure
and enable it to take more informed business decisions. Companies can derive significant financial
value by leveraging multi-echelon visibility to rapidly respond to changes that could negatively
impact the business. Companies can reduce inventory while maintaining stringent customer service
level requirements by optimizing product mix at each location.

By analyzing inventory liability through metrics like 'Inventory Exposure' and 'Valuation of Multi
Echelon Inventory Obsolescence' companies can gain enterprise-wide visibility, analyze impact of
events on a near zero-time basis, and thereby reduce lead times and variability, enable lower
inventory investment, improve customer satisfaction and cut supply chain costs.
Inventory Liability

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Eight Worst Mistakes in Outsourcing and How to Avoid Them

2011-11-30T15:11:00.001+05:30

Much has been written about the numerous benefits and ills of outsourcing. Nonetheless, it is now a business imperative for most companies, underpinning the need to ensure a successful outsourcing relationship.

Being a strategic decision with long term impact, the success of outsourcing depends both on the service provider and the outsourcer’s commitment. An analysis of outsourcing relationships that have not been successful reveals a certain pattern. Based on our extensive experience in outsourcing engagements we have identified the eight most common but serious mistakes enterprises are likely to commit while outsourcing their processes to a third party service provider. This paper analyzes each mistake in detail and outlines measures to avoid these pitfalls.

The following illustration highlights these eight common mistakes.

Poor Governance

This is one of the most commonly encountered problems and a key cause of failure of an outsourcing relationship. Organizations often take a tactical approach to outsourcing and do not pay attention to executive sponsorship, which is an important ingredient for success. Lack of a structured governance mechanism has led to the “untimely demise” of several outsourcing relationships.

A good governance model ensures a strategy which clearly defines the objective of outsourcing, prescribes a working model that is flexible and collaborative, sets up SLAs and decides on a mechanism for arbitrating issues. Most outsourcers, however, under invest in the ongoing governance and management of the service provider relationship and this invariably spells trouble for the engagement.

Shortsighted Focus on Cost Savings

Most enterprises cite cost savings as the key reason for outsourcing their IT requirements. According to a survey of more than 800 executives in the US and Europe, cost saving is still the primary driver for outsourcing. This often raises unrealistic expectations with reference to continual cost savings. Owing to this myopic view, enterprises fail to consider other benefits such as process efficiency, improved focus on core business areas, better ability to plan, higher levels of operational reliability, and more rapid implementation of new strategies and initiatives.

A broader and long term approach is essential to set pragmatic goals, spread over time for evaluating the success of a relationship. Enterprises should seek access to flexible, scalable and easy to maintain systems — leeway to focus on core strategic functions, access to high caliber labor and more importantly risk mitigation. When enterprises broaden their vision and visualize outsourcing as a strategic function, they will be able to adopt a more balanced approach as opposed to viewing it as a pure cost reduction mechanism.

Lack of Preparation - Seeing Outsourcing as an Instant Solution

Using outsourcing as a quick fix to alleviate immediate problems is another commonly encountered issue leading to poor results. While outsourcing does result in some operational sweet spots, it should not be the primary reason to employ this strategy. This mindset leaves an enterprise under prepared for outsourcing.

Many a times, companies start the request for proposal (RFP) and contract negotiation processes before they have thoroughly evaluated the outsourcing decision internally. Outsourcing being a complex decision, such an unplanned approach will jeopardize the future of the relationship. To ensure a successful and lasting outsourcing engagement, the organization must prepare itself for the change it will have to undergo during this transformation. Issues such as job loss and resistance to change will crop up during the transition and needs to be guarded against.

Outsourcing High Touch Activities

Not all work is ideal for outsourcing. Understanding what processes to outsource is an important part of the planning process. Against this backdrop, it is useful to consider a framework such as the one shown below and categorize work into four broad buckets -

Outsourcers sometimes do not invest enough time to do such a mapping and may end up outsourcing the wrong processes leading to disastrous consequences. Then again, organizations that outsource projects with low business value, or too many hand offs, may not enjoy the right results. If the project requires considerable interaction, the management overheads are likely to increase exponentially leading to questions over the possible benefits.

Failure to Develop an Effective Communication Program

In a recent survey by a leading association, 28 percent of the 1,000 respondents had pointed out poor communication as the top reason for the failure of an outsourcing project.

Communication is a key factor in delivering results in an outsourcing engagement. Sharing of information is essential for –

Clarity of expectations and objectives
Alignment of interests
Compatibility between the two parties

Factors like distance, time, language, and cultural differences create barriers for communication. In cases where cost cutting is the only reason for outsourcing, communication often takes a backseat. For a successful outsourcing relationship, the outsourcer and the service provider need to work in a collaborative manner. Key elements for overcoming barriers for communication include:

Establishing clear communication channels
Standardized format for content, frequency, levels and modes
Interactive and proactive communication
Escalation mechanism
In global outsourcing relationships, showing diversity

Improper Evaluation of Outsourcing Service Providers

Often companies invest less time and money on selecting service providers and put the complete project in jeopardy. Proper evaluation and selection of providers is crucial.

The pitfalls of choosing the wrong service provider are many. At the minimum it would give sub optimal returns and in the worst case, it may lead to the outsourcer abandoning the engagement. Therefore, it is essential to thoroughly evaluate service providers on their contextual understanding. Before selecting a provider, or even drafting a RFP, it would be a good idea to know the big and up-and-coming providers in that space. This due diligence can come in handy while short listing providers.

It is better for a company to stay in control and remain focused on the key criteria, essential for the success of the engagement. Ranking the providers based on certain pre-defined criteria is the best selection method; this also minimizes the subjective influence on the selection.

Poor Cultural Fit – Compatibility of Parties

An outsourcing relationship works best when the chemistry between outsourcer and service provider is right. Given that people are at the center of an IT outsourcing arrangement compatibility is essential.

“Off late, CIOs who consider cultural fit to be as important as cost savings have experienced the most successful outsourcing relationships,” says an AMR Research article. The finding is not surprising given that outsourcing is becoming strategic and long term in nature. Consequently, it has become all the more important to find an outsourcer who has similar work ethics, values and ways of doing things. Businesses are also beginning to see the value in bringing in external consultants to help bridge cultural gaps and iron out differences during negotiations. As a rule, compatibility issues needs to be addressed during the selection process. In addition, effective communication is essential to ensure good cultural fit.

Improper Definition of Metrics and KPIs

Often businesses believe that a set of predefined metrics will help them monitor the performance of the service provider and retain control over the relationship. However, the wrong set of metrics or an overdose of KPIs can do more harm than good to an outsourcing relationship. In the first case, the outsourcer may not get the true picture of whether the relationship is moving in the right direction, and this is dangerous. In the second case, fatigue may defeat the value of the tracking.

Thus, the recommended approach is to choose a few apt metrics that gives the outsourcer a sense of where the engagement is at any point in time. On line dashboards are becoming increasingly common as a means of providing visibility on metrics and KPIs to the buyer.

Conclusion

Progressive companies have demonstrated a multitude of benefits by adopting an outsourcing strategy. However, not appreciating these critical success factors could result in either failure of the engagement or disappointment on the part of the outsourcer.

This article first appeared in Global Services Magazine

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A tale of lights, cameras and computer-generated images

2011-11-29T18:33:00.001+05:30

Movies these days have brighter colours, mind-boggling stunts and more; even the glitches seem to have disappeared. And it’s all thanks to the use of multimedia and animation. A peek into how this technology has made movie-watching more interesting.

The tension in the air is palpable as Bollywood heartthrob Aamir Khan races on the tracks towards the speeding train, in the movie Ghulam. The train is just seconds away from hitting our daredevil hero when he jumps off the tracks, missing being hit by mere inches.

No, it was not a stunt artist. And contrary to popular belief, neither was it Khan himself. The scene was shot with Aamir Khan running against a static wall, which was later fused with the shot of a running train, resulting in the nail-biting action sequence that was shown on screen.

The collective gasp of the audience resounds throughout the theatre as Rani Mukherjee is hit by a speeding car and goes flying into the midst of oncoming vehicles.

A shot that managed to elicit a reaction from even the most cynical viewer. A shot that occupies only 15 seconds in the three-hour long Saathiya. A seemingly simple shot, but one over which the maximum time was expended by the production team. Three weeks, to be precise.

Welcome to the new age of Indian cinema, where talent coalesces with technological wizardry to transform imagination into reality and create images which dreams are made of.

India’s first futuristic film Deham has more than 23 minutes of special effects; the set was entirely computer generated

Why is it that even a low-budget Hollywood-produced movie has a slicker finish than those made in Bollywood? Even a frame-to-frame Bollywood remake somehow lacks the finesse of the Hollywood original. The seemingly impossible action sequence in TheMatrix is more believable compared to the on-screen antics of some of our superstars. For that matter, why is it that after churning out more than 800 movies a year India is still unable to produce even one film with stunts and special effects on par with those released by Hollywood? The answer is simple: special effects!

The good news is that, though a bit late in the day, Bollywood has finally woken up to the importance of computer-generated effects (CG) and the magic it can weave on the audience and box-office returns. It is the effective use of animation and multimedia that sets a movie apart and attracts audiences to the theatre.

Of course, nothing can compare to a well-made movie, but Bollywood has realised the hard truth that multimedia is the future. Express Computer took a closer look at some of the recent Bollywood hits, only to realise that, though in a small way, there has been an increasing use of multimedia in most of the big budget movies that were released in the last couple of years.

A shot with a differenceTake for instance the shot described in Saathiya. The story is about a couple who marry for love despite stiff parental opposition. The twist in the tale comes when the heroine meets with an accident on her way home from work. This is one of the most poignant scenes in the movie, made possible thanks to technology. The handiwork is of Pankaj Khandpur, creative director of Tata Elxsi’s Visual Computing Labs, and his team.

The accident itself is a total of six shots shot from 15 different angles. And the icing on the cake is that it is not Rani Mukherjee or even a double who did the stunt, but a male stunt artist "in a sari and a wig who jumped from a height and tumbled onto a mattress placed on the road," says Khandpur. The challenge for the Tata Elxsi team was to fuse the various shots into a single integrated whole, seamlessly. All the shots had to be weaved together to produce a 15 second clip, which finally had the audience staring at the screen in awe. Watching the scene repeatedly, even after five replays, we couldn’t notice any flaw in the final product. The effort had definitely paid off.

Though Saathiya had only a one-minute CG image, there are a spate of recent releases that boast of more than half-an-hour of special effects and animation. The recently released iDream Productions’ children’s movieJajantaram Mamantaram (J2M2), directed by Soumitra Ranade is a case in point. J2M2 has the distinction of being the first Indian film and the second in the world to have more than an hour of special effects. This loosely based version of Gulliver’s Travels and the Gujarati folklore of Bakasura, takes you on a fantasy trip complete with fairies, man-eating demons and lots of magic. An idea that would have been impossible without oodles of help from Maya Entertainment and its animation team. The movie contains 63 minutes of unbridled CG images (1,800 shots), replete with dazzling special effects.

Gulliver goes digitalIf one minute of special effects can take three weeks of hard work, one can only imagine the challenge faced by the Maya team. Explains Rajnigandha Shekhawat, communications officer, Maya Entertainment, "The actors had to act and emote in front of a blue screen instead of each other. Since Javed Jaffery portrays a character six times his size, he emoted in front of 6" sticks with a blue screen forming the backdrop, and the Lilliputians did likewise looking at a 36-feet high pole. The blue chroma was then carefully keyed off and the two layers joined together seamlessly to make it appear as if Jaffery was actually interacting with the little people.

To achieve the natural look, special effects supervisor Prasad Sutar of Maya demanded extensive pre- and on-shoot planning, that included "maintaining tilt angle proportions of the characters throughout the film," planning the lighting of each layer, etc. Each of the 1,800 shots had various layers, some shots had up to 10 layers that needed careful planning and execution.

To achieve a realistic look, the ground level of all the characters, shot separately on different days, had to be constantly monitored so that when the layers were added to each other it looked like all the characters were on the same plain, at the same time. The animation was done mainly on 3D Studio Max and Maya (a software package), while the compositing was done on Flame. The mammoth task, which consumed a whole year, involved 20 animators, two visualisers, three storyboard artists and two associate producers.

Besides J2M2, the animated Bengali series based on the Panchatantra tales, produced by netGuru India was no mean task. The animation and editing, on Incite software, took almost three months. This was in addition to the three months spent on writing the script, storyboard character creation and voice recording. According to Dinanath Gokhale, regional manager-West, netGuru India, the challenge was in delivering an end product comparable to the characters seen on Cartoon Network.

A 13-member team handled the entire project, including the direction. Ghokale claims that this series was the first of its kind in the animation industry, which illustrated the essence of the traditions and culture of ancient India. The interesting part of the story is that a considerable part of the movie was created on Intel workstations. netGuru even developed its own in-house software, AXA, to bring the project to fruition.

Filmi, very filmiBesides these films, there have been a plethora of Bollywood award-winning blockbusters that have brought about a revolution in the way multimedia is used in today’s film-making environment. Leading the way are big budget multi-starrers likeKabhi Kushi Kabhi Ghum (K3G), Mohabattein and Devdas.

K3G has a total of 42 minutes of CG effects. The most challenging work was the ‘Suraj hua maddham’ song shot in the Egyptian desert. The entire song was colour-corrected—right from the desert sand, to the sky, to the skin-tone of the actors—to render a darker-tone that Indian viewers usually associate with the desert. The sequence where Shahrukh Khan and Kajol’s images have to be juxtaposed with their own images in flashback, required multiple compositing of Shahrukh Khan and Kajol. But the toughest part, according to Khandpur, was the reversal of age, i.e. making the older couple look thirty years younger than they actually were.

Even Oscar nominee Lagaan, has 16 minutes of special effects in the movie. The magnum opus, set in pre-independence late 19th century India, wouldn’t have been possible without the creative wizardry of Pankaj Khandpur and his team (earlier a part of Western Outdoors, now with Tata Elxsi). The opening shot of a tossed coin falling on the map of India took the most amount of time to generate than any other shot in the movie. Khandpur spent almost two months trying to execute the intricate moves of a tossed coin falling to the ground.

Looking at the final output not even an expert can deny that the shot is real, whereas the truth is that even the coin is an animated image. The British flag flying atop the fort, the clouds, the rain and more interestingly the shot where the two heroines and Aamir Khan are juxtaposed in a song sequence wouldn’t have been possible without CG effects.

Even the period buildings, which now have extensions based on modern architecture, were touched up to provide the authentic feel. In fact, a period film of the magnitude of Lagaan wouldn’t have been possible without technology.

The multi-starrer love epic Mohabbatein, is another example of the combination of technology and talent. One would think that a simple tale of love wouldn’t require any animation sequences or special effects. But the team that worked on the movie has delivered a total of 15 minutes of special effects. The maple feel transition, which became the trademark of the movie, was completely computer generated.

Another famous scene in the movie is Amitabh Bachhan paying obeisance to the rising sun. Technological wizardry once again came into play to touch up an afternoon sun in a cloudy London sky and provide the dawn effect seen in the movie.

For that matter, a layman might not find anything interesting about the ‘Silsila yeh chaahat ka’ song sequence in Sanjay Leela Bhansali’s Devdas either.

This shows the expertise with which Hyderabad-based Digital Art Media (DAM) has executed the project. Aishwarya Rai dancing in the rain with a lit lamp which refuses to go out, invisible effects like unlit candles suddenly springing to light and flying bees wouldn’t have been possible without DAM’s expertise.

The flame that refuses to go out despite the tempest has been digitally created. The company has seamlessly integrated close to 80 shots in that one song itself. Says Vamsi Ayyagari, executive producer at DAM, "We had the opportunity to provide photo realistic effects, which makes it next to impossible for anyone to figure out that most of the objects are actually computer generated. DAM used a hybrid mix of animation and compositing software and NT-based hardware platforms to deliver the visual effects."

Freeze frameOther than these blockbusters, there have been quite a few experimental movies that have adopted special effects, Govind Nihalani’s Deham is one. Set in the Mumbai of 2022, it would be inconceivable to imagine this film without special effects of any sorts. But though a lot was expected from India’s first futuristic film, financial constraints limited the use of graphics and CG effects. But special effects veteran, Ramesh Meer and his team at FX Factory, have created more than 23 minutes of CG effects for this scientific thriller.

According to Meer, the entire futuristic set was digitally created. The effects were generated by using software like Maya, Softimage, Lightwave 3D, 3D Studio Max and Digital Fusion.

It’s not just movies that have been making use of animation and special effects. Companies like USL WOA, previously known as Western Outdoors, provide animation and multimedia skills in the ad film space. The challenge for the company is in creating a short but highly effective piece, which conveys the message to the viewer in the shortest possible time. More often than not, the message has to be packed into a 30-second commercial.

The AT&T (IDEA Cellular) ad done for MAD Entertainment is a classic example. The shots were composited by Western and replaced by numbers. An example is the violin used in the ad turning into numbers. Other than this ad, Western has done ads for several global majors including Johnson & Johnson, Levi’s and Revlon. The company has also done work on Mission Kashmir, the Hrithik Roshan-Sanjay Dutt starrer. The scene where Roshan jumps 6-8 feet in the air has been done using wires. USL WOA did away with the wires in each single shot to provide the end product. The AT&T (IDEA) and J&J ads took one month each, while Levi’s and Revlon took a week each.

Back to the futureBeside these known examples, Bollywood is planning releases resplendent with visual effects. DAM’sKoi Mil Gaya, Tata Elxsi’ Agni Pank, Boom by Kaizaad Gustaad, Chupke Sei, etc are going to stun viewers with effects. Agni Pank, which is still in the planning stage, will see MIG 21s in flight and in combat.

For Koi Mil Gaya, DAM’s team of eight animators and five compositors worked for close to a year to provide more than 30 minutes of special effects, including modelling, animation and compositing. The work done includes the creation of an exotic spaceship, glow effects and some special scenes in dance sequences. A non-disclosure agreement prevents the studio from revealing more at this point of time, but we should soon see the finished product on the big screen in a few months time.

And as a parting shot we’ll share a well kept secret, the MIGs in Agni Pank are Mumbai-born, generated in the Tata Elxsi lab in Bandra.

This article first appeared in Express Computer.

Exclusive channel network

2011-11-29T18:23:00.001+05:30

During the course of conversations with several distributors, one point that was reiterated was the need to build an exclusive channel network—a set of channel partners in different regions who would be faithful only to one particular disty. This, according to the disties 360 Magazine spoke to, would resolve the issue of low margins while ensuring the disty of a much more aggressive and dedicated channel. Even the partner stands to benefit from additional; support and greater margins.

But while this may seem to be the ideal solution to a nagging problem it is easier said than done. Customers demand an array of option each time they are out shopping. If a partner doesn’t house the particular brand demanded by a customer then he is bound to lose that business. However, channel partners that do not directly deal with end customers stand to benefit from entering into exclusive relationships with a disty. And here we explore those mutual benefits.

Today, disties are dedicatedly exploring the possibility of cultivating exclusive relationships. Says Yogesh Dutta, Country Manager, Aditya Infotech, “In an exclusive relationship, the partner puts his heart and soul into the work. And this is what a disty looks at in any channel relationship.” even V. K. Bhandari, managing director, Supertron Electronics, feels that it is definitely more beneficial to have a few exclusive partners in place. Says Bhandari, “There are certain advantages in developing an exclusive channel network. Firstly, exclusive partners are more loyal to the brand. Generally, these set of partners desist from selling other competing brands. And in cases where they do, the focus on the brand in question is much higher. This is so because they get special discounts. The additional revenue they can generate by being loyal to a particular brand is one of the biggest attractions of being an exclusive partner.”

Also, it is easier to exercise control over the market operating price (MoP) because this is defined by the channel partner. MoP is influenced by the competition. But a channel partner has more control over the same if he is the exclusive dealer for the product in a particular market. Rashi for instance, is the exclusive distributor for Sony products in India. They, in turn, have several premium partners to push the brand. However, despite charging a premium they haven’t faced any major challenges on the price front. They have been able to maintain their premium pricing solely because they are the exclusive partners for the brand. An exclusive partnership also enables the disty to ensure minimum discrepancies in the operating price.

The visibility that a disties’ products would enjoy in an exclusive relationship is likely to be more, as the partner will not feel compelled to make a sell by pushing a competing product if the customer awareness of another brand is lower. Also, in an exclusive relationship the disty can leverage the relationship its partners enjoy with the customer to break into accounts where the partner is selling a complementary product.

An exclusive partnership also can be leveraged by a disty to source specific data about consumer choices and their preferences. This information can then be used by the disty to gain a deeper understanding of likely future customer behavior and analyze market trends. Even manufacturers can benefit from this information, as product and strategy planning is based on market intelligence thus derived.

BENEFITS CHANNEL PARTNER

For the channel partner the value proposition can lie in forming a core business around the set of products pushed by their disty partner. Exclusive channel partners also have priority access to product support, training, certification and exclusive sales and marketing resources. This can then help them in acquiring new customers and at the same time increase the satisfaction levels of the existing set of customers.

Additionally, disties would be more comfortable involving these partners in strategic account planning. Adds Bhandari, “We give good margins to premier partners. When you are a premium partner you get a hefty margin and a chunk of benefits, which can then be shared with those further down the chain.”

An exclusive performance-based program level is offered to partners who are committed to selling and promoting the products from a particular disty. Premium Partners conduct joint business plans with the distributor and can receive performance-based margins in addition to the benefits of an authorized Partner. Says Dutta, a disty is more comfortable discussing joint market strategies with a premier partner.

Other benefits include access to the latest product and roadmap information, advanced training opportunities as well as a higher level of direct technical support. The idea is to help exclusive partners become more knowledgeable about products, as well as evaluate new opportunities for business.

CHALLENGES

Profitability is the key concern for most partners. Distributors tackle this challenge by ensuring that operational guidelines are strictly adhered too. For instance, according to Dutta, Aditya Infotech has established a minimum market-operating price, which its premium partners have to take into consideration before finalizing a deal. This ensures a minimum level of profitability for the partners. Disties also need to ensure that partners do not overstock, as this could then force them to cut prices to clear the same. Disties can play a proactive role here by desisting from dumping products on its exclusive partners.

Certain parameters need to be met before conferring the exclusive partner status on a reseller. According to Dutta, if the partner is interested in wholesaling then he should be considered for the role of a premium partner. But if the partner is focused on retailing then it would be difficult for him to stick to one brand. He will have to consider market dynamics.

Also, disties should take a partner’s strengths into consideration. A particular partner maybe strong in the keyboard and mouse space but the equation might change in the case of monitors. A disty can then consider this particular dealer as an exclusive partner for its inputs peripherals while the monitor distribution business can be assigned to another partner. Dutta says that it is not practical to pressure one partner to sell all the products in the disties portfolio.

According to Bhandari, it is also important for the disty to have strong brands in its portfolio to attract exclusive partners.

Exclusive relationships also help the disty to create a certain level of monopoly in key market segments. Such a relationship can also be used to create entry barriers for competitors. Additionally, it provides the disty more avenues and opportunities to tap the market.

Spotlight: Photography

2011-11-29T18:20:00.001+05:30

Photography consumption in

India

has been on the rise over the past two years. According to market studies, the Indian photography market had grown at a CAGR of approximately 12 percent over the past few years. According to market analysts, the growth rate could touch 15 percent before the end of this year. Traditional photography itself is expected to continue growing at the rate of over 8.3 percent. According to the same report,

India

consumes close to 90 million film rolls a year.

But the overall cost of photography has kept many users away from analogue cameras. Digital photography, on the other hand, comes with the promise of zero clicking costs. The Indian Digital Still Camera Market witnessed an explosive growth of 114 percent in unit terms during 2004. According to IDC, the Indian digital still camera market notched up revenues of Rs 366 crore during 2005.

Each year, camera manufacturers have been introducing increasingly sophisticated, high performance digital cameras at a fraction of the cost consumers had to pay even two years back. Three mega pixel digital cameras have now become the de facto standard. Most manufacturers have actually stopped production of anything below that specification. While in 2003 the models which sold most units were in the 2 mega-pixel range, 2004 witnessed a shift to the 3 mega-pixel range. Around 48.2 percent of cameras sold during 2004 were in the 3 mega-pixel range. Even in the area of processing, digital technology has been slowly replacing conventional processes. Entry of manufacturers like HP, BenQ, TVSE and Techcom in this market further accentuated the competitive landscape of the Indian digital still camera market.

Worldwide trends also point to an increasing movement towards adoption of digital cameras. The InfoTrends Research Group estimates that worldwide revenue from low-end digital camera sales will reach $11.8 billion by 2007. Shipments of these cameras will reach 24 million units in 2002, capturing 28 percent of total worldwide camera sales (not including one-time use cameras). Unit volume is forecast to grow at a compound annual growth rate of 16 percent to reach 51 million units in 2007. Says Charanjit Singh, Analyst, Peripherals Research Group, IDC India, “As prices dropped and quality issues got addressed, digital still cameras became a mass product. This is clearly visible from the fact that 90 percent of digital still cameras were sold in the consumer segment in the last year.”

PREVALENT MARKET CONDITIONS

This is one market segment that has an extremely strong growth potential. The reasons for this are manifold. Currently, photography consumption in India is less than half that of China and hardly constitutes more than a percent of the total consumption seen in Europe and the US.

However, there is a strong demand from India’s burgeoning middle class where there are currently more cars than cameras. Cameras are still not on the priority list for most buyers. It is still perceived as a lifestyle statement. But thanks to the awareness programs conducted by companies like Kodak, Canon, Samsung, etc, this perception is undergoing a gradual change.

Even the gargantuan growth witnessed in the phone camera space has played a key role in increasing the demand for cameras. Phone Cameras are expected to reach five million by end this year. And a rapid decline in price can only accelerate this growth rate in the coming years. Digital camera manufacturers are indirectly benefiting from this trend, as camera phones are slowly inculcating the photography culture among the masses. The relatively low resolution of phone cameras convinces many users to then opt for a relatively high-end digital camera.

The growth of the Internet has also led to an increase in the demand for digital cameras, as high speed broadband connections and unlimited online storage space has made sharing pictures that much easier. This has in turn led to an increase in demand for new and more innovative and cost effective methods of shooting and printing digital photos.

The ability to acquire, store, and distribute content over a media network has created new opportunities for PC resellers. The impact of devices such as Media Center PCs, Wi-Fi image capture devices, media servers, and portable media players on traditional viewing models will be nothing short of revolutionary. Not only will premium content from service providers need to be managed, but personal content from digital cameras and video camcorders will flow over these networks, creating a need for management of this content and an opportunity to monetize it for hardware and service providers.

MARKET OPPORTUNITIES

The Indian digital still camera market is flooded with manufacturers from different backgrounds. Gone are the days when cameras were sold only through the photography channel. Year 2004 saw the distribution channels for digital cameras being redefined with the coming-to-the-fore of the IT and Consumer Electronics channels. While vendors may choose to selectively focus only on the photography channel or the IT channel or the consumer electronics channel, bigger players like Kodak and Canon have a presence across all three channels. According to IDC estimates, the IT channel contributed to 30.5 percent of total sales during the second half of 2004. Though studies have still not been made available for the same period last year, market analysts estimate that there has been a significant rise in this figure.

Resellers can create opportunities by focusing solely on the photography market. A end-to-end solution provider can look at entering diverse product segments like photo printers, all-in-ones, photo editor software, memory card players, card readers, special lenses, media solutions (such as T-shirt transfers, photo paper), consumables (inks, toners) and of course the digital cameras itself.

Currently, a large number of digital camera owners are resorting to digital photo finishing labs to print the photos. This is one reason why companies like HP and Kodak have been setting up digital photo labs. However, consumers are increasingly looking at home solutions to meet their photo printing needs. Printer solution manufacturers have been introducing various innovative and technologically advanced solutions in this space. Today, there are printers available that can match photolab quality. Technological advancement in ink technology has made it possible for home consumers to print copies that can last eons. As per IDC estimates, the ratio of digital cameras to photo-printers during 2004 was 8:1. Increasing use of digital still cameras is expected to lead to higher levels of penetration of photo-printers in the home segment. At the same time, the digital still camera would get a further fillip once the availability and affordability of printing infrastructure is in place.

Memory Cards is another area, which resellers can tap. This product segment has played an important role in the development of the digital still camera market. Following the growth in the market, the SD/MMC card has emerged as the most popular storage medium.

Sooner rather than later digital photography will replace the traditional. The total cost of ownership and the ability to view recorded images immediately, online sharing capabilities and wireless accessibility will prove to be key drivers. Storage on the Net and wireless technology that facilitates transmission, storage, display, and printing of images will be key drivers.

As PC penetration levels in the Indian market increase, this is expected to drive growth in the digital still camera segment too. The PC to digital camera ratio during 2004 was 24:1. Hence, there is still a long way to go for digital still cameras in terms of their penetration. However, India is a value conscious market. And affordability is a key factor. Hence, resellers need to focus on quality at an affordable price to penetrate the market.

Top 10 Practical Uses for IT Automation

2011-11-29T18:17:00.001+05:30

Runbook Automation systems empower organizations to design, build, orchestrate, manage, and report on workflows that support IT processes. Run Book Automation is not limited by IT infrastructure elements and acts as the connecting layer between disparate IT processes and user-friendly service desk tools. With Run Book, enterprise users can automate routine, repetitive operational processes, drive down costs, and remove complexity from the datacenter. The solution introduces greater accountability into the system, and furnishes organizations with tools to measure productivity and improvements in efficiency.

1.0 RBA is the Next IT Battleground

A study of past trends reveal that in the early nineties, businesses were more concerned about the management framework they needed to adopt in order to effectively and efficiently manage their IT infrastructure. While this need was effectively met by packaged solutions like CA Unicenter, IBM Tivoli and HP OpenView, today, the focus is on configuration management database or CMDB, as it is more popularly know. This unified repository of information helps organizations understand the relationships between the various components of their information system and track their configuration. CMDB is a powerful tool, as it can sever the foundation to tie together all the different processes within IT. It is a fundamental component of the IT Infrastructure Library (ITIL) framework's Configuration Management process.

Today’s rapidly evolving and highly competitive marketplace doesn’t allow enterprises to focus only on current requirements. To leverage their IT investments effectively and ensure maximum returns on the same, it has become imperative for organizations to gain a deeper understanding of emerging trends in IT and the developments that are likely to take place in the next 2-5 years.

The need to design, build, and report on workflows that support IT operations processes has become critical and traditional IT management processes such as job scheduling products and custom scripting, are not adequate to meet this requirement. In light of the changed requirements and demands of the IT marketplace, a solution like Run Book Automation can deliver to enterprises what is seen as the need of the hour, that is… According to international market analyst firm Gartner, RBA is the next battleground for IT.

2.0 What is Run Book Automation

In a report published by Gartner in June 2006, Run Book automation, is defined as the ability to design, build, orchestrate, manage and report on workflows that support IT operations process. It refers to products that help organizations employ workflows to automate different operational tasks across IT management disciplines, to support IT management processes, which includes identifying various manual tasks that are repetitive and error prone, and putting them onto automated workflows. This is additionally supported by a lot of reporting, auditing and enforcement. It leverages technology to replicate the processes or activities that are otherwise performed manually especially routine and repetitive tasks or functions. Thus RBA enables organization to streamline their processes and make it more manageable.

In addition, there are several critical customer requirements that need to be taken into consideration. For instance, operators require a visual user interface that provides step-by-step directions through the various IT processes and procedures. RBA, therefore, leverages the visual medium to guide users through the various steps involved in triage, diagnosis, and other repetitive maintenance tasks.

Customers have different needs and processes and hence they might want to initiate these automation workflows through different modes. Some customers may like to schedule certain activities on a periodic basis; at other times, in the likelihood of a particular event they may want to automatically trigger a series of follow up actions. Hence, the level of flexibility that a Runbook Automation system offers is very important.

Another key requirement is related to the ease with which workflows can be created. It is possible that a customer has previously leveraged scripting to create automated processes. However, scripting is a specialized skill set. And not many IT professionals are equipped with the same. The customer therefore faces serious limitations when they need to broaden the base on who can create automation workflows. This raises the need for a solution that is much easier, and also more intuitive to use than scripting.

Nonetheless, most customers have already invested significant sums into their legacy solutions. And this has to be leveraged to justify those investments. This makes it necessary to identify techniques that would enable incorporation of existing scripts into any new solutions that are likely to be implemented. Additionally, most customers also insist on leveraging their existing knowledge and expertise.

Integration with the existing solution at the customer’s end is highly important especially because millions of dollars have already been invested in these management frameworks and CMDBs. The challenge is in taking these investments and adding Runbook Automation to the mix.

Customers also demand capabilities like additional filtering, ability to change different automation processes, and leverage existing processes to form blocks that can be put together to create more complex processes. This forms an important aspect of the expectations customers have from RBA systems.

Other than this, mundane but critical aspects of running processes like reporting and documentation needs to be automated. In addition to providing highly sophisticated and detailed reporting, RBA systems should also be able to create documentation on the fly.

This not only brings about greater operational efficiency but also ensures improvements in the quality of output while cutting down on the time generally spend on completing the task. It also enables an organization to leverage its resources to provide higher-level analytics and functioning, in order to ensure continuity and holistic delivery of services.

Security is another key concern for most organizations. Customers are often faced with a dilemma when they have to delegate certain tasks to different individuals. Though automation doesn’t do away with manual involvement, it puts in place processes to identify resources involved with restarting and stopping a service. Greater security is introduced into the system as manual involvement is now more role-based, which demands greater accountability from each individual user.

3.0 Why RBA is Becoming a Key Initiative

The sudden surge in demand for Run Book Automation systems is mainly driven by two factors. First, IT departments of most enterprises, small and large, are under tremendous pressure to show tangible return on investment. With no significant increase in their budgets or resources, IT departments are expected to draw a clear chart highlighting the benefits IT brings to the organization and prove improvements in service levels. which calls for mapping the various processes, followed up by detailed auditing and reporting.

The second factor responsible for the increase in the demand for Run Book Automation systems is the need for greater control over the datacenter. The adoption of the Information Technology Infrastructure library (ITIL) has given an impetus to the maturing of various operational processes. This is essential if an organization wants to maintain a predictable, repeatable and streamlined environment in their datacenters.

Today, the expectation is that IT should be able to support more and more systems and applications when the demand arises. This, in today’s environment, can be a daily occurrence. Internally, organizations are identifying the means to get more out of their current IT investments. This calls for driving greater efficiency into existing processes, identifying resources that can be freed from performing banal, iterative work to more resource intensive ones. In light of these expectations, automation seems to be the only solution for taking existing efficiencies to the next level.

The actual availability of technology that can satisfy these internal requirements has also provided a boost to the rising demand for RBA systems. Traditional automation methods like custom coding and scripts lack best practices, change management, documentation and flexibility. However, this is imperative in an operations environment, where business rules and configuration settings change frequently.

Implementing best practices is achieved primarily by defining and automating IT operations management processes. Though most data center tools also provide evolved automation capabilities, they do not automate processes between applications. Thankfully, technology has now matured and is in a position to tackle the need that has arisen internally. Today, sophisticated IT operations management platforms and tools are available that can enable a customer to deploy a Runbook Automation solution and experience its benefits in a live environment.

No wonder then that Gartner feels, through 2012, Runbook Automation will have the highest RoI in any of the IT initiatives you can partake today because automation is the direction for IT operations going forward.

4.0 Runbook Automation and IT Infrastructure Library (ITIL)

The ITIL framework outlines best practices for all IT activities. The service support areas of ITIL including incident, problem, configuration, change, and release management make up the daily operational tasks within IT.

With ITIL, the most important processes are under service support and service delivery. RBA ties these different processes together: from incident problem management to change release configuration management to even mobility capacity management. These processes can be integrated, and then leveraging RBA the release and change processes can be automated. Prior to RBA, putting in place such processes would have involved investment into additional resources. However, automation accomplishes a much more effective result by using minimal resources.

5.0 Leveraging Existing Investments While Filling a Critical Gap

RBA is a layer that enables an organization to leverage its existing system management tools including monitoring systems and event consoles. The solution actually acts as a connecting layer between an organization’s monitoring solution and service desk solutions. Inputs from the monitoring solution are fed into the RBA system. When certain conditions coded into an alert ID are fulfilled it triggers an automated workflow. Since this is fed into the ticketing system it provides detailed auditing and tracking without necessitating the need to rely on manual data input. Thus RBA acts as a layer that sits between an organizations system management, system monitoring and service desk tools.

For instance, iConclude’s Opsforce Central is a web-based application, where Tier 1 system administrators based out of the Network Operating Center (NOC) can come to find the common repairs that are put out by iConclude or workflow automations an organization has created to meet the requirements of its specific environment.

In addition to these, iConclude also provides accelerator packs for all kinds of common infrastructures like Linux, Unix, Solaris, Databases, web servers and networking. iConclude’s solution covers all the various platforms as well as situations that can occur across the vast majority of datacenters.

A study of these workflows and diagnostics points to the fact that typically customers prefer to initiate them via any of the three possible modes listed here. In the ‘guided Run’ mode the operator running the workflow has the ability to proceed in a step-by-step manner and ascertain exactly what’s going on.

Another option, and which is emerging as the preferred one, is the automatic mode. Here the workflow is integrated into a monitoring or a service desk product whereby whenever an alert or ticket is created an automatic workflow is put into motion. The automatic workflow process follows the triage, diagnose and repair process wherein the system first gauges the problem from a criticality point of view and then assigns the next step accordingly. In routine cases, the system might even carry out the repair itself doing away with the need to escalate it further.

The third option is running the diagnostics for system maintenance at pre-scheduled intervals depending on whether the customer wants to opt for a daily or weekly or another pre-decided cycle.

6.0 Common RBA Use Cases

Below we have provided the common Runbook Automation cases that we have encountered, and which customers are likely to face during the course of automating various business processes.

Out of The Box Repair

OpsForce Central includes critical features like an out of the box repair solution, which is a diagnostic around Windows Server. For instance, a technician attempting to isolate a problem in a windows datacenter would at first try to determine whether it is a network connectivity problem, or a problem related to CPU usage or lack of memory disk space. During the course of these tests, an audit trail is formed, which is really the key. A lot of enterprises with very large datacenters are struggling with factors like compliance issues. For instance, those in the healthcare industries are struggling with issues related to Sarbanes Oxley or HIPPA compliance, which calls for in-depth audit requirements though they have made a lot of investments in documenting their procedures.

Automation tackles the repetitive processes successfully and at the same time enables users to audit the workflow. This helps ensure that the processes that were earlier documented are being strictly adhered to. The audit features enables an organization to track a particular infrastructure that was touched, identify the individual who has touched it, provides details of their interaction, and what data was returned. This has proved highly helpful to these companies, as it has been identified as one of the best ways to attack the audit requirements laid down by HIPPA or Sox. The solution also raises an alarm whenever they detect potential problems and then offers users a diagnostic panel that lists out the potential problems in the system.

This is a common use case that can be run either manually or automatically if an organization is affected by poor server performance. But in today’s datacenters, where enterprises are looking at large server farms to service an application; they may face the need to analyze things at an application level instead of looking at it server by server.

An organization that has implemented application level monitoring or service level monitoring in their environment and has some monitors looking at web pages may get the feedback that certain key web pages are taking much longer to load than expected. These kind of issues can be challenging because a single web page is probably being run through a load balancer to a large number of web servers. Using dedicated resources to check when the pages slow down is impractical today.

However, using automation technology, you can dynamically query the load balancer to find out the IP addresses of the servers that are servicing a particular application. Information on these servers can then be garnered on a real time basis, and analyzed to identify potential problems with the server. Automation would take that information and run it through the workflow that has been implemented within the ticketing environment and escalate it through the workflow. While all the work has been done automatically, the data that has been gathered will be placed into the ticket. This would provide a technician who looks at the ticket with all the necessary information.

The manual process of information gathering, which can generally take 10-15 minutes for one server and more if there are multiple servers, can now be done automatically and the key information placed into the ticket. Often, when people commence with automation, doing this repetitive triage and diagnosis proves a great way to get quicker time to value.

Virtualization

Another example is virtual machine management. Virtualization has been gaining grounds in almost all large datacenters. However, most enterprises are finding it a challenge to manage them. A financial services company, for instance, was looking at ways to automate their daily business cycle. During the trading day, they needed to dedicate am large portion of their hardware resources to servicing their trading applications. And as the trading day came to a close, the resources needed to automatically provision other applications and bring them into play.

Automating this process helps identify the virtual machines that are running trading applications that are not heavily utilized and shutting down those virtual machines. If there are VMs being over utilized, it keeps those running, as it can take those out of service later. It then goes through all the hosts and identifies ones where it can provision the other virtual machines. It then looks at various characteristics of those hosts, to make sure there is enough CPU utilization and memory to bring those new virtual machines online. This is a common repetitive task that can be done on a daily basis to optimize the operational environment.

In ITIL, automation would help organizations garner information about their environment. This provides the ability to start doing data mining, and business intelligence gathering to help move from plain incident management to problem management. The difference essentially is that while the former is a reactive approach to problem solving the latter helps the datacenter operator or engineer take more proactive measures.

Configurable Dashboard

iConclude’s configurable dashboard helps configure charts around various dimensions and provides a visual representation of the alerts that are flowing into the datacenter, whether they are infrastructure style alerts like CPU thresholds or application style alerts like slow page loads. Touching these applications for repair helps gather drill down capabilities, which shows the configuration items that are causing the most problems; and also the actions being taken to solve them. Based on the problem area, this information can then be driven back to the respective teams be it the development team or the capacity management or capacity planning units. Thus the information gathered by doing incident management can now be leveraged to enable more proactive problem management.

OpsForce Studio

iConclude’s OpsForce Studio helps create and modify automation. If an enterprise has a large number of different back up devices to manage, and if failures came up with those, dealing with the inundation of log files would pose a serious challenge. OpsForce Studio can automate the process of analyzing those log files and restart backups on particular servers that were having problems. If the servers are unable to back up due to lack of disk space, the system can archive some files offline thus enabling the back up jobs to work without incident. Here automation goes through back up log files, identifies errors, analyzes server loads, checks disk capacity on those servers and then takes the appropriate action.

RBA can also automate the process of conducting periodic checks of an organizations network infrastructure to ensure that the devices are running smoothly and are up-to-date on firmware. By dynamically going through the routing infrastructure we can verify firmware then create tickets to go ahead and have those updated.

Runbook Automation can help glue ITIL disciplines like change management, release management and configuration management together. Here automation touches change management, waiting for a particular change request to get approved. Once the change request gets approved, the particular server indicated from the cluster can be removed, lead off transactions that were linked to that server, take it out of monitoring, hook up with the customer’s provisioning software, install the particular patch, reboot the server if necessary, bring that back into monitoring, bring it back into the cluster, and then update the ticket.

Automations should be conceptually easy to use and have reusable sub components. This makes it easier to drill into one of these, and see that this in itself is another automation, and each of these are in themselves sub automations. Therefore by building things in a hierarchical manner, you have these reusable components that make automations scalable. This can prove critical in disaster recovery.

Even if an organization has monitoring software that incorporates the ability to restart a service it is highly unlikely that it promises the level of sophistication provided by RBA. Take the example of an organization that requires a service restart. An SQL query gets the information about the machine, verifies that the particular service is running, and if it is a mail is send informing that there is no problem.

This is necessary because there are transient events that are sometimes termed false alerts. However, at times, things that are transient might just show up on the monitoring software and go away. But if there is a problem a trouble ticket has to be created, additional information added to that, an email has to be send to an escalation person informing that trouble ticket has been created, try to restart the service automatically, verify that the restart succeeded, and if it did, update the ticket, update the database that had the information about the trap, and then send an updated case email. If the agent didn’t successfully restart, the ticket has to be updated with a failed notice, find out whom to escalate to for another SQL query and then escalate that to the concerned person. If we drill into things that seem conceptually simple like restarting a service even that requires true process automation.

Another use case that can be frequently seen is in the area of dealing with clustered systems and load balancers. For instance, if an online service provider wants to take a few servers offline, they have to ensure that there are enough other servers to handle the load at that time. Automation would examine the server pools, locate how many nodes are currently available to service a particular application, check that against thresholds and only disables nodes if there are enough other servers available to handle the load. This gives the ability to automatically manage the environment based on current conditions.

7.0 Getting Started with RBA

Before investing in an RBA solution, it is necessary to analyze and identify your key business requirements. An organization needs to first determine the most common alerts and incidents that could be automated, which in turn would provide maximum RoI. It is, however, important to set realistic objectives and goals. It is imperative to plan each minor detail to ensure that you derive maximum benefit. This includes the IT strategy that you plan to follow, the platform you intend to adopt and the tool vendor.

After these initial needs have been identified, an organization needs to plan out the workflow design. The top five or 10 alerts that have been identified needs to be documented and common steps that need to be taken to remediate them should be enumerated. Once these initial steps have been successfully completed all an organization needs to do is design and develop the automation flow, which is a straightforward process using the RBAs visual user interface The next step is to pilot and implement the initial automation flows. For the pilot project, it is advisable to stick to a few selected processes and expand to other processes, domains and groups once these are running smoothly.

8.0 Keys to Ensuring RBA Success

There are three key factors that need to be adhered to in order to ensure successful implementation of an RBA system.

An organization needs to understand the complexity of its infrastructure. It is important to understand the requirements of all the different stakeholders in the initial analysis. While analyzing process requirements, it is important for an organization to plan for the future. While the needs may not seem many at the moment rapid growth can change that in a very short span of time. This might then put pressure to move to a more robust and scalable platform. Hence it is imperative to ensure that an integration plan is in place throughout the course of a Runbook Automation project.

During the initial trial phase, organizations should select processes that are likely to demonstrate quicker RoI. It is advisable to avoid highly complex processes. The complex processes may be highly important to the organization and might also have greater visibility. However, the likelihood of errors is higher during the initial trial or learning phase. Hence, going in for a less complex process will enable you to demonstrate the success of the system much more easily and in the process provide more buy-in for an organization-wide roll out.

Enterprises should adopt a phased rollout strategy that will enable them to take a more proactive approach instead of being reactive. Closely consider the auditing and data coming out of the incident problem management process, and then proceed to a more predictive mode. Leverage Runbook Automation products to automate these processes and integrate all existing tools and processes. This will enable you to predict where your datacenter needs are headed.

9.0 Gartner Recommendations

Ensure you understand Runbook automation and make sure whatever you are doing is in line with the service level and business priority you have identified together with your business counterparts.
Make your initial project very narrow in scope so you can deliver very tangible benefits.
Set clear objectives.
Ensure your process requirements are in line with your current operational tools. Select the right tool set with the right features that are going to support your most flexible set of needs.
Make sure that integration is taken into consideration in the initial project, because you never want to implement this in a vacuum. Understand the different integration points, and where you want to hit in the initial target. You probably don’t want to integrate with everything in your pilot, but you definitely want to hit one or two key tools that are currently a backbone in your datacenter.
Obtain full support across the organization – talk to different stakeholders.
Put in place well defined processes and take it to the next level with Runbook Automation.

The Chinese threat and the need to focus on R&D

2011-11-29T18:14:00.001+05:30

India

has developed into a dynamic market for the machine tool industry over the past years. Bangalore and Chennai are becoming important industrial centres in addition to the traditional markets like Delhi and Mumbai. Today, many European countries as well as neighbouring countries and other South East Asian nations are importing machine tools from India. Even our neighbour China has been importing from Indian manufacturers.

But the machine tool industry is still a fledgling and is to a large extent dependent on servicing the domestic market and the burgeoning automobile components manufacturers. Though India has made strides to do away with the technology gap that existed earlier we still are a long way from matching the quality standards expected by consumers like The UK and other European nations both in terms of product quality and design aspects. We still have to go a long way before we can introduce our own innovations based on the international market requirements.

The growth in the domestic market has provided a boost to the growth in the machine tool sector. But this fillip is not enough for us to establish ourselves on international standards and provide cutthroat competition to MNC manufacturers.

China

, for instance, pose a big threat to Indian exports. The rapid growth in the domestic market and its emergence as a low cost manufacturing hub has made it one of the biggest markets for machine tools. And with investments from the more developed nations pouring in both in terms of resources as well as technology they have an advantage over India as far as quality technology is concerned. The volumes generated through domestic consumption alone is enough for Chinese machine tool manufacturers to not just survive but remain profitable and look outwards. Many Chinese manufacturers are already exporting machine tools to the UK and various European nations. Even India is a big consumer of Chinese products. And their biggest advantage is cost.

Says Ajmera, SPM Machines, “In China, there are lots of factories in the small scale as well as large-scale space. Big companies like HMT in China are selling to countries like UK. They also meet the demand in other European nations as well as in American. They have already established their market there and now they are focusing on the Indian market. That is why I am saying that the Indian machine tool industry will face a very big problem. The Chinese manufacturers are following European standards. There are many big companies there who are manufacturing machines that match European standards. They have got the certifications required to sell in these countries and their products have already met with approval there.”

The Chinese manufacturers are following the pricing strategy to capture market share in India as well. Says Sanjay Suri-managing director, Legris, “India is a price sensitive market. Chinese manufacturers are lowering their prices in terms of machines and technology. We do face a threat on Chinese product lines. We have come across a number of cases and as a counter action we have developed a product line, which is price-wise by and large competitive to the Chinese products. It is our second line of products and I think we will be able to compete with them as well. We do face competition but there are market segments of customers who prefer to buy a standard, branded product, which have been built over a period of time, because it carries a reputation.”

ADVANTAGE INDIA

China is doing very aggressive marketing but, according to Ashiesh Chandavarkar-vice president-Nugen Machineries, they can’t match Indian technology as far as quality is concerned. They can give products at a low price point but it is harmful for Indian customers in the long run. Says he, “Of course, Indian customers are conscious about price. But in the long run I don’t think the Chinese will able to sustain themselves in the Indian market.”

One of the major plus points of India over China is the language. The Chinese are still not fluent in the English language though they have been making studious attempts to undo this gap. Hence, MNCs find it easier to handle joint venture and partnerships with Indian manufacturers and industry bodies, government agencies. Says Mr.Volker- Carl Zeiss India, “

Thanks to India’s command over the English language it is easy to handle communication with India. The understanding of business, the methodology of doing business is easy to achieve dealing with an Indian partner and it is harder to deal with a Chinese company.”

According to a CII study, during January-May 2004, Indian machinery exports to China registered a 178 per cent increase touching $51.32 million as compared to $18.49 million in the corresponding period of the previous year.

India

's exports have increased in absolute terms in every successive month this year, rising from $6 million in January 2004 to $15 million in May 2004, stated the report.

While China imports large number of machinery products to meet its growing domestic demand and to complement its production, India's share in Chinese imports of engineering goods has been consistently going up. In 2002-03, the value of exports increased by 80 per cent to touch $76.82 million as compared to $42.29 million in 2001-02.

The CII study also notes that the auto component sector offers an excellent opportunity to Indian companies for export to China. Continuous high growth of the industry is expected to produce 5.1 million-5.3 million vehicles, including the 2.5 million-2.6 million cars this year, predicts the CII study.

China

has the world's largest machine tool market with $5.7 billion worth of annual consumption. However, the study points out that Indian machine tool industry is yet to tap this market.

The CII suggests that a market research study be conducted on the price, pattern, tariffs and source of the imported products by China to identify a niche of products in which India has both quality and price advantages for export to China.

The export of machine tools to India generated 77.4 million euros (Rs 414 crore) from the German machine tool industry in 2004, and the first half of 2005 saw a growth rate of 123 per cent against the same period in the previous year. With a growth rate of over 30 per cent, India was the fastest growing automobile market in 2004.

IN the backdrop of increasing exports of Indian machinery to China, the Confederation of Indian Industry (CII) has said that there is a tremendous potential for exports as well as technological collaboration between India and China.

R&D For Success

R&D is critical, as it is responsible for our technology getting upgraded regularly. There are many parts involved in press brakes and shears and each part is advancing technologically. The market is being inundated with innovations on a constant basis. And we have to cater to new technology. R&D and design go hand in hand. Every Company should have a well-knit in-house R&D team, equipped with the latest computer software and well-defined goals and headed by veterans. Improvisation, transformation and improvement are the tools with which the R & D department should work. In addition to this, the R&D department should take into consideration customer suggestions, special requirements, and feedback before setting out on any on new inventions. So the role of R&D is very important, as far as business is concerned in today’s world.

Most international manufacturers focus heavily on R&D and invest a large part of their profits into R&D activities. Says Volker, Carl Zeiss, “R&D is a very important part of our product strategy. I think more than 30 percent of our revenues each year is generated from products younger than three years. We have up to 400 patents. And we are adding new patents every year. And so we focus really on new development.”

In India, R&D is one of the most neglected factors. If you see big companies abroad, they spend 30-50 percent of their gross earnings into R&D because R&D is not for the currently available product line. R&D is for patching up with the future and to be prepared with innovations when the time comes. Says Mr Lim, international sales manager, Autonics, “We are, as it is, behind on the technological level because our R&D is not very strong. We are learning to catch up with the existing products. We will continue to be 20 years behind if we don’t change our style of functioning, if we don’t invest in R&D today for the result tomorrow. R&D makes you feel much more comfortable when you invent, when you create something which was not there earlier. We improvise and call that R&D. We upgrade and call that R&D. R&D is not just these two.

We have to do a proper research with a proper environment with those people who have an ability to create. Once we create something new, I would say in the world we are among the very few creative nations.” For example, we say we have a history, a lot of original monuments, constructions. When we say R&D, everything is new. But we also learn, take ideas from the past. We have forts in India standing on top of the hill made 400-500 years back and they are still standing. So what we had as skills we have forgotten. R&D is improvising these skills into converting into modern environment and learning from the past. Convert for the future but absorb today.

Issues

As far as export import policies are concerned most manufacturers are comfortable. But many have raised their voice against the existing excise duty structure. Says Chandavarkar, “I think there has to be some relaxation. For small and medium companies it has become difficult to invest in new machinery. Because of excise the price of my machines has gone up. And most of my machines start at a price point of Rs 3 lakh upward. So paying Rs 45,000 in excise has become too much for small-scale industries. So the government should think excise relaxation especially for small-scale industries. They want to buy our machines but they cannot because they find 16 percent excise too steep. This are the things government should take care as far as small scale industry is concerned.”

One of the key issues is safety. In India, most product manufacturers in order to cut costs compromise on the safety aspects. And this has become the rule rather than the exception. Whereas in Europe and the US there are regulations to handle the safety aspect and to basically take care of human life and limb. In India we do not have any such restrictions or rules at the moment. In India industrial safety means wearing helmets and boots and things like that. But optoelectronic devices for industrial safety where you have real certified systems are almost non-existent in India. Says Nair, GM, Sick India, “I am really hoping that very soon the concerned authorities like the national safety council (NSC) and the heavy industries ministry takes a serious view of things and formulate some rules wherein manufacturers will have to abide to some restrictions for safety.”

The most important issue is how to make that product workable at the premises of your customers, how much fool-proof you can make the product. You cannot make it idiot-proof, but you can make it fool-proof. Indian manufacturers have to make quality the first motto of manufacturing. And quality comes from within, so we have to produce our right environment, right culture, and trained manpower to produce quality at the grassroot level. Only then, after five years, you can see that every where else we have reached a certain level of acceptability. This means that our labour, our secondary staff, our clerical and supporting staff, our helpers, our production labour, our skilled labour, etc have to be woken up to the need to strive to achieve a certain standards of quality in everything they do. From there, we should start training people for quality consciousness.

Secondly, services is the most important factor today. Its increasing importance can be gauged from the fact that the government has started taxing services almost at par with manufacturing. Any products, the best of the products made in the best of countries also need a service department. So we should be more service friendly. Rather than only manufacturing and implementing a product we should ensure products and services to the customers are available at all times from the technological package side, physical conditioning, physical help at the site but there should be a reservoir of information available at every head quarter at every manufacturer, which should be connected with I-net. The customer should be able to just connect to the head office of the manufacturer and connect directly to the information. He does not have to be available in front of the machine. This is something we should do as early as possible so that the products will have lesser downtime. Productivity will improve. And if we improve the quality of life, the quality of workmanship automatically improves.

The government has supported the globalization of the machine tool industry allowing imports by doing away with DGTD and DGS&D and licensing and delicensing processes. The government should provide the platform and industry should be free to work within the norms. Government probably should not be necessarily involved in the industry in future. We are already talking of public sector being decentralized. There will be resistance, there will be time when everything will be accepted but the government should focus only on governance and industry should be given a free hand to import and export at their will within the norms and policies of the government. The policies should be uniform and consistent.

The government should encourage industries by reducing customs duty. Especially the customs duty for small scale industries is very high. Where the export-oriented units pay only 5 percent, and the large industries pay only 15.65 percent, the small scale industry, which is the backbone for all the big industries pay 34.55 percent. This is too exorbitant. Without these small scale industries none of the big industries can make profits. If you see any large industry their profits lie in sub-contracting to small scale industries. So the government should revise the duty structure so that the small scale industries can afford to buy good quality imported machines.

Steps should be taken to harmonize the tariffs at least to Asian countries. And since India is a signatory to WTO, we can harmonize the structures of our taxation at the same level, this will help the market grow faster.

In addition to this, the industry needs to prove its capacity and output quality. We have to prove that our product quality and technology are equivalent to what is being offered by the multinational companies. Indian companies should go up to that level otherwise they will face a very big problem in the near future.

R&D plays an extremely important role here— not only on the product side but also on the services front. What customers want is more value for money and obviously at a very competitive price. Manufacturers need to come up with a lot of innovative ideas to serve customers. A lot of research needs to be done by all the companies not only for product improvement but also enhancing quality standards. Product quality becomes a standard with everybody starting with quality. So, what one offers after the quality is going to be the selection criteria for the customers.

Machine tools: The India opportunity

2011-11-29T18:12:00.001+05:30

The growth in the machine tool sector is directly proportional to the growth in the other industries. The machine Tools Industry is the backbone of the entire industrial engineering sector. And the growth trends visible in the Indian hardware manufacturing sectors are clear indicators of this fact. , today,

India

is in a position to export various automobile components and other industrial equipments. If we study the growth chart, one will notice that there has been a simultaneous rise in the export of general purpose and standard machine tools to other countries including the industrially advanced nations. During the last four decades, the machine tool industry in

India

has established a sound base and there are around 125 machine tool manufactures in the organized sector as also around 300 units in the small ancillary sector.

Engineering Review delved a little deeper into the subject to understand the opportunities that exists in the machine tool space and also the market potential that India holds for both domestic as well as multination players in this space.

THE INDUSTRY

The Machine Tool Industry is a vital constituent for the entire manufacturing and engineering Industrial Sector and is vital for the growth of the capital goods industry. The higher the quality of the machine tools the better the quality of the goods produced. Technological advancement in the machine tool space directly leads to improvement in both product design as well as quality and reliability. The Indian Machine Tool Industry, however, constitutes only a small part of the overall Engineering Industry. Yet it plays a very important role in the development and technology up-gradation of the Engineering Industry.

The quality and cost of engineering products depends on the quality of mother machine tools and their automation level. The development of the machine tool industry is therefore of paramount importance for a competitive and self-reliant industrial structure. Despite having a large and diversified industrial sector and registering rapid growth in the production of machine tools, India's position in the world machine tool industry is much lower than most other competing countries. The share of exports by the machine tool industry in India has also been negligible. Though there are several manufacturers exporting their products to other nations the more established European companies and to a large extent even Chinese manufacturers have a stranglehold over the market. The Indian machine tool industry comprises of large, medium and small scale sectors.

The small scale sector has traditionally a strong presence in the machine tool industry but losing its market share because of competition from large units and some of the other countries. The small scale units primarily meet the demands of ancillary and other units whereas machine tools from the large sector meet the demand of medium and heavy industry. Therefore the problem is two-fold in terms of the inability of small scale machine tool manufacturers to supply quality machine tools at affordable prices and difficulty of ancillary and small scale industry in buying machine tools. The units in region have traditionally been producing machine tools with low cost production methods and technology. The machine tools produced with these constraints are of low quality.

To counter this lack, the Government of India has established several Institutes in collaboration with various state governments for upgrading the technology of small scale machine tool manufacturers. These initiatives are aimed at providing technical services in terms of new designs, precision engineering facilities, laboratories and testing, expert advice and training to entrepreneurs and engineers of small scale units.

Says Mr.Suhas Joshi- GM Batliboi, “Any country is measured by technological excellence. The technological excellence is reflected directly on the machine tools status and health in that country. The world over, India is known as a developing country, which means not that we don’t have enough exposure to worldly pleasures or worldly equipments. It’s only a question of infrastructure, which is lacking in the country. It’s a question of political will which was earlier missing. It is only a question of the will to execute. Time-bound projects within reasonably good time so that cost is not enormous.”

Adds Sanjay Suri-managing director, Legris, “The world is becoming one now. All technologies developed outside flows into India very fast. I don’t see any technological barriers in the products. What are being sold in the rest of the world is available here. It’s only a matter of manufacturing, whether you manufacture here or abroad, it doesn’t make any difference because most of the products which we at least make are made on automatic machines. They are not labour intensive and as barriers go down as they have been going down in the past, the location of the plant will be immaterial. More focus will be on the services.”

Over a period of time, thanks to factors like capitalization, liberalization and globalization as a country we have achieved major milestones. We, at a technological level on a man to man basis are not inferior when we compare ourselves with the supposedly more modern countries. The question was only about facilitating our manpower allowing them free access to information and technology and not restricting access.

This has given us good results thanks to the innovative and creative minds, which is available in abundance in India. What was not available was the opportunity. With globalization the opportunities are now, however, immense. When you have more opportunities, people are willing to invest because the ROI is assured. This is a major factor in inducing new investments. Any decision on investment is based on ROI. ROI comes from volumes. Earlier; we did not have the volumes to justify the investment.

Now with globalization, both the domestic as well the international markets have opened up. That has become a key for success for the machine tools industry as a whole in India. Ten years back, the few players that existed in this space considered a monthly production of 4 or 5 CNC machines a great job. Today, various machine manufacturers in different parts of the country are manufacturing more than hundred CNC type machines per month and yet there is demand for more.

What this means is that technological achievements in the country are related—starting from the mother machine. The mother of all equipment is machine tools. In every day life, right from the geyser or to the air-conditioner, you come across a lot of electronic, electrical and mechanical products, which are all produced using mother machines, or machine tools. So the health and wealth of the country is directly related to the growth of the machine tool industry anywhere in the world.

Says Joshi, “Today, India is on the threshold of opening up to the world in the machine tool industry. And for a change we see machine tool people producing in volumes, which was a foregone conclusion once upon a time. So as it looks, today on one side we are producing and on the other side we are achieving the milestones of technological advancement. These milestones are trying to catch up with the technology available in the rest of the world. I think, the IT sector has given the impetus and the respectability and has opened up of the field for Indian engineers to look globally. Yes, we can do it. It’s a question of gathering together right talent and the right infrastructure and making it happen. Once it happens, we will have excellent quality of workmanship which was missing in the days of old.”

The ‘Made in India’ tag was not very respectable ten years back but with IT professionals going all over and earning a good reputation people have started looking towards India. And the first development started in the automobile industry. Most of the global automobile manufacturers have started taking interested in sourcing from India. Today, we have manufacturers based out of upcountry regions like Faridabad and Rajkot exporting automobile components world over even to the likes of General Motors, Ford, etc, which are US manufacturers known the world over.

The growth in the automobile industry has been phenomenal and simultaneously the requirement for machine tools has gone up. But we are still way behind. If you analyze the previous year’s figures, imports outnumber the manufactured products in India. The reason is technological obsolescence of the products made in India. So we have to catch up on technology. Secondly, if you analyze the imports in India, generally people say Indians are price sensitive and they buy cheap machines. But the highest imports have come from Germany in numbers, which is definitely not a very cheap product. This means that we are hungry for more and more technologically advanced products. Indians may be price conscious but they are willing to pay the price if we see value. The exposure to the global market has made Indian manufacturers focus on better product quality, better workmanship, better reliability and better consistency, and better service and support. They have realized that this cannot be provided at the cost of productivity. This is what is driving the machine tool as a whole in the industry.

However tackling the price conscious mind set has been a challenge for many MNC manufacturers. Most have been following the policy of avoiding any discussion about the price factor till the customer is convinced about the requirement for their products. Says Mr. Volker, Carl Zeiss, “We try to convince the customers about our technique and the way we do our business and the way we try to support our customer and the solution that they will get in the end. The demand of the market is to have machines that will speed up their production process and improve the overall finish and quality.”

OPPORTUNITIES FOR MACHINE TOOLS

Says Ashiesh Chandavarkar-vice president-Nugen Machineries, The opportunities for Indian manufacturers are tremendous. In the last few years, there has been significant movement in this space. And I foresee the industry growing three fold in the next couple of years.” Adds Mr. Nair, GM of SICK India, “ India is going to be one of the major players in the whole industry especially with industries like automobile and metal handling equipment taking off in a big way. I think the growth in these sectors, to a large extent, has also given a boost to the machine tool industry. As these industries are huge consumers of machine tools it was automatically bound to happen. And yes, I am sure there is lot of growth here. And with foreign companies setting up operations here in India we have also much more advanced technologies coming in.”

India

is emerging as a manufacturing hub. According to S.K. Mahadevan- Director of Haas Automation, the growth will be at least 15-20 percent compounded annually. The conventional machine owners are shifting to CNC machines. Basically, the main reasons are productivity. Another key reason is that it has become increasingly difficult to fins operators willing to work on conventional machines. Says Mahadevan, “The new breed of workers and engineers are not interested in operating conventional machines; everybody wants to operate computer-aided numerical control machines.”

Most companies in this space have been doubling their turnover every year. One reason is that India is slowly emerging as one of the main outsourcing destinations for many countries worldwide. However, according to Mr. Ajmera of SPM Machines, the machine tool manufacturers in India will have to face competition from the Germans and other European companies and even from China. China is a major force that Indian manufacturers will have to face in the near future because they are coming in a very large very big scale to sell their machines. And their focus is India. Says Ajmera, “The Indian machine tool industry may go down if the Chinese compete with India. The Indian machine tool industry is not so mature. The Chinese are making every kind of machines—light as well as heavy industrial tools. And they are already developed in terms of technology as well as production facilities. They just have to modify their technology according to the needs of the moment. And this they can do, as their technology is developed.”

TECHNOLOGICAL TRENDS

People are more cautious now as far as the technology is concerned. Previously customers were satisfied with opting for the mechanical version. Now that mindset has changed. More and more customers are opting for NCs and CNCs. They want to upgrade their present technology. Those who had deployed conventional press brakes earlier now want to opt for NC and those using NC want to upgrade to CNC technology.

Says Chandavarkar, “We have manufactured three machines in the Auto Turret Punch Press space. We saw the demand and we decided to cater to this. This will hit the markets in the coming year. People are becoming more technically savvy.”

In the case of machine tools, more and more people are keen to automate their machines because the volumes are bigger. So you naturally need faster throughput for your machines, which you can only achieve through automation. Says Nair, “I can see more and more people being conscious about the safety of the usage of machines, which means that safety has become a priority and safety aids are being used more and more.”

One of the key technological trends driving growth is the increased subcontracting in the automobile space. In the US and Europe, manufacturing is expensive so they want to sub-contract to India and China. India is more quality-conscious than China. Hence the growth has increased. Many of the manufacturers want to shift their base to India. They will only retain R&D, marketing and strategy.

India

is growing as far as export is concerned. Nugen, for instance, already exports its products to 17 countries as of now. Says Chandavarkar, “We are still getting many inquiries from overseas companies. People abroad are aware of our products and they are keen to get details about our machines. I think demand is going up as far as the export market is concerned.”

India

is as it is a very big market for sensors. To a large extent, it is also immeasurable because there are both foreign companies who sell their sensors here and also Indian companies who manufacture their own sensors and who give a really good and tough fight in terms of quality as well as price to the foreign manufacturers. Now as the machine tool industry grows other industries too grow in parallel. These sensors get more and more used and especially for machines manufactured for exports these sensors are going to be used in a very big way.

Our qualified people plus English speaking qualified people are assets to India as well as to the world. The IT industry has proven that given the right environment we can excel in performance. It is coming back to India in the products space as well. Our components, if not products, have started getting accepted. If this continues, then the overall life pattern of an individual will become wealthier than what it was. And naturally he will be spending more than what he was expected to earlier.

The GDP growth has been good. There is an increased demand for more lifestyle products including modern gadgets. The demand for white goods is going up. Indirectly, the rate of internal consumption in the country is what is going to decide how we are going to sustain this productivity. We have not offered cheap labour, land, electricity and incentives for multinationals to come here and produce and take away products outside the country. We are telling them use our resources, use our land, use our power, manufacture and we consume it here.

In times to come, if we are able to continue and maintain and sustain these globalization policies and the right environment, we will be able to produce world-class goods. We have enough natural resources to sustain the momentum—we have water, we are trying to catch up on the electric power generation front, we have mines, minerals, coal, petrol, etc. We are not dependent on any outside country for our basic requirements.”

Government needs to do more for the electrical and electronics industry

2011-11-29T18:09:00.001+05:30

Almost all major players in the electrical and electronics industry are rising in unison on calls to improve government initiatives, investment and easing duties. It’s what they feel will unlock the potential in the local industry and help it assume gigantic proportions.

With the Elecrama 2006 acting as a popular platform bringing together nearly 1,000 major players in the electrical and electronics industry, common issues and dilemmas were bound to be open to discussion.

Is Government Doing Enough?

The biggest issue that the electrical and electronics manufacturers and distributors are facing didn’t come as a surprise. Most of the respondents that Engineering Review spoke to pointed out the additional initiatives that the government of India need to take to improve infrastructure, increase awareness among consumers on energy conservation and industrial safety, giving laws more “bite” or even enforcing the laws that are passed, etc.

D. Jai Ramesh, Chairman, Vijai Electricals feels that not every state electricity board is concerned with transmission and distribution losses. “Energy saving is more economical than energy generation. That is why there is a need to adopt energy efficient transformers,” he says. According to Ramesh, transformers are the most important but energy consuming product in the distribution network, and contribute to almost 30 percent of the distribution and transmission losses. “It is a major bottleneck for the losses. Buy an energy efficient transformer. Do not see the initial investment into the transformer, look for the total life cycle cost of the transformer. Then you will realize the energy saving and the country will grow like anything. We will be energy efficient and all over India we can get 100 percent access to electricity,” he says.

According to Piyush Patel, Director of Amtech Electronics, Gandhi Nagar, Gujarat, if the government were to follow the lead taken by governments and electricity authorities in Japan, Hong Kong or Singapore who imposed strict laws governing energy efficiency, the huge potential in our own market for industrial motors would be adequately fulfilled. “There should be a focus on energy saving. So any pumps, fans or motors which are being used should have AC drives or variable speed drives on it so that the energy can be conserved. India has a big potential and the market is growing.”

Patel feels that after certain years, these kinds of laws will also be imposed in our country because you just stay away with it. “Saving energy is saving nation, so everybody should focus on it. That’s what I would expect. At present there is awareness in the industrial market. There is also a niche in the domestic market, in the household or the agricultural sector, which has not yet opened up. The market will be growing by 5-12 percent every year for the next 5-10 years,” says Patel.

Baldor Electric’s GM Sales, Bhanudas Chaudhari, says that awareness on energy saving was indeed present among large companies like Telco, Tata Motors, Cummins, Century Enka, most companies in the textile and cement segment, paper and pulp industries, and steel. “Electricity is not available is most of the important point and generation takes normally 8-10 to build the plant. One megawatt needs huge money. There is another possibility, if we can save on the electricity cost on the motors especially then that can help the nation to cope with the energy requirement in the future,” he says, agreeing with Patel’s argument that saving energy is saving nation.

But Chaudhari feels that the government needs to put in their bit to improve the situation too. Costs affect the decisions normally taken on the motors, which means customers often choose the EFF1 - the motors are the cheapest possible motors meeting the specifications.

“It is normally considered as the motor that should be fitted on the equipment. We are creating awareness through CII and other corporate organizations, but we still expect that the government should look into it. The government that should provide some subsidies or some type of advantages to the customer who want to buy these particular equipment and save electricity. That’s also going to help the nation. It’s a matter of concern, and if the government looks into, it will be more helpful,” he says.

The government needs to enforce basic safety standards, for instance, right from schools and colleges so that from the growth phase individuals understand fire safety. “Awareness could be only done through education. The awareness should start at the school level, school security, school prevention against fire. We are still maturing as a market,” he says.

The Other View

Rishi Khanna, Director Low Voltage Products of C&S though has a different view regarding expectations from the government on investments, etc. His contention is that with basic demand being strong, and the Indian market still being an unsaturated market, there is a huge room to grow, almost like the next China in the making. “I think the industry here should not think or worry about investments. Rather, we should think big, we should think about the next 20-30 years. This country is going to go somewhere, in a very big way and that step by step approach of “let’s invest a little and see what happens, invest little more and see what happens”, I don’t think is required anymore now. You can have confidence in our economy, at least in our company we have blind faith in the Indian economy and that’s why we are investing and developing production businesses with the conviction that basically if you have a good business philosophy, you have good attitude towards your customer, you have good products, there’s no way you can go wrong. That’s what most companies should think,” he maintains.

Ramesh who is also President of IEEMA agrees, “The electrical industry actually is coming of age. With the government’s program of electrifying all the villages by 2012 and as the economy is growing at the rate of 6-7 percent, electrical industry should grow at the rate of 12-15 percent.”

This, he feels, has already been felt in the scenario today. “For the next 10-12 years, we have to grow at those rates per annum. If you look to China, it has already added 400,000 megawatts and we are still at 125,000 megawatts. We have to catch up to those levels. The next 10-15 years is going to be the era of power industry,” he says.

Taxation Woes

Another issue, which has been rearing itself every year just before the annual Budgets, is the rates of taxation and uniformity in taxation across the country. The general opinion is that compared to 10-25 years ago, when many players in the electrical and electronics industry started their businesses, government policies have improved considerably, but there is still room to improve.

Ramesh says, “We have been representing our requirements to the finance ministry just before the budget. This year also we have gone there. Most of our requests have been heeded to also. Last year we wanted to reverse the import duty on raw materials, which was being charged at higher rate than finished goods. They accorded the request. This year also we have quite a few requests and it’s going to happen.”

But DAV’s Naveen Kumar Deswal says that whatever decisions the government makes, it should make according to the requirements of the prevailing market conditions. “If you see the purchase itself has gone up so much that even the smallest of manufacturers has a Rs 1 crore turnover, which brings him into Excise slab but he doesn’t have the capability of doing even Excise accountancy. I am talking of small traders, businessmen, who are basically my vendors,” he says.

To illustrate his point, Deswal says, “The government needs to increase its Excise limit accordingly. Some years back if somebody was making ten panels, he was making a turnover of Rs 50 lakh; now with the same 10 panels, he is making a turnover of Rs 1.25 crore. So even if he hasn’t really grown, he has come into the bracket of excise for which his overheads is going to increase. He has to keep one more guy to do all the paperwork, he has to pay the excise. The government should move faster according to whatever is happening in the market.”

Sumitron’s MD, S. K. Jain opines that the import duty structure still consists of so many components, and there is no transparency. “It’s very complicated. We need to make these import duties more clear and transparent. For instance, the finance minister says import duty peak rate is 15 percent but that is not true. The import duty actually comes out to be 35 percent,” he says. He also suggests that the working days in the Customs and Excise departments should be increased to six per week instead of the current five since importers are made to wait for 2-3 days longer at times.

Timely approvals is also a problem with Vishye’s Director Marketing & Sales, Paul Dax, who terms getting approvals from quality assurance institutes a serious difficulty. “If we want to get approval from Indian institutes it takes a long time. We want to get faster approval for our technology. Sometimes we send them references; we prove that our quality is good but getting approval takes a very long time. Maybe you need to speed up this process. This will not only result in a positive thing for us but it will also result in a positive thing for India because new technology will come faster,” he says.

Opportunities and solutions in the power sector

2011-11-29T18:07:00.001+05:30

The Indian industry is coming of age. The government’s program of electrifying all the villages by 2012 has proved to be a major factor in boosting growth. In addition to this, since the economy is growing at the rate of 6-7 percent, the electrical industry is expected to grow at the rate of 12-15 percent. This is a must rather than an expectation. The current power shortage is a case in point of the ill effects of the electrical and power industry not matching the country’s overall growth rate This is already been felt in the scenario today. For the next 10-12 years, we have to grow at those rates per annum if we have to stay competitive.

China has already added 400,000 megawatts to its power capacity. India, on the other hand, is still at 125,000 megawatts. The country needs to catch up to those levels to sustain even the current growth rate. The next 10-15 years is going to be the era of the power industry. And if the current development scenario is anything to go by there can be no possible doubt about this fact. The industry is gearing up for that eventuality and hence simultaneously the quality of the products is also going up. In addition to this, India is also slowly emerging as a destination for outsourcing the manufacturing of electrical equipment for the rest of the world. Thanks to this trend, Indian manufacturers are slowly focusing on improving quality. In most cases, the manufacturing process and the product quality already match up to international standards. Proof of this change can be seen from the fact that many European nations are increasingly importing from India.

ELECTRIC MACHINERY AND ENERGY

The electric machinery and energy industry has a critical role in modern society. Electric machinery and energy research covers equipment for new energy sources and renewable energy and heavy-duty energy equipment, electric wires and cables, household appliances, the lighting industry, industrial and commercial electric equipment, power systems, refrigeration and air conditioning equipment and related key components.

This offers immense opportunities for Indian electrical and electronic equipment manufacturers both in India as well as abroad. And the industry here has realized that there is vast untapped potential waiting to be tapped. Hence, many Indian manufacturers are developing innovative products to capture mind share and market share. Almost all manufacturers looking at the business with long-term goals in mind have already set up R&D centres thus breaking a myth that has persisted for long about the lack of interest by Indian manufacturers to invest time and resources into research.

Says Piyush Patel, Director of Amtech Power, which is into the business of industrial electronics and has launched several innovative solutions, “We are focusing on motion control equipments, which is supported in the background by our in-house R&D. Our facilities have been approved by the government of India’s standards body. We do a lot of technology oriented projects, which could be more challenging in the field of industrial power electronics. We have a strong R&D background, which enables us to keep ourselves in the market in spite of stiff competition from multinational big wigs. We have already executed some of challenging projects in the field of power electronics especially in power supplies.”

Indian companies have also forayed into technology areas where only a select few have dared to enter till date. Amtech, for instance, has made its mark in the area of traction drives. There are only 4-5 manufacturers around the world, which has anything significant to offer in this space. This is a challenge that the company has taken up and succeeded. Amtech now manufactures traction drives for export to the US market. And the company has been growing at the rate of 10-12 percent every year in its line of business. Amtech is now aiming to be a leader in the motion control and industrial electronics space. The company plans to stick to its strategy of providing solutions rather than be known as a product company. This might be in keeping with the success of India’s IT industry, which adopted the strategy of providing solutions than developing products.

Unlike Amtech, which is focusing on providing solutions, well know switch and electrical products manufacturer Anchor has opted to dedicate itself to the consumption segment of power and electricity. This is another field where Indian manufacturers have managed to carve a niche for itself.

Says Dinesh Aggrawal, Country Head, Anchor, “There are three aspects of power and electricity – power generation, transmission and consumption. We fit into the consumption segment of power. We would like to be the leader in every product which goes into the energy consumption area. Our vision is very clear. Right now we are focusing on low voltage, medium switchgear and medium. But now that we are renowned in this space, we have also added institutions into our customer portfolio. Through this move we have now effectively moved into the production of high end switch gears. We aim to repeat our success in this space as well.”

But R&D continues to be at the core of all these innovations. Says Manabendra Chakrabarti, Chief Marketing Officer, Bhartia Industries, “We have invested a lot in R&D. We have our own tool room facility, which is one of the best in the industry. We also upgraded our manufacturing plants in line with future requirements.”

The C&S Group recently set up a new R&D centre in Noida, in the National Capital Area—a state of the art facility boasting world class standards in terms of research equipment and personnel. Says Rishi Khanna, Director - Low Voltage Products, C&S Group, “So we are investing heavily on R&D right now. The R&D center, which we set up in Noida earlier this year has all the facilities over there for design, development and testing of low-voltage circuit breakers, switches and other related items. We even have an excellent team of R&D professionals. Our head of R&D was formerly with of Alstom worldwide. So we are actually developing a lot of new products including a new circuit breaker and various new additions in all our products.”

There is a wide scope for global expansion for Indian manufacturers. Many companies have already achieved world class standard when it comes to quality and so there is ample scope for exports. Says Vivek Ranade, deputy manager, Lawkim, “Indian products match international standards when it comes to quality. We are planning to export our products once we gauge the response from the market. At the moment, we are going ahead with our products all over India and in different markets even in rural markets. We already have a presence in cities like Chennai, Coimbatore, Kochi, Jammu and even Far-East states. We are now going into the interiors also.”

Power Distribution

The industry was in the dumps a few years back because in the area of sub-transmission and distribution sector the problems were never identified. Enough investments were never made in this sector. The common though that to some extent persists even today is that generating more electricity will solve the energy and power problem in the country. We need to generate more electricity undoubtedly. In fact, if the recent CII reports are anything to go by our requirements far exceed the capacities that we are currently planning. The planning has not taken into consideration peak hour demands.

But unless we make sub-transmission distribution the focal point, the investing in the industry will not be viable proposition. Industry as well as institutional investors will only invest in industries where they can see a return on investment. And even if investments do come, it will go down the drain because 40 percent of the power generated in India is stolen or lost. So sub-transmission distribution is a sector which needs to be taken seriously now. And this is already happening at the moment, which shows the industry has turned the corner. The industry doing well at the moment and other factors remaining equal it can only do better in the years to come.

India needs more electricity. The Indian economy is growing at almost 8 percent per annum and if it has to sustain this growth, and also increase and accelerate this growth rate, it will require more power. It is not just the manufacturing sector that needs power but even the services sector, which today accounts for a significant portion of the country’s economic growth needs huge investments into power sector.

So the prospects for the power industry are looking good. But much more needs to be done. The government needs to support private sector initiatives to generate power through policy support. Infusion of public investment into the sector is also the need of the hour otherwise it will not sustain the momentum. only private investment will not sustain it. And unless it is commercially viable investments from this sector could also dry up.

The industry must make more investments into research and development initiatives. In addition to developing new products manufacturers should also take initiatives that will reduce overall costs of deployment. As the volumes increase, the cost also necessarily needs to decrease else it will not be able to sustain the momentum for long. These are lessons that can be learned from any fast growing industry. So the challenge now is to come out with new solutions. Some of the meters in the market can already address the problem of theft because the moment you try to tamper with it the meter can be totally disconnected. More such solutions are however required, and at a macro level. And using information technology in such products is critical because that’s where the integration is required now. Software and hardware must work together.

ENERGY CONSUMPTION

Conzerve Energy’s Abraham Verghese, who is the Head of the Energy Management Group in the company, says that energy has now become the most important factor in production or manufacturing cost. Says he, “We help the industry in energy management. Earlier it used to be a neglected factor. Now with price of fuel going up it has become a very important factor in the total manufacturing costs. In fact, in industries like steel, energy costs make up 40 percent of the total production cost. So it has become a very important factor. What we do is, we help the industry in managing their energy or basically to reduce their energy costs and help manufacturers use energy more efficiently.”

Manufacturers can follow the three-step approach suggested by Verghese for energy efficiency-- measure, detect and control. So the first step is measurement. Without proper measurement it is practically difficult to identify whether a manufacturer consumes more power or less power. Hence, manufacturers need to take measures to measure the exact usage of power or energy be it electrical, thermal or mechanical energy. Once the rate of consumption is identified, manufacturers can then compare it with the expected consumption to get an idea about whether it consumes more power than the stated standard. Whether consumption is high or low, it is creating problems for consumption as well as for the process. There are various equipments available for electrical energy measurement or manufacturers can avail of the services of service providers in this space.

Once the measurement stage is completed, the next stage is detection—why is energy consumption higher. Manufacturers can -compare it with accepted standards. Says Verghese , “We study the technology, then we find out why the consumption is higher. After the detection part, we do energy audits and power quality audits, power factor correction studies, we do cogeneration consultancy. We offer many such services in the detection part.”

The third step for companies--once they have the consumption measurements and have identified the reasons for the extra consumption—is to get the consumption under control. C&S offers energy management system software, which claims to help manufacturers in controlling its energy consumption.

NEIGHBOURING MARKETS

Several manufacturers are looking at expanding into the subcontinent before venturing into more far flung territories. DB Power is a case in point. The company is currently present in four countries including Sri Lanka, Bangladesh and Nepal. However, D. B. Power took the partnership route to this end. Vinayak Joshi, the DGM Marketing of the company says that horizons are now expanding. But according to him DB is still concentrating on India at the moment because it’s a big market and a major chunk of its business is still dependent on the domestic market. Simultaneously, it has started developing the market in Sri Lanka where it sees a huge opportunity. Says Joshi, “We have a small presence in industrial type of market, which is expanding. Awareness is increasing because through our partnership we have introduced several international quality products. So we are recognized as a good service provider with quality products in our portfolio. And because of that we are now expanding our horizons in other countries also. With DB Power we are already in Middle East and we have sold a different type of UPS system and power supply in the US also, which are required for plasma. DB is in different fields also, in solar and grid interactive units. So there is no limit as such, we are doing lot many things in the field.”

Indian companies need to set up call centers to handle technical support—both pre and post sales. In addition to this, there is a need for factories that provide supply for machinery, improved office environment, banking and financial institutions, airports, better transport infrastructure, etc

Several manufacturers are looking at developing indigenous solutions to meet raw material requirements. The reasons for this are manifold—it will help keep a check on quality on raw materials required, it will help keep a control on innovation in the components space to keep up the pace with the technologically developments in the final product and finally it will help control costs if planned effectively. Says Vijai Electrical’s Chairman D. Jai Ramesh who is also IEEMA’s Vice President, “We want to develop our own indigenous raw material like magnetic core material and some other accessories and fittings. Our sister concerns Samrakshana Electrics and Techno Electrical manufactures circuit breakers, press boards, powder paints, lightning arresters, insulating materials like bushings, etc. This makes us an end to end manufacturer in our space.”

Vijai Electricals, for instance, is the biggest manufacturers of distribution transformers in our range in the Asian market. We have the capacity of manufacturing 1,000 single point transformers everyday. We are the leaders in CSP transformers completely self protected transformers and we introduced in India the CSP technology. We introduced the highly energy efficient amorphous metal transformer in India.

In addition to this, the company is developing transformers in collaboration with a Swedish company. Says Ramesh, “We do have the patents for the technology. The product is yet to be released commercially. Maybe we will launch the product in the next few months. We do manufacture transformers to all standards like IEC, Indian standards, American standards, Japanese standards, South African Standards and even Mexican standards. All the transformers are tight tested at independent test labs like CBRI in India, Canada, ERDA in Baroda.”

CONCLUSION

The customer in India wants the best. The earlier distinction between local and export customers is no longer applicable. Today, the customer in India wants the very best at a very competitive price. Companies have learned many lessons from there interactions with the export market. This has helped them significantly in their dealings with the home markets. In turn, the home market is helping companies in their exports. There is homogenization of demand. The home customer, today, is equally or much more demanding than the international customer. Says Electrak’s Export Director, Andi Pearson, “The Indian market is booming at the moment. That is one of the reasons we are here to show the products to the Indian community so that they can see what’s on offer. And as of now we have had positive reaction.”

It is crucial for the country’s future as an attractive location for business and industry that its firms remain internationally competitive in a global economy, which is increasingly driven by technological progress. Only then can the advantages of the international division of labor be fully utilized and jobs and incomes safeguarded. To accomplish this, however, business and industry must be capable of innovation and willing to undergo structural change; firms must concentrate on areas of technological and industrial growth. Modern technologies, efficient and economical production methods, and efficient company organizational structures form the foundation for the nation's competitiveness.

Strategies: Marketing and R&D

2011-11-29T18:05:00.001+05:30

Indian manufacturers can stay competitive in the global marketplace only through innovation. This in turn, leads to better production processes and higher quality products—quality that meets international standards. Indian manufacturers have an added advantage in the form of cost effectiveness, as the wages here are much lower than those offered in more developed nations thereby directly affecting the end price of the product.

R&D activities serve as incubators for the new ideas that can lead to new products, processes, and industries. Although they are not the only source of new innovations, R&D activities conducted in industry-run laboratories and facilities are the source of many important new ideas that have shaped modern technology.

Industries that traditionally conduct large amounts of R&D have met with greater success in foreign markets than those that are less R&D intensive, and they have been more supportive of higher wages for their employees. Moreover, trends in industrial R&D performance are leading indicators of future technological performance.

MARKETING STRATEGIES

Most manufacturers are following the strategy of tapping the potential in the domestic market before foraying into the international market. By leveraging the opportunities presented by the domestic market, manufacturers can gain enough volumes to recover the cost of production. And for larger profits the manufacturer can then look at alternate markets. The domestic market also offers manufacturers the option of experimenting with their innovations. Domestic customers have been exposed to international standards and hence have become as demanding as customers from the more developed markets. Hence, if a product doesn’t find acceptance in the domestic market the likelihood of it doing so in the global market place is quite slim. Manufacturers can leverage the feedback it receives from local customers to improve product quality and functionality. Hence, many manufacturers are spreading their marketing network all over India irrespective of the size of the market.

Another aspect that has come to differentiate manufacturers is the quality of service provided by them. Today, product quality more or less matches international standards and are at par. The competition is now on the quality of service and support provided by manufacturers. Says Piyush Patel, Director, Amtech Power, “We have a commitment to service all our customers, to be at their doorstep within 72 hours. Our main theme is not guarantee or warranty. We are looking at offering more and more uptime to our customers. Giving guarantee or warranty doesn’t make sense if I make my customer suffer for five days. So the warranty doesn’t actually help him. Our company is more interested in offering maximum uptime to our customers irrespective of warranty or guarantee issues. That’s how we differentiate ourselves from competitors. “

Any manufacturer worth his salt has to offer presales and post sales support. Customers are more comfortable with manufacturers that offer them a solution instead of a plain box product. This can help marketers in up-selling or cross-selling products.

Support on product information can be provided through electronic direct mailers or regular newsletters to the customers. These newsletters can focus on new technologies, how an application or product can be leveraged optimally, real-time case studies, savings that could accrue, what would be the return on investment and other similar benefits. Many manufacturers even conduct road shows and seminars and symposiums to ensure that awareness levels remain high and that the customer feels closer to the technology.

Dinesh Aggrawal, Country Head, Anchor says that quality, reach and a wide network are three factors that are paramount in reaching out to customers. Says he, “We believed in the network. We even reached villages, and then started manufacturing switches that would meet the need of customers in these villages. And that has become a winning force for us. We have around 61 branches all over India and over 30,000 retail outlets and distributors who are capable of handling this total system.”

Joshi feels that it is necessary to aggressively encounter your competitors, as long as it is ethical. Manufacturers need to show always that it has a basket full of products, which will certainly give better solutions to customers. Manufacturers should make the customers feel that they are not selling just a box but solutions that will enable the customer to increase efficiency in his business.

D. B. Power, for instance, recently launched its Digital Active Power Factor Corrector (DAPC), which is a pioneering effort from DB’s house of R&D. Says Vinayak Joshi, DGM Marketing, D. B. Power, “Basically, this is a sort of import substitution and this product will certainly serve the industry in a much better manner. Because no matter which industry it might be, be it an IT organization or an industrial unit, you don’t have any control over the load coming into the premises. And at that time power scarcity is tremendous. DAPC will help organizations tackle this issue effectively. DAPC can reduce the harmonic disruption, power factor by which he could be able to save his energy which is a scarcity anywhere in the country.”

Normally, the industry looks to a product from two points of view--returns on investment and how much time it will take to get back the benefits of the product. So whenever manufacturers launch such products they should ensure the customer about the value they get for the money they are investing.

R&D

Indian manufacturers could depend on the local industry to meet their requirements for various product components instead of just importing and then assembling. The common complaint is that investments required are huge and the business volume doesn’t justify the investments. However, several manufacturers have already dared to take on the classic chicken or egg situation and venture into hitherto untrodden territories. The Indian industry is growing and demand is likely to grow. But if India ever has to emerge as a manufacturing hub then the situation has to be tackled now. This will also ensure several side benefits. The R&D industry in India will get a direct shot in the arm. And India could reach the level of innovating and developing new technologies.

Amtech has already played a significant role in this area. In every available category the company has ensured features that differentiate it from existing products. Says Patel, “If you see the energy meters, we were the first ones to introduce prepaid energy meters with prepaid cards. In ballasts, we were the first ones to introduce electronic reliable ballasts. In switches, we keep innovating constantly in designs and the mechanism. This is the strategy we have adopted to stay ahead of the competition.”

Amtech is now focusing on automation because it believes that the future market is headed in this direction. Today, there is more electronics in the switches and every accessory. The accessories have become more intelligent. India has to move in this direction. Amtech already has a light automation product. According to Patel, it has a complete prototype ready for the entire home automation. “Feature wise it will be as rich as any other product in the world but it will be much cheaper than any multinational product,” says Patel.

The focus of R&D should be to keep pace with the latest technologies coming up worldwide and in addition to this, develop technology that will out us ahead in the race. Come manufacturers have collaborated with foreign manufacturers to develop products that will meet international standards. In several cases, the collaboration leverages the strengths of a particular entity to develop industry leading products in that category.

In the cables space, heat shrinkable is the latest technique in the cables space. But with times changing cold shrink is also coming into this space. The cold shrinkable cable accessories are made of imported silicon rubber material. They not only have excellent electric performance, such as high elasticity, but also excellent physical performance, a long life span and constant shrink pressure, and they don't need a flame or special tools for heating. Technology is changing because lots of new polymers are coming into this space. The science is changing. The basic standard is something that can stand up to 130 degree centigrade. However, Indian companies already boast products that can withstand 150 degree centigrade of continuous operation

Today, Indian companies have the facilities required to carry out all kinds of type testing. It is an open market and we need to have end-to-end solutions to be able to ask whatever the customer demands. Manufacturers should ensure that the need of the customer is clearly identified. Based in these needs, the R&D team can accordingly work on correct solutions and come out with good products. Says G. K. Banerjee, VP Marketing, Finolex, “We are conducting surveys and trying to understand the Indian market -- what the customer wants, where is the gap between demand and supply, is there a gap in expectations itself and whether customer wants something that is not available. We are trying to assess those things and working backwards to come out with a product which is required and suits the market.”

The main motto should be quality. Quantity can come later after quality is taken as a given. Focus on quantity which compromises in quality should be discouraged strongly. In the international market, the product quality can make or break a business. Says Naveen Kumar Deswal of DAV, “Quantity will automatically follow quality. We have incorporated that into our corporate culture. Every single entity within the organization should be convinced about the fact that there should be quality in whatever they do.”

CONCLUSION

Indian customers need reliable quality, backup service, and availability over the counter. The Indian market is an upcoming market. People’s demands are increasing – people want lavish products, automation, and manufacturers cab tap the opportunity to meet these demands.

To tap the global market, manufacturers here need to increase their manufacturing capacity. There have been many instances where several manufacturers have not been able to fulfill the demand in the Indian market. While competing with multinationals this can serve as a potential recipe for disaster. Manufacturers need to develop infrastructure in such a way that it should have mass manufacturing capacity.

Manufacturers can also look inward at the various growth opportunities within existing products and businesses. Instead of resting in the success of one product range manufacturers need to look at new products and ventures.

In today’s world where everything is changing, people are changing, companies are changing, technology is changing if you don’t change and keep pace with the times you are not going to survive for long. So we can’t sit on our laurels and be complacent. We have to move forward, and always bring in new products in the existing space as well.

Customised training for the bureaucracy

2011-11-29T17:37:00.001+05:30

India is truly shining. Or so it seems from the increasing demand for customised IT training from the government sector, an institution that has traditionally resisted change of any kind. Ascribe it to the much-hyped feel good factor or the decade-old e-governance dream. Fact is babudom is finally linking IT literacy with the long-term goals of establishing India as an IT superpower. In the process, the men in Gandhi topi seem to have learned a lesson or two from their more enterprising brethren in corporate India.

The mammoth bureaucratic machinery is now assaying to make up for the time lost in decision-making by speeding up the literacy drive. Though a bit late in the day, realisation has finally dawned. Customised IT training has become the latest mantra in bureaucratic circles.

Tailoring a perfect fit

Customised training ensures that only those courses or modules that meet specific objectives of the organisation are taught instead of entire courses at greater costs. For the Rs 1,215 crore education industry, which has been beleaguered by negative growth for the past few years, this comes as a welcome relief.

E-governance represents the most dynamic sector in terms of volumes. Most government organisations are looking at computerising their applications. This calls for specific focus on large-scale end user training on applications that are being computerised.

The government sector largely focuses on key areas like basic IT literacy or end user training, e-governance and IT support services. Generally, employees are divided into different categories, based on the roles they are going to play in computerisation. Further training is provided based on this segregation. Elaborates Ajay Kumar Sharma, president and CEO of New Horizons India, “The first step is IT literacy. It is only after this initial exposure that differentiation, based on the roles and responsibilities of an employee, comes in.” For instance, an accountant will require training in using spreadsheets and databases, and office productivity tools such as Microsoft Office, whereas the EDP and systems department would require training in high-end systems.

Adds Javed Tapia, director of Red Hat, “Training in the government sector addresses various segments—right from user level IT literacy to equipping them with the requisite skills to develop applications that are required in various government departments. For example, the e-governance initiative not only calls for training the government machinery at the end user level but also in development and implementation.”

As of today, 90 percent of training requirements are generated in the end user area and only 10 percent can be classified as IT support services—EDP and systems department. Though the trend is increasingly towards e-governance, the government sector has still a long way to go compared to the corporate sector.

Corporate strategy

Corporates have already taken to customisation in a big way. Today, the corporate training segment is worth Rs 214 crore and is growing at a steady rate of 9 percent year on year. Suren Singh Rasaily, head and senior vice president of NIIT’s Enterprise Learning Solutions, however feels that the corporate training segment could be growing at a rate of 15 to 20 percent per annum, thanks to their willingness to spend on training employees.

According to conservative estimates by Rajiv Sharma, associate vice president at Aptech, generally, the overall IT budget of an organisation is 3-5 percent of the total budget, of which IT training accounts for 0.5 percent. But both Sharma of New Horizons and Rasaily believe that the figures could be much higher than that. Both have estimated the spending on IT training to be anywhere between 2-3 percent of the total IT budget. This is one area where the government sector could emulate its cousins in corporate India.

Factors considered

Organisations consider various factors before opting for customised training, including usability, employee profile, applications of the knowledge gained, how it relates to the organisation’s IT objectives, the time factor, the accessibility of the employee, and the need for incorporating specific industry-oriented examples and exercises. Most organisations work on the basis of its IT policies and long-term business goals. The plans are designed to empower/upgrade the workforce skill sets so as to achieve these objectives.

Tapia albeit feels that the biggest influence is market opportunity. Organi-sations usually take into consideration the requirements that can arise over the next three years and then opt for a course, which can meet this need. This trend can already be witnessed in the government sector. But no two organisations have similar requirements. This is where customisation comes into play.

Training Need Analysis

Customisation necessarily calls for a structured methodology to ensure that the client’s needs are captured and expectations are met to the fullest. To ensure this, most training majors offer a service called the Training Need Analysis (TNA). This programme, if done comprehensively, can gauge the overall training requirements of the company, based on its management vision and overall IT policy. It then considers the manpower requirements and capabilities needed to reach the desired objectives. Based on this, the institute can then formulate training plans, create the right modules and finally deliver it in the manner required. Sharma of New Horizons says that TNA helps analyse the gaps that need to be bridged to achieve greater return on investment.

Once TNA has been completed, most institutes offer training through various mediums—instructor-led training (ILT), computer-based tutorials (CBT), Web-based tutorials (WBT), blended learning and e-learning. Blended learning offers a combination of ILT, CBT and WBT. Both Aptech and NIIT, for instance, offers training through its online initiative called onlinevarsity.com and netvarsity.com respectively. Elaborates Rasaily, “The industry is definitely looking for blended solutions in terms of modes of delivery that include a combination of instructor-led and e-learning, to suits their budgets, geo spread and time requirements.”

The RoI factor

Most organisations are now demanding a measurable RoI on the IT training undertaken by them. This is where New Horizons’ Integrated Learning Manager (ILM) tool comes into play. A company’s real-life working environment is taken into account, and examples and exercises are devised based on this. This modus operandi is specifically incorporated in the case of end user training. Sharma of New Horizons believes that this methodology helps in breaking the mind block of the workforce as they can relate to and see the tangible benefits of using IT automation in their everyday lives.

The demands don’t stop there. Most institutes are today required to provide post-training support via tools like e-learning and help desk. The institutes too take efforts to establish a life-long learning relationship with the client, be it a corporate or a government body. This adds tremendous value to the offering and ensures that an organisation continues to benefit even after the training is over.

Advantage customisation

Customised training helps in better meeting an organisation’s skill set requirements, rather than generic training, which, according to Tapia, serves no purpose. It also plays a significant role in enabling companies to extract greater RoI on IT investment due to inherent advantages such as optimisation of resources. Courses can be customised to blend traditional forms of training with technology-enabled training in a way that meets the organisation’s training goals. This not only saves costs but also saves the employee’s time, as they only learn skills relevant to their jobs and not sit through training on topics they are familiar with. Adds Rasaily, “What the industry is looking for is quality—standard content customised with examples and case studies relevant to their organisation.”

Looking forward

Most companies still tend to opt for ready-made courses, as its takes time and effort to create customised modules. And generally these modules cannot be reused with a different set of people, which makes it seem expensive. Another key issue, according to Sharma of Aptech, is the necessity to create a homogenous group with the same IQ levels, interest levels, and common skill sets.

Organisations need to treat training as an investment for achieving success in the deployment of IT. Government policymakers seem to have realised the importance of quality deliverables rather than a pricing approach.

Opportunities are immense, as the government workforce needs to accomplish its mission of overall computer literacy. The Ministry of Information Technology has been working aggressively towards this end. Merely training users on a mass basis will not suffice in meeting these goals. It’s important for decision-makers to optimally utilise training budgets because as technology keeps changing, bringing with it new tools, customised training will emerge as a necessity.

This article first appeared in IT People.

Moving beyond software

2011-11-29T17:31:00.001+05:30

It’s a truth etched in stone that the software services sector has created job opportunities for a large section of the Indian tech community. Our highly skilled, highly talented software engineers are sought by multinationals the world over. But what about the not-so-skilled multitudes? The many who did an ITI or a diploma in hardware engineering thinking of benefiting from the technology boom? Or for that matter, the ones who didn’t even have the privilege of finishing college, leave alone a diploma in engineering or programming?

Various studies conducted by MAIT as well as other industry bodies and research agencies indicate that there are more job opportunities in the PC manufacturing space than the services sector. While the software sector holds the promise of a lucrative career for highly skilled software engineers, the manufacturing sector opens up wider avenues, not only for the highly skilled but also for India’s semi-skilled and relatively unskilled workforce.

Till a few years back the hardware sector didn’t attract many skilled professionals thanks to the huge remuneration packages offered by software service providers. But today there is a perceptible shift in this attitude. One reason could be that there has been a rationalisation of salaries in the software sector. But professionals have also realised that the hardware manufacturing sector offers fulfiling career prospects, be it in research and development or in designing.

And for the not-so-skilled, this sector opens up a whole new world. Unlike the services sector, where there are not many options available for the semi-skilled, the manufacturing sector promises to provide jobs to thousands of people every year. Not only will manufacturing units require people to work in their plants but this also opens up opportunities in the area of sales and marketing, after sales support, technical support, etc. Says Raj Saraf, chief managing director of Zenith Computers, “PC manufacturing will generate additional jobs not only in the area of basic manufacturing and servicing but also in the fields of sales and logistics. Apart from this, it will create job opportunities in the area of user training and user education.” Saraf estimates the industry to generate above 50,000 jobs per year.

Need for indigenous manufacturing

The Indian PC market is divided between multinationals, domestic players and local assemblers. According to studies conducted by MAIT, the unorganised sector still dominates this space with more than 50 percent market share. The rest of the market is divided between the MNCs and domestic vendors with the multinational vendors holding the upper hand. Though this segment has been growing at a rapid rate the PC penetration rate (six per thousand) is still dismal. Prices have been falling over the years, but the PC continues to remain beyond the reach of the common man.

What this means is that though a latent demand exists there is an urgent need to cut prices to make it affordable to the common man. And the best option available would be indigenous manufacturing of PCs. Not only will this drive down prices but will also be the key to

providing employment to a large section of India’s teeming millions. Both software and hardware production are labour intensive processes. But while software calls for skilled labour, hardware manufacturing comprises more of unskilled people. According to Saraf, skilled people accounts for 2-3 percent of the total workforce.

What opportunities exist?

Vendors like Hewlett Packard and IBM already have manufacturing plants or assembling facilities in Mumbai, Bangalore, Noida, Goa or Pondicherry. So do domestic players like HCL Infosystems, Zenith, Wipro and D-Link. D-link, in fact, has three manufacturing plants in Goa employing 400 odd people. Of this, around 125 people account for the skilled workforce.

Manufacturing comprises of various levels, including design, research and development and even sales and marketing. One might wonder what sales and marketing has to do with manufacturing. But truth be told, most domestic players who had ventured into this space initially didn’t survive thanks to the lack of a robust sales and marketing team. Both Zenith and D-Link attribute their success to aggressive marketing initiatives.

R&D and designing are the areas, which calls for highly skilled personnel. The R&D department makes the first prototype of the product. D-link itself has around 65 people working in this section. Though D-Link doesn’t manufacture complete PCs, designing the PC board represents a range of design challenges. The engineer has to design the board in such a manner that it meshes mechanically with the rest of the system it’s destined to be part of. Board design involves more than just integrating components onto the board and routing it. The system design expert will have to consider aspects like how the finished board will interface mechanically with the rest of the system. The design element also includes drawing accurate front panels, enclosures, and other mechanical pieces, ensuring that the board will mesh smoothly with the packaging it will ultimately reside in. This is one area that calls for highly skilled professionals, possibly the best brains in the industry.

The top-tier workers in all manufacturing plant are generally made up of engineers. The middle-tier can comprise either of engineers or diploma holders. Most are generally ITI certificate holders. Companies usually face a shortage of people in the top and middle levels. This leads to poaching workers from the competition, as whenever a new manufacturing unit is set up, there is a need for skilled people with similar skill sets.

The areas

Manufacturing basically involves assembling line and burning facilities. SMT lines form a key aspect of the plant. Managing the SMT lines is a very complex process and requires skilled people. All the personnel handling D-Link’s SMT lines at its plants in Goa are either engineers or diploma holders with considerable experience. At least one skilled person is required per shift to manage a single SMT line. Organisations generally have several such lines. D-link, for instance, boasts of seven SMT lines.

Another area in manufacturing is ‘precision components’. Each product boasts of more than 1,000 components. Consi-dering the number of units manufactured every hour, a plant might be dealing with anywhere between 25,000-100,000 components per hour.

Since manual placing of components on the board can lead to errors, most of the processes where precision is of utmost importance, have been automated. But considering the need for top-notch quality, after the precision components have been laid out they are subjected to a manual check.

There are also components that have to be placed manually. Generally one person is assigned for each type of component. The skills here are interchangeable, as a person working with one type of component can easily shift to another type. It is not difficult to retain people in this section, as long as the company provides them with a good work environment and other benefits.

Other than this, there is also a need for people with managerial skill and technical skill sets for monitoring quality, handling logistics and for handling shifts.

Benefits of indigenous manufacturing

Indigenous manufacturers operate on very low overheads and can offer international quality at highly competitive rates. It provides vendors various benefits compared to importing fully built PCs.

Even multinational firms have realised the benefits of indigenous manufacturing. Wh-ile most are contemplating setting up plants here, some have already set up assembling units. Countries like Taiwan are also slowly losing their price advantage. This has resulted in more and more multinationals looking at prospective cost effective destinations like China and India. While this would mean heightened competition for domestic players, for the job seeker this opens up a vast vista of opportunities.

Also, according to Anand Mehta, manager—HR and administration, D-link, world wide, it has been accepted that the quality of Indian manufacturing is much better than China’s. This could again result in more job opportunities coming India’s way.

Challenges

As far as skilled people are concerned, you need to give them due recognition. Also, skilled people look out for companies that are constantly growing, as they require something new and challenging to keep them motivated. According to Saraf, the churn rate, especially in the area of customer service and sales, is in the region of 20 percent.

There is also a tendency among employees in the skilled category to acquire further skills in software networking specialisation and migrate to that field, as there is a perception that it provides higher remuneration packages, and better growth opportunities.

Another key challenge would be convincing entrepreneurs to venture into this space. Most are unwilling to get into manufacturing as it is still a risky bet. Though the government has been encouraging the manufacturing sector, the policies are not uniform across the country leading to a host of issues.

In conclusion

Despite the seemingly insurmountable challenges, manufacturing is emerging as an attractive career option, which was not the case earlier. Most of the factors needed to encourage manufacturing are present in India. But manufacturing remains a capital intensive business. And it will require people with guts and huge pockets to take on these challenges head on. Few have already taken the step and succeeded and it’s a matter of time before others follow.

This article first appeared in IT People.

Reverse auctions help cut procurement costs

2011-11-29T17:07:00.001+05:30

When reverse auctions started off amidst the dot com boom, many viewed it with scepticism and did not think it would survive for long. However, contrary to popular expectation, this business has not only survived the dot com meltdown but has done so in good health.

At its launch, razorfinish.com seemed to be just another portal pretty similar to the umpteen launched during the time. However, one element that set it apart from its other counterparts was the reverse auction model it adopted (considered novel at the time), whereby hotels could post bids based on the customer’s requirements. Although today the site cannot boast of the popularity it enjoyed back then, what matters is that it is still in business something that can’t be said about its competitors.

Many believe that razorfinish was able to survive the dot com debacle only because of its reverse auction model. Though critics may say this is just one reverse auction success story in the B2C environment, it is in the realm of supply chain management, in a B2B sphere, where Net-based reverse auctions have tasted undisputed success. And with names like Maruti, Telco and Hindustan Lever swearing by reverse auctions, they have become a vital cog in the e-business wheel of the New Economy.

What are the dynamics of reverse auctions in a supply chain scenario and how do they differ from normal auctions? Typically, suppliers bid against each other for offering their wares to a manufacturer, and obviously the main criterion is that bid prices are constantly brought down. For example, an auto manufacturer would look for auto components from different suppliers, and with these suppliers bidding against each other in a reverse auction, the manufacturer might end up with considerable savings. Reverse auctions are now considered an important part of e-procurement. As more and more customers try out reverse auctions, the concept is increasingly finding acceptance as a mode of procurement.

The success stories do not end here. The cost-savings that Commerce One, which jumped onto the reverse auction bandwagon last year, delivered for its clients varied from 5 to 30 percent. The company’s first pilot auction event for the L&T group in Chennai for procurement of desktop computers for the entire country, resulted in a net saving of 17 percent over the offline negotiated prices with 9 suppliers participating. For the Mohan Meakins group, auctions were used for procurement of Crown. The auction was conducted from Chennai while 8 suppliers from across the country participated. For the auction value of approximately Rs 2.31 crore, savings of approx. 4 percent were achieved as compared to the last PO raised by company on its suppliers. In the subsequent auction, Commerce One delivered savings of more than Rs 1 crore.

“Large buyers have today realised how critical e-sourcing is to the overall growth of a company,” says Amit Bhatia, vice president and general manager, Freemarkets, India’s leading reverse auctioneer. The potential for savings are huge as almost 70-80 percent of a company’s turnover is spent in procuring goods which leads to a massive opportunity for e-sourcing. There are already plenty of real life examples in India. SmithKline Beecham realised savings of 17-20 percent through reverse auctions for sourcing some direct materials. HLL realised savings of 35 percent through a reverse auction for an electrical wiring contract for a personal products plant. Maruti’s auction for conversion from diesel to CNG for 17 forklifts led to 40 percent savings. Even Ariba, which now conducts reverse auctions only with clients in the US has seen large savings. These include FedEx savings of 25 percent in just one sourcing event and General Dynamics saving an average of 16 percent from preliminary sourcing events on a variety of goods including copper piping, wiring and bare printed wiring boards.

With savings of this magnitude, it’s no wonder that the market for reverse auctions has been growing over the last few years, and even though there is no unanimity on the figures, the fact that it is growing cannot be denied. Bhatia estimates the Indian market to be worth around Rs 2,000 crore, growing over 50 percent year to year. On the other hand, Rakesh Malik, chief operating officer, Trade2gain, the earliest reverse auction player in India, having started way back in 1999, feels that the market currently stands between Rs 800-1,200 crore, considering only the private sector as the main user. He adds that a compounded annual growth rate of 60-80 percent looks very much achievable.

Process dynamics

According to Mythily Ramesh, head, 01markets, the reverse auctioneer from the Wipro stable, the entire reverse auction process from the category amenability study to preparing the RFP, market making and the final online bid takes three to four weeks. She adds, “Our process is rigorous and ensures capture of all technical and commercial aspects of the client’s purchase. This helps us get all the suppliers and buyers on the same wavelength. We identify suppliers, source alternative suppliers for customers, contact them, familiarise them with the RFP and train them on bidding and rules of the auction. Our consultants, along with the buyer, decide on auction parameters such as operating price, reserve price, structuring of lots and rules of the auction event.”How does a typical reverse auction process work? The auctioning procedure is just a small part of the complete procurement solution that most vendors offer. The complete process can take as long as 4 months for certain items, where vendor development along with design inputs is required to be undertaken. For certain commodity based items, the process can take 2-4 weeks. The actual auction (bidding) is usually open from 2-6 hours depending on elements such as lots, participating community, value of the transaction, competition amongst bidders and buyers’ objective from the auction.

What about the main players and their achievements till date? Trade2gain, the oldest in the business, has conducted more than 150 procurement auctions till date. In terms of volume, this translates to about Rs 350 crore worth of concluded business. However, Malik refuses to divulge the names of his clients. According to Ramesh, 01markets has conducted over 100 reverse auctions so far for a wide variety of materials from steel to sugar. Some segments where they have delivered substantial savings for buyers are steel, automotive, commodities (starch & sugar), freight, MRO items, infrastructure items and hi-tech equipment. 01market’s transactions for the first six months of operations (Septe-mber 2000-March 2001) for both reverse auctions and IT market place stood at Rs 55 crore. Some of its clients include Blue Star, Hindustan Motors, Ballarpur Industries and Wipro Technologies to name a few. Freemarket’s client list boasts of the likes of Telco, Maruti and Carrier. Though Bhatia refuses to give figures, he says that FreeMarkets is the leader both in terms of value and volume. He says, “A pointer to this can be seen by the fact that Telco alone e-sourced goods worth Rs 400 crore. Though we do not guarantee saving percentages, customers like Telco have saved 15 percent while Carrier Aircon has saved 18 percent of their total purchasing costs. The end result for the company is a high return on investment.”

CommerceOne’s clients include DCM Sriram Consolidated, Hindustan Motors, Larsen & Toubro, Apollo Tyres, Hindalco Industries, Indorama, Hero Cycles, Godrej & Boyce, Mahindra & Mahindra, Ballarpur Industries, Mohan Meakins Group, Berger Paints, Carrier Aircon, Escorts Hospital and Research Centre, Fedders Lloyd Corporation, HCL Infosystems, Honda Power Products, Iris Computers, Tata McGraw Hill Publishing Company and NEI Bearings amongst others.

Other advantages

But apart from cost savings, are there other advantages to be gained out of reverse auctions? Malik feels that if the client only wants to use reverse auction as a price reduction tool and gives no credence to the market making services which are a significant part of the overall procurement solution, then only the client will be the loser in the long term. Savings are linked to input costs and can only be ensured in the first few transactions of a particular item. The ongoing benefits of reverse auctions are in negotiating prices and obtaining prices that are the most competitive at the time of conducting the auction. Along with monetary benefits, the client can expect benefits such as cycle time reduction in price negotiation, access to a larger base of vendors, technology based vendor evaluation, transparency in negotiations and benefits of an outsourced process.

Adds Vivek Agarwal, chief operating officer, Commerce One, “Reverse auction leads to greater transparency in the process and a more objective basis for deciding contract awards. It removes emotion from the process and leads to better understanding of supplier behaviour and economics. It also leads to better focus on strategic issues vis-à-vis transactional negotiation issues and lowered paper work/manual effort.”

The other advantage is obviously how reverse auctions have re-defined eProcurement. “eProcurement as a concept,” says Ramesh, “has dramatically changed corporate purchasing patterns, the world over. Companies are using the power of the Internet to improve the efficiency and effectiveness of its purchasing processes. As e-business matures, companies are increasingly migrating to purchasing or procuring goods through the Web. The migration to eProcurement provides tremendous return on investment with relatively little risk for companies who Web-enable the buying function.”

eProcurement solutions have an appeal because they span across multiple industry segments. The timeless question for purchase managers and production managers is how to extract lowest total cost without compromising on procurement time, delivery schedules and quality. eProcurement adequately addresses these concerns, while optimising costs. Studies have shown that a 5 percent saving in procurement costs translates into an effective increase in sales growth of 30 percent. Moreover, purchased products and services are the single largest expense in most organisations, accounting for 50-55 paise of every rupee spent. Any reduction in procurement costs translates into a rupee-for-rupee increase in profits. By contrast, external factors, such as overheads, cost of sales and profit margins dilute improvements in other functional areas such as sales.

What about the revenue model of these reverse auction players? 01markets works on a fixed and/or variable fee composition with its clients. There is a fixed fee and the variable component is either a transaction fee or a percentage of the savings generated for the client. Freemarkets charges a client a fixed price based on volume, which is close to 1.5-2.5 percent of volume. Trade2gain charges its clients as per the following schemes: one, fixed monthly fee linked plus percentage of savings; second, a fixed fee per transaction and finally, a percentage of savings.

The benefits from supplier discovery through auctions will not accrue unless there is sufficient liquidity or participation on an exchange. Auctions have set off alarm bells in supplier communities and many are unwilling to participate due to the fear of being commoditised. Says Bhatia, “In order to ensure participation and to get the best price, it is essential to deal with supplier concerns that auctions will not result in under-bidding without crediting them for other aspects of their offering.”

Challenges on the horizon

Says Ramesh, “One of the biggest challenges that we faced early on, that of convincing customers to try reverse auctions leveraging our market making expertise and technology. We were fortunate to have many customers realise the benefits of reverse auctioning early and do auctions with us as a proof of concept.” She adds that today, customers have not only been convinced of the benefits of reverse auctions, but have also become brand ambassadors for 01markets. Moreover, most vendors feel the acceptance of reverse auctions in the wake of the economic slowdown is far greater than it was couple of months ago.

Bhatia feels that the industry is still in an evolutionary phase. The CFO (chief financial officer) who is responsible for a majority of the decisions involving purchasing, rarely gets the CEO’s attention, who is responsible for taking top management decisions involving processes like reverse auctions. Therefore, there has to be a considerable change in mindset for adoption of processes like reverse auctions. The common problem, infrastructure, affects this industry too as clients need robust telecom networks for transactions to take place on a smoother scale.

Bhatia suggests that the government should take some forward-looking steps and adopt e-sourcing on a major scale. Everyone knows that the government is a very large sector with large monoliths in sectors such as Railways, Defence, Oil and Gas. In many of these PSUs, purchasing is not done in a transparent manner. By adopting e-sourcing, the government can save money in a huge way. The government of India should take a cue from the US and Singapore governments who have adopted e-sourcing in a major way.

But what about security concerns in a free auction scenario where the bidding parties should be prohibited from knowing each other’s prices? Each bidder for a procurement transaction has to go through an exhaustive selection process before they are invited for participation in the actual bidding process. Specific IDs and passwords are provided to bidders after payment of an earnest money deposit which can be anywhere between Rs 5000-5,00,000. This process leaves very little scope for playing with the system. The software solution has built in security checks and balances to ensure that no unauthorised bidder can participate in the bidding process. Also, data encryption is used to ensure that data travels safely.In India, though awareness is growing, it has yet to convert into adoption. Very few companies like Telco, Maruti, Hindustan Lever, Wipro and Carrier have showed the way with their early adoptions. Revenue wise, the difference in revenue in India and the US is high. For example, if a material sells for Rs 100 in the US, the actual price may be Rs 60 with the rest being labour and other taxes. But in India, with labour costs being very low, the difference between the cost of the material and the actual price is not very high. Hence the potential for cutting down costs in labour is less than with a market like the US. Due to this, if one earns say, 15 percent on the total volumes of a particular product, in India, it will be only 10-12 percent.

Another important issue is in case of bidders from overseas, how do vendors handle the differences in laws which may be contrary to each other. “In case of bidders from overseas we have to take care of the differences in the cost stack up, the duty structure, the freight costs and the currency differences. This we take care of during our market making process which includes the RFP preparation and compliance from the suppliers so that suppliers are clear what stack up they have to put,” says Ramesh. “The same is also incorporated in our software before an auction. Through this process, it ensures that all suppliers are brought on the same level so that comparison is easier and suppliers and buyers are very clear about the pricing before the auction starts.”

However, Malik feels that this does not usually present a big challenge, because for each procurement activity “we have to understand the entire legal structure around the transaction completely along with the client and then work out specific solutions for specific products.” There are tools available with vendors which help them use extensive customisation for handling events of a complex nature. For countries where there are different tax structures and issues such as anti-dumping duties, Freemarkets has incorporated intelligence into its solutions, so each of them can cater to a different market, while maintaining the core functionality of the product. Currently, FreeMarkets has over 40 different online markets to cater to different client requirements and countries.

Agarwal’s prescribed solution as used by CommerceOne: “All the electronic suppliers catalogues on our e-marketplace Gate2biz.net conform to the United Nations Standard Product and Services Code, the universally accepted standards.”

Looking forward

Where does the reverse auction industry go from here? In phase one, as in any industry, the adoption rates will gradually increase. In phase two, as the industry matures, there is likely to be a shakeout with the smaller and lesser focused players getting wiped out due to their focus on niche markets. Phase three will most likely be a phase of consolidation with larger players buying out smaller players. Though globally, the industry is in phase three with a lot of consolidation already happening, in India we are still in Phase one.

Bhatia says, “e-sourcing is not a business which can be operated locally. Local players with no knowledge of the overseas markets simply cannot last in this industry. In the future, either these players will pack off or will be bought over.” There are players in the industry who are immaturely selling auctions as a commodity and will realise over a period of time that low cost service is not the way to conduct this business. A holistic solutions approach is what is likely to develop over the next one to two years, where auctions will be available as a technology tool for corporates that can be integrated with the existing ERP of the client organisation. The industry is likely to move away from a hosted environment where the service provider does all the effort to a solutions environment where the clients will themselves conduct auctions amongst the existing base of suppliers and will approach service providers only for value added services such as market making, vendor development, international suppliers and setting up of complex RFQs/RFPs.

This article first appeared in Express Computer.

Captive, third party players slug it out in BPO battle

2011-11-29T16:55:00.001+05:30

While going the offshore way is not a hard decision for many global majors, deciding on which approach to take certainly is. Organisations are divided on whether to set up a captive unit oroutsource to a third party service provider.

History oft repeats itself, they say. If the current trends in the information technology enabled services industry are anything to go by then history is certainly being repeated. This time it is the BPO industry. The odyssey that began with the West’s discovery of India as a low-cost, high-quality IT services destination took a new turn when a few industry majors decided to experiment with offshore outsourcing of non-core processes and customer service-related activities to centres in India. The agenda was quite obvious—to cut costs, and wherever possible, to improve process quality.

But in the race for market share India is now fast becoming a battleground with two clear sets of players emerging—the giant multinationals (the likes of GE, Prudential, HSBC, etc) versus the new emerging class, the third party service providers, which include the likes of Daksh, Tracmail and Wipro Spectramind. While both classes of players have their positives and negatives it would be interesting to find out how this industry will eventually evolve.There has been no looking back since then. An increasing number of aggressive Fortune 500 companies realised the huge cost saving potential and began outsourcing non-core rocesses to India. It started with the setting up of wholly owned subsidiaries by the likes of GE and British Airways. This was soon followed by the entry of Indian third party players, either in conjunction with established players from the West or with the backing of venture capitalists. And as was the case with the IT services (ITS) industry, players realised the benefits of outsourcing to third party service providers (TPSP) over investing in captive units.

Who will win?

The more conservative companies in the West have also gradually awoken to the realisation that outsourcing is no longer a fad, but rather a prerequisite for survival in competition between global majors. And for most of them India is the preferred destination. But here the trend has deviated from what was seen in the ITS industry. Being conservative these companies were reluctant to outsource their IT needs and processes to a TPSP, the path taken by many of the global majors.

Need for absolute control over processes thanks to fears over the chances of intellectual property being compromised prompted most to set up captive units instead of taking the beaten path. Even some of the early adopters preferred keeping critical activities within the organisation while outsourcing non-core activities, a route taken by the likes of American Express, HSBC and other financial services companies. Says Ravindra Datar, principal analyst for Gartner India, “Some companies in the US are convinced about the benefits of going offshore and of using India as a base for global requirements, but are not comfortable outsourcing to external service providers. These companies prefer to set up their own captive units to gain from the benefits of offshoring.”

This, in turn, has put pressure on TPSPs to cut rates, thinning margins further. TPSPs have indirectly lost business that would otherwise have been available to them. So what’s in store for the Indian BPO sector? Will we see the market being ruled by the captive units or, as in the case of the ITS sector, will Indian third party service providers emerge winners?

The numbers game

In 2002-03 the Indian ITeS sector grew at a rate of 59 percent and clocked revenues of Rs 11,300 crore, up from Rs 7,100 crore ($1.5 billion) in 2001-02. The industry is projected to register a growth of 54 percent to clock revenues of Rs 162 billion ($3.6 billion) in the 2003-04 fiscal. Amazing figures. But there’s more to come.

A report published by IDC states that worldwide spending on BPO may increase to Rs 54 trillion ($1.2 trillion) by 2006, growing at a compounded annual growth rate of 11 percent year-on-year. Worldwide spending was approximately Rs 32,040 billion ($712 billion) in 2001. Another study conducted by Forrester Research estimates the US BPO market to grow to Rs 6,570 billion ($146 billion) by 2008. Elaborates John McCarthy, group director of Forrester Research, “Approximately three million jobs will be created in this space by 2008. Up to 40 percent, or one million, of these jobs will end up offshore.” India stands to get a sizeable cut of this pie if we play our cards right.

In terms of cost savings that a company can accrue, India is far ahead of any other competing region. According to another study, the 45-55 percent cost saving enabled by setting up a centre in India is significantly higher than the APAC average of 40-45 percent. And while Mexico and other Central American countries offer 35-40 percent savings, the numbers fall significantly once we move westwards. Canada, which is the preferred destination for many US companies for near shore operations offers only 20-30 percent cost savings and this comes down even further to 15-25 percent on reaching Europe.

Besides cost, there are several other factors, which can influence a decision in India’s favour. According to Nasscom, Indian companies offer 20 percent higher productivity in comparison to other competing countries like Philippines, Canada and Australia. Even in terms of quality offered India stands 30 percent higher than any other region. The fact that almost 60 percent of the work undertaken is repeat business further strengthens the argument in India’s favour.

But captive units have snapped up a major portion of the business. According to studies conducted by Nasscom, captive players have almost doubled their share in the Indian ITeS space, growing by a phenomenal 90 percent. From $710 million in 2001-02, captive units have crossed $1350 million this year. This is not to say that third party vendors have taken a hit. Though not in the sane scale as the captive units, TPSPs registered significant growth. From $769 million in 2001-02 they touched $985 million in 2002-03. Absolute growth increased from $549 million in 2001-02 to $856 million.

But when it comes to new investments both captive units as well as third party players have attracted an equal share. The quantum of new investment in the industry increased by around $300 million to reach $800 million by the end of 2002. Most of the investments by third party players have been in infrastructure development.

Freedom in captivity

Many companies are uncomfortable with the idea of outsourcing to a TPSP due to two main reasons—as mentioned earlier, the company might have certain intellectual property, which it doesn’t want to fall into outside hands. Also, the outsourcer may not be convinced about the TPSPs capacity to handle the volume of activity that needs to be supported. Security and privacy issues are other key factors.So what is a captive unit all about? There are various types. The larger companies might see huge benefits in moving processes to a different geography in order to avail of cost benefits, and if possible improve processes. But not all companies wishing to have a captive unit have deep pockets or international experience. Such companies might either enter into a joint venture agreement with a player having BPO expertise or they might even enter into a build operate transfer agreement.

The larger companies with deep pockets and the ability to wait out a few years before seeing any return on investment might set up a captive unit to handle non-core processes. Typically, captive units look at a payback period of around 3-4 years. This reflects a capability to sustain all initial capital and recurring costs. Most of these captive units are cost centres, and have not been established with a view of churning out any profits.

But some leading firms companies have adopted a mix of captive and outsourced services wherein some of the more complex and core processes are being handled by the captive unit. Credit card companies, for instance, have complex technologies in place to analyse customer behaviour. Around 20 percent of their people would be involved in analysing customer behaviour. This is one section they may never outsource.

Explains R K Rangan, managing director, Prudential Process Management services, “Insurance is a complex business with highly regulated processes. Over a period of time we have evolved various processes, which provide us with a competitive advantage. A third party can redeploy the expertise. We have a comfort level as the assets remain with us. Also, the jobs go to our own company. And we get to capture the margins, as much as 20-30 percent, that would otherwise have gone to a third party.”

Says Prakash Gurbaxani, CEO, Transworks, “You may want to opt for a captive unit to mitigate risks and to ensure that your IP is not compromised. What is happening is no different from how this industry has evolved worldwide. Most large companies outsource some work and keep some in-house. For large companies the risk involved in investing in a captive unit is less. And in case demand goes up they can also ramp up faster than a TPSP.”

Additionally, availability of fully-owned multiple sites across various countries in Asia enables these organisations to continuously innovate, re-engineer, and re-migrate processes within the region. This provides them with a strategic perspective and also the opportunity to spread risks, ensuring better business continuity and disaster recovery.

Says Atul Kunwar, managing director of E-funds, “A captive unit understands the pains and the dynamics of the outsourcing parent company. It can understand the issues involved in knowledge transfer, employees losing jobs, etc. This enables them us to talk in the customers’ language since we have ourselves faced these issues. TPSPs, on the other hand are insensitive to such issues, as their sole agenda is making profits.”Says Avinash Vashistha, co-founder and managing director, neoIT, “Other than cost savings, the necessity of bringing together currently disintegrated processes that serve similar product lines in various countries is becoming paramount. Companies are also facing shrinking bottom lines, time-to-market issues, and they need flexibility to continuously innovate and serve customers in real-time across all time zones. Owing to the nature of such decisions and strategies, management control assumes paramount importance, which cannot be devolved to a third-party supplier. Investing in a captive unit the becomes the one viable approach to ensure long-term business gains, and enhance competitive edge.”

But being a cost centre can also have a negative impact as captive units can lose touch with market reality. TPSPs constantly innovate and improve processes to cut costs, driving down market rates. The captive unit might be oblivious to the current market rate and might be missing out on opportunities to cut costs further.

Also, Kunwar feels that as workload increases the captive unit might have to face irrational demands from the parent company. In its effort to keep costs down the management might not think it beneficial to invest in a lot of bandwidth or set up new centres to handle the load or hire more people. This might in turn have an adverse impact on efficiency and productivity.

Also, the scale and size of some of these organisations has helped in developing and nurturing excellent manageria and decision-making talent. Complete ownership of the outsourced entity offers outsourcers the flexibility to retain and productively redeploy this talent, rather than losing out to competition.

The insider

Companies that do not have the comfort of sustainable cash look at outsourcing as a definite strategy too. Approval for capital expenditure is a convoluted procedure in most companies. Hence, most companies prefer conserving capital for investing in core activities instead of in setting up a captive unit. This is one of the key reasons why they outsource to a third party.

These companies look at short wins, and long-term savings. Such needs can only be satisfied if the organisation does not have to invest in the very involved and costly exercise of business analysis and the outsourcing flexibility they have. An efficient and proven supplier who has the capability would suit their purposes better. Says Gurbaxani, “Not all companies are global. Such companies will have to invest outside of their environment. A strategic decision to open a centre in another country and the costs involved is a long drawn process. A TPSP on the other hand can be up and running in less than 90 days.”

Adds Aniruddha Joshi, director and head of strategy, Zenta Group, “The second rung of companies do not have the management talent or the financial muscle to set up captive units. But they have seen what the large companies with whom they are competing with have done and cannot afford not to outsource.”

Outsourcing to external service providers helps the organisation in focusing on core business issues. It also ensures that the organisation benefits from best-of-breed solutions rather than depending on internal staff that may not always be the best team capable of delivering the required services. Outsourcing to external service providers brings out hidden costs and makes it easy to monitor and manage expenditure. It also adds flexibility to operations since the number of people working on the specific job or the infrastructure dedicated can be changed and paid for accordingly as per changing requirements, without having to suffer from the burden of excess capacity or the challenge of insufficient capacities.

External service providers if selected properly can deliver better quality of work at even lower costs than done internally due to better process maturity, resource flexibility and economies of scale.

Says Rahul Kanodia, managing director of Datamatics, “While there are companies who believe in core competency others believe IT processes are crucial to their operations. But as long as an external service provider respects the customers’ intellectual property rights, they shouldn’t face a problem.”

TPSPs are also more committed than a captive unit when it comes to commitment on price and adherence to quality, as outsourcing is their bread and butter. Their very existence depends on work being outsourced.

And being a profit centre, a TPSP will be proactive rather than reactive. They will also invest considerably in building better processes and developing expertise. Outsourcers can also provide benchmarks to captive units. And being much smaller TPSPs can implement newer technology faster. But TPSPs will have to prove their financial stability and sustainability to the outsourcing company.

Third party companies who don’t have the process expertise will lose out in the long run. But those who survive will add capabilities and processes. Says Kunwar, “Our advantage is that the business enjoys good support within the country. There is recognition of the fact that we are delivering. It has become a mainstream trend. It is not just cost arbitrage but improvement in processes that we can provide. And with advancements in technology and telecom the risk today is much lower.”

My non-core is your core

One common complaint has been that most multinationals prefer to outsource non-critical, non-core activities to third party service providers while preferring to employ captive units for core activities. There has been a basic issue about classifying what is core and critical, what is critical but not core and what is neither core nor critical. Lack of proper understanding of this led to companies outsourcing only things that were very obviously non-core and non-critical, which in turn deprived them of the full benefits of outsourcing.

But issues of core and non-core cannot be understood without understanding what is core to an organisation. It is important to identify what the source of competitive advantage is for the client. What may be a critical function for one organisation may be non-core to another.

That’s not to say that the work being outsourced is unimportant. For instance, most companies outsource processes like customer service management, accounting, human resource management and transaction processing. Though these functions may not be core to the company’s activities no company could afford to dismiss them as unimportant and non-critical. But outsourcing these functions enables the company to focus on its core activities and improve organisational competence.

There are also issues of aversion to give up direct control over processes and about security and privacy of information. As the business environment continues to become more and more challenging and centred on intellectual property and the knowledge domain, security is very important for organisations.

Says Vashistha, “Only captives can effectively provide enhanced security for data and processes. Ideally, companies should outsource their non-core processes to TPSPs, while retaining critical core activities within a captive unit.” Captives have been set up to keep all core and non-core activities within, while leveraging on reduced operational costs, and improved quality. This results in a lack of management focus on core activities. More or less, all activities, core or non-core tend to see some complacency creeping in, much of which can be attributed to a detached and laconic view of managing a captive unit. Usually this could result in a very conservative attitude to embracing change.

But Datar differs on this point. Says he, “It may not be right to assume that information is secure just because it is controlled in-house. In some cases systems and processes set up by internal staff may not be as secure as an external expert can provide simply because the internal staff may not have the necessary expertise in that area. An external service provider may be able to provide a more secure and stable environment by virtue of their expertise that internal staff may not have.”

Tertiary bonus

Whether to have a captive centre or not is a business decision in the end. Both captive units and TPSPs will grow together as different companies have different propensities. Many of the larger companies might opt for a dual approach.

Almost all experts that Express Computer spoke to felt that the cost advantage will soon be lost. This will force Indian third party service providers to come up with innovative solutions and look at different ways of doing things to increase productivity.

Captive units have an advantage over TPSPs when it comes to attracting talent, as they come with a brand name. So from a recruitment point of view TPSPs would have to invest in brand building to attract good talent. But third party vendors stand to gain from the experience of employees shifting from multinational companies.

Even from a macro economic point of view setting up of captive units can benefit the Indian economy, as it creates plenty of job opportunities. And having captive units helps to build the India brand name, making it easier for TPSPs to attract customers in the international market.

Captive units also present the challenge of competing for resources. This can motivate or rather force Indian companies to move out of the major metros to smaller towns in order to save costs and also focus on delivering better quality. This in turn creates opportunities in these smaller towns.

All players feel it is a good thing for Indian companies to face stiff competition. Some will suffer but those who survive will emerge stronger.

Going forward

Says Vashistha, “Third party service providers (TPSPs) shall continue to be an integral part of this industry. However, one may note that large-scale outsourcing commitments shall remain within captive centres, because of the nature of control and complexity of product lines.”

While cost saving is one of the major decision motivators, service providers should think beyond costs, while developing and demonstrating their competitive differentiators. There is a need to build and demonstrate processes and domain expertise and the processes and infrastructure set up to address their potential client’s key concerns about quality of work and security of information. They need to develop innovative non-cost differentiators and communicate clearly to the client how they can deliver business value relevant to the client. They need to demonstrate capabilities by which they can provide their clients with long-term strategic benefits rather than focusing on short-term, cost-based competition.

According to Gurbaxani, captive units will constitute more than 50 percent of the outsourcing business over the next few years. “Even in a mature market like the US 80 percent of the work is captive,” says he. Mature captives will become profit centres in the times to come, with ownership still being held as before. This has already been demonstrated in the case of WNS and E-Funds. Going forward we should see different kinds of strategic partnerships and alliances being formed. Joshi of Zenta feels that we will witness business cycles similar to those seen in the ITS business.

Although suppliers will become increasingly savvy, the market is still not mature for build operate and transfer arrangements and clients who have little experience of international business will find it hard to make the captive option work for them. It is likely that some captive centres and traditional outsourcers will enter the third party services market, WNS (spun off from British Airways) and E-Funds are examples of this. As these players expand, it is conceivable that these BPO captive centres will be spun off as independent mega-suppliers.

This article first appeared in Express Computer.

SCM gaining acceptance in India

2011-11-29T16:39:00.001+05:30

Supply Chain Management is gradually making inroads into corporate India, but it will be quite a while before industries here are ready to go whole hog and embrace SCM completely.

No wonder then that such success stories have had a positive effect on India Inc. with almost 90 percent of Indian corporates now believing efficiency in SCM as vital for their business. And expectedly, the Indian market for SCM solutions had touched Rs 107 crore in 2001. According to IDC India, this market is expected to grow by 26 percent to reach Rs 597 crore by 2004. The importance of supply chain management in India can be gauged from the fact that logistics cost is in the range of 10-12 percent of our GDP. As per the recent CMIE database, over Rs 1,00,000 crore of total capital is tied up in inventories in the industrial sector. This is close to 22 percent of aggregate industry sales. This may be attributed to many reasons, like increasing complexity and uncertainty of supply networks, globalisation of businesses, proliferation of product variety, and shortening of product lifecycles. “These are forcing businesses to realise that it is no longer possible to prosper in isolation. As a result, Indian organisations are required to look beyond their four walls for collaboration and co-ordination with supply chain partners,” feels Pradeep Sen, director for process industries at SAP India.

The year 2001 might have been generally gloomy for a wide spectrum of India Inc. But like that old saying “every cloud has a silver lining”, these tough times have led many companies to adopt innovative business methods, and the results in several instances have been nothing less than spectacular. The auto giant Mahindra & Mahindra has been able to reduce its inventory by 20-50 days in this year, FMCG major Hindustan Lever has reduced its inventory from about 45 days to less than 5 days, while in LG’s case the reduction has been around 30 days. All these successes have one common denominator: the adoption of supply chain management (SCM) solutions and judicious optimisation of the entire supply and distribution chain as a result. The benefits have not only been in terms of inventory reduction: Mahindra made savings of about 30 percent, HLL has realised savings to the tune of 35 percent while LG saved about Rs 4.7 crore.

It is imperative for Indian organisations to highlight the effects and the benefits of the five key dimensions namely - information integration, workflow assimilation, technology assimilation, synchronisation, and trust to make supply chain integration a reality in today’s business environment. However, the Indian figures pale in comparison to the worldwide scene. The worldwide SCM market was at $41 billion in 2000, $62 billion in 2001 and with an estimated CAGR of 33 percent is expected to reach $90 billion, $117 billion, $140 billion and $170 billion in 2002, 2003, 2004 and 2005 respectively.

With the growing realisation of the benefits of supply chain optimisation, what is heartening to note is that there seems to be no dearth of SCM solutions in India. In fact, at a conservative estimate, more than 68 percent of Indian software houses have expertise in SCM solutions. The leading vendors include the major ERP guys like SAP, Oracle, Baan, PeopleSoft and JD Edwards, who also offer independent SCM modules. Then there are vendors like i2 Technologies who are a leading name worldwide in SCM solutions. In addition, Indian vendors like KLG Systel and Deloitte Touche Tohmatsu also offer customised solutions for their clients. The main solutions in the SCM space include strategic planning, collaborative demand planning, collaborative supply planning and supply chain execution.

The recent competitive pressures have made several Indian organisations realise that individual companies by themselves cannot face up to the competition. A well designed product and a good technology for manufacture may not ultimately deliver value to the customer because of a bad set of suppliers or an inefficient distribution network. Explains Mukesh Arora, executive director, KLG Systel, “For instance, a manufacturer of auto electrical components competes with a competitor on the basis of what he does in his factory as well as on the basis of his relationship with suppliers and customers, and on the strength of his distribution system. In this case, the supplier, the customer, the logistics partner and the manufacturer together constitute the supply chain. The key requirement of SCM is the ability to network with several other business entities having complementary skill sets.”

Every organisation has three types of flows, the material flow, the information flow and the fund flow. While the material flows from the back end (supplier) of the supply chain to the front end (customer), money flows in the reverse direction. The information flows in both directions. SCM involves developing a set of management practices that will ensure that these three flows are smooth. Faster material flow will greatly improve responsiveness to customer requirements and will in turn ensure faster money flow back into the supply chain. However, the information flow is the crucial determinant of the other two flows in a supply chain. Collaborative planning and information sharing practices will streamline the information flow in the supply chain. A good supply chain management will provide superior value to the ultimate customer.

The challengesWhat are the challenges facing increasing adoption of SCM solutions in India? The main one is the lack of awareness of the business potential of SCM solutions in India. Says C S Venkatesh, senior consultant for sales at i2 Technologies, “The problem is in most people treating SCM as ‘one more module’ to be implemented after ERP. This focuses attention more on the technology / IT part of the project rather than the significant rethink in business policies that need to accompany a supply chain improvement project.” Next, there is a lack of consulting experience in the field in India. There are comparatively fewer people who have sufficient experience to guide organisations through successful supply chain improvement projects. As a result, the business process integration of SCM solutions has suffered. “Typically, customers have implemented ERP systems, which offer very basic

SCM functionality, and they have carried out a BPR at that stage. In order to get comprehensive benefits out of an SCM implementation, customers normally have to revisit key processes and modify them. This needs significant consulting input and can turn out to be a challenge if not managed well,” adds Venkatesh.

One of the key challenges faced is the business process transformation required to exploit the best practices and tools of SCM. Some business processes will go away, like the informal ones including faxes and hot lists. Some new processes like closed-loop supply base responses will appear, whereas some existing processes would need modification. Typically, companies work with many suppliers and are not happy with them, but after SCM implementation, the endeavour would be to work with fewer suppliers and inculcate mutual respect.

The next and even more difficult challenge is the management of change. This involves getting people who have been engaged in the same process for many years to change to best practices. Explains Mani Bharadwaj, director, Deloitte Touche Tohmatsu, “A successful change management program determines the effectiveness of the SCM solution. SCM requires a higher level of trust and openness among trading partners, based on a new attitude towards suppliers and customers.”

Going by Agarwal’s logic, it seems that despite the numbers, the Indian market is not ready for a complete SCM solution. But it is definitely ready for what he calls the Phase One of SCM, or more correctly Supplier Relationship Manage-ment (SRM). “SCM will be SRM + Phase Two. SRM will provide more effective communication between buyer and supplier,” says Agarwal. And most companies, he feels, have gone in only for SRM, not SCM. “The total number of companies in India which have gone in for complete SCM is not more than 10. Most of these are large companies and even they went in for it because of the hype that surrounded it.”Vivek Agarwal, COO, CommerceOne, feels the challenges SCM faces in India will ensure that it does not totally take off as yet. It is difficult to implement the entire SCM solution at one go because that would involve putting a complex network in place with every single entity connected to the whole process. “It is not about increasing efficiency between you as a buyer and me as a supplier but also between us and the supplier and the supplier’s supplier. When so many people are involved the system becomes complex. Even those who are involved need to change their mindset to accept the potential,” says Agarwal. This has not happened even in mature markets like the US. It will be another two years before the market there is ready for such a system. And since we in India are not far behind when it comes to implementation of IT technology, in our country it will take roughly the same period to evolve to that level.

Prognosis for India

What are the sectors that have been the biggest beneficiaries of SCM implementation in India? Industries that would see tremendous benefits include the manufacturing sector, automotive sector, FMCG, retail, oil and gas. Says SAP India’s Sen, “The popular opinion has been that the manufacturing sector is the one that is benefiting the most from SCM. While not opposing its importance in that sector, some of the other industry sectors we see it picking up in a big way are FMCGs and the organised retail industry.” Moreover, with changes imminent in the tax structures, there are large opportunities in key supply chain areas such as logistics, network design and optimisation. There are also immediate opportunities in the auto sector, particularly on integration with vendors of components and assemblies.But does this mean SCM has no future in India? “Not really,” feels Bharadwaj. “Even in the US, though the first supply chain planning (SCP) collaboration technologies were introduced some time ago, but it was not until the year 2000 that collaborative SCP pilots became a reality. It is my view that these technology solutions will be widely and comprehensively adopted around the second half of 2003. I expect the SCM demand to grow initially at around 15 percent for the next couple of years. However the growth in the next five years or so will be exponential - just like it happened with ERP. Having said that, the early adopters of SCM will benefit by e-marketplace and business-to-business (B2B) service offerings.”

SCM flavours

One good sign for SCM solutions has been the fact that in the past ten years, the proportion of purchases to the total cost of goods manufactured in Indian organisations has significantly increased. Currently, on an average this proportion is more than 65 percent. This indicates the increasing willingness of many organisations to resort to outsourcing instead of manufacturing in-house. This is a huge opportunity for SMEs. Good SCM practices will make SMEs more attractive to such initiatives of the buying organisations. SMEs have traditionally suffered from their inability to reach a wider set of customers. Increasing the reach typically involves additional expenditure due to more manpower and better skill requirements. Geographical limitations and high costs of communication prevented many organisations from tapping a wider market. Due to the ubiquitous nature of the Internet, SMEs are able to reach a wider audience without significant increase in cost. Sceptics may scoff at such logic, especially after the dot com disaster. But as Venkatesh points out, “The experience of the dot coms has shown that e-business can deliver value only when all participants in the value chain stand to benefit. The surviving e-marketplaces are those that have SCM as the cornerstone of their e-business offering. So, implementing e-business solutions without SCM would be like trying to drive a car without an engine.”

Even SCM solutions come in different flavours. KLG Systel, for instance, offers a Supply Chain Optimisation (SCO) solution. There is a fundamental difference between SCM and SCO. In SCM the consultants capture all the processes and build it into the ERP system. Everything is hardcoded into the system. Each and every transaction conducted is based in rules. It does not analyse the different options that are available. Explains Arora, “Suppose a company has a rule which says that all cheques above Rs 50 lakh have to be signed by the CEO, then the SCM solution would not accept any other signature. There may be a situation where the CEO may not be available and the cheque has to be signed urgently otherwise it could result in a loss. SCM does not give any scope for breaking away from the set rules. Whereas our solution ensures that options are incorporated in the event of such a situation. SCO will look at all these options and come up with a solution that will ensure optimisation of the resources available. SCM does not do resource optimisation the way our solution does.”

This article first appeared in Express Computer.

SISL uses Intelligent Digital Passport for total security

2011-11-29T16:35:00.001+05:30

In an era when security is on the minds of everyone from corporates to the home user, there is an urgent need for a device that ensures maximum protection against intruders. The scientific applications centre of Siemens Information Systems (SISL) recently came out with a biometric-based smart card, which promises just this.

September 11 may now be a distant memory for those of us not directly touched by the carnage. But the fundamental issues it raised with respect to the foolproof nature of our security systems continues to haunt us. No system is invulnerable. But with traditional modes of access control such as passwords, PINs, keys, entry cards, codes and other handwriting-based identification methods proving to be far more susceptible to attack than previously believed, it became imperative to develop a technology that would provide higher levels of security. Over the past year, technologists across the globe went into overdrive, trying to develop the perfect security system. Biometrics has been the buzzword but the fascination with smart card technology still holds sway over the majority. Taking this trend into consideration, many companies have been trying to develop biometrics-based smart cards. Among them is Siemens Information Systems (SISL) India. The company has introduced an authentication device called the Intelligent Digital Passport (IDP), which incorporates multiple biometrics into a smart card for authentication purposes.

The Market
Says Dr Vinay Vaidya, associate vice president-scientific applications centre for SISL, “The total market for security in the US alone is worth $60 billion. The global market for smart cards is worth $100 billion and is expected to touch $600 billion by 2006.” According to Vaidya, most of these cards will be biometrics-based. The reason for this being that biometrics is today considered the most foolproof method of access control. And with multiple biometrics available on the same card, the chances of a breach becomes all the more remote.
Even research and advisory firm Gartner says that the security space is seeing high growth in India. Many countries have introduced smart card-based identity cards and others are in the process of launching them. Hong Kong, for instance, has introduced a national ID card. China, on the other hand, plans to launch close to 800 million cards by the end of March. Master Card has already introduced a PKI-based solution, called MC2 card, in Latin America.

History
SISL’s foray into biometric-based smart cards was a natural evolution of R&D work done at the scientific application centre in Pune. Started in 1997, this centre has been conducting experiments in the areas of image processing, satellite imaging, document processing and medical imaging. Medical imaging required compression of data. Says Vaidya, “Though storage rates have gone down, code optimisation and compression is a must. With the rate of data acquired by an organisation growing at a rapid pace, the overall spending on storage has been on the rise. The only way to cut cost is to compress data as much as possible.”

It was at this point of time that SISL decided to conduct R&D in the biometrics-based smart card space. Vaidya’s team identified three areas of biometrics that could be incorporated on the card to provide maximum security—fingerprint identification, facial recognition and voice recognition. The company had already gained considerable expertise in the area of data compression. The challenge now was in using this expertise to compress the biometrics of an individual into the 32 KB chip on the smart card. Elaborates Vaidya, “Though 64 KB cards are available abroad, 32 KB is the maximum limit offered by vendors here in India. Hence, it was even more of a challenge for us to compress heavy data into a 32 KB chip.”

This was when the company decided to expand its expertise in data compression into other areas. Fingerprint identification was an evolved technology and could be compressed to the required size, but the problem with most companies experimenting with compression of facial data features was that due to loss of data during the compression process the resulting image was difficult to recognise. But SISL’s expertise in the JPEG2000 standards area came in handy. The company was able to compress facial features to the bare minimum without any loss of data. Incidentally, SISL is the only company in India and among 10 other companies in the world working on the JPEG2000 standard.

The next step was speech recognition or what SISL calls speaker identification. According to Vaidya, SISL’s system is not concerned with speech recognition but with speaker verification.

SISL integrated all the various technologies along with the traditional text information and compressed it into a 10 KB file. The entire information could be verified by a system in less than 50 seconds. But many organisations found this too long a time for verification. This prompted SISL to work on further compression of the data on the chip. The company succeeded in its objective. In the current version of biometrics-based smart cards offered by SISL, the data has been compressed to less than 6 KB and can be verified in 15 seconds. The challenge the company has posed for itself is to reduce the verification time to less than eight seconds, without any loss of data or compromise on quality.

Advantages
Since the verification unit is not connected to the server, an organisation deploying IDP can save a lot in terms of cost of hardware and real estate space occupied by servers. Also, since the system is an independent unit, the problems associated with authentication if the server were to crash have been alleviated. The IDP can be used for myriad purposes, including access control to highly secured areas, banking applications such as ATM services, Web-enabled transactions, network access, time and attendance monitoring systems.

The IDP unit has both software and hardware components consisting of a fingerprint scanner, speaker/microphone, camera and a smart card reader. In addition, it also has a computer-processing unit, and application software. If required, all the above components can be integrated in a kiosk along with a barcode reader for additional functionality.

The customer is allowed to choose the number of biometrics at the time of purchase, with options to expand at a later date. IDP also has provisions for adding more biometrics as and when SISL achieves breakthroughs in new areas.

Security
Though it is possible to duplicate a smart card personalised by IDP, the uniqueness of each cardholder’s biometrics makes it practically impossible for an unauthorised person to use the card.

However, according to Vaidya, duplication of the smart card would mean that a new card is created for the original cardholder. But new data insertion for an unauthorised person will be extremely difficult. Says he, “Proper safety measures have been incorporated in the system so that data on the smart cards is difficult to decipher. The entire data is compressed, encrypted, and put in a non-conventional format, ensuring that unauthorised card creation does not take place.”

Challenges
Vaidya visualises several challenges before the solution will gain acceptance in the country. Says he, “Awareness is still not very high in India. The technology can’t work with a mass of people, verification is done on each individual separately. We also have to train people on how the system works.”

In the case of speaker identification, if there are long pauses between words the system can’t function effectively. Or if the concerned person speaks in a different tone—too loudly or too softly—then the system won’t work.

In India, though the government introduced the system of a national ID card, there have been no coherent efforts to develop something on the lines of a smart card. But SISL has been working in association with EPFO (employee provident fund organisation) to provide smart cards to its more than 2.5 crore subscribers. The card, based on the US social security number system, will provide a unique identification number. It will provide the subscriber access to his account position, pension payments, claim settlements, etc. The best part about the card is that the employee can use the same card even if he were to change jobs.

The company plans to spread the technology in India. Target verticals for SISL include defence and banks. But according to Vaidya, the technology is applicable wherever security of premises is valued. As part of its expansion strategy, SISL has appointed a number of channel partners for selling and providing requisite support. Says Vaidya, “We have already appointed partners in Indore, Bhopal and Kolkata and we are at the moment looking for established channel partners in the metros.”

The card is currently priced at Rs 250, which is still too high for many organisations. But advancement in technology should see prices coming down in the near future. Also, though there are no competing products in the Indian market, we should see more and more security companies coming out with similar products. This will definitely provide the boost required for increasing visibility. Besides, government adoption of the technology should also see this sector receiving a major boost.

This article first appeared in Express Computer.

Biometrics: The body of evidence

2011-11-29T12:34:00.001+05:30

As Indian organisations search for more secure authentication methods, biometrics is slowly being perceived as a frontier technology. And though the industry is still evolving and emerging, the use of biometrics can greatly enhance security measures.

Hollywood action thrillers like Mission Impossible, Minority Report, and the James Bond flicks portray savvy men who constantly seem to easily break into the best security systems in the world, sometimes discouraging even the most ardent technologists in their endless quest for the perfect security device. In real life it’s not so easy a task. Especially with the rapid advances taking place in the biometric security space.

According to an International Biometric Group market report, biometric revenues grew from $399.4 million in 2000 to $523.9 million in 2001 and are expected to touch $1.9 billion in 2005. Till now, fingerprint and face recognition have been the high-growth areas, thanks to the rapid adoption of e-commerce and the increasing usage of security-enabled applications worldwide. The events of 9/11 in the US have also served to wake the world out of a lackadaisical attitude towards security. The perception is that as technology matures and prices of devices come down, more and more security applications will become biometric-based.

However, biometrics vendors still do not have a clear picture of the market and differ in their views regarding growth rate in this market. Pradeep Bhatia, managing director, BioEnable Technologies, feels that the nascent market today is worth only around Rs 100 crore with a growth rate close to 70 percent. But Girish Podar of Jaypeetex Engineering differs. “Though no independent market analysis has been done so far, based on the growth rate of individual players one can say that we are witnessing a growth rate of more than 250-300 percent,” he says.

Podar’s assumption would make the Indian biometrics market worth close to Rs 500 crore by 2005. There are two kind of biometric technologies globally available today, namely physiological and behavioural. The commonly used physiological biometrics include fingerprint, face, iris, retina, palmprint and hand geometry recognition. Traits like signature, voice, keystroke pattern and gait recognition, which are more to do with recognising the unique behavioural characteristics of an individual, constitute behavioural biometrics. Abhay Khinvasara, CEO and president, Axis Software, explains that behavioural biometrics, involving the incorporation of time as a metric, is commonly used for physical access, virtual access, time attendance, criminal and civil identification and e-commerce transactions. Many of these technologies including fingerprint, iris, face, voice, hand geometry and keystroke pattern recognition are currently available in the Indian market.

Still infant in IndiaEven India, with its fatalistic attitude and reluctance to adopt new technology, is slowly realising the power of biometrics in providing security. Both the private sector and the government are on a fast-acceptance mode, and it might not be long before all password and card-based systems currently in vogue get replaced with biometric devices. The otherwise reticent government sector has been enticed by the convenience and near fool-proof security biometrics can provide in mass applications like passports, voter ID cards, public distribution system and law enforcement, and is therefore already conducting a host of pilot projects in these areas.

Though fingerprint recognition devices are the current hot favourites in the market, Podar feels that iris scan will soon emerge as the market leader. According to him, iris scan has not caught on as expected because of the high costs involved. The technology is also not perfected as yet. But it offers greater accuracy and is far harder to replicate than any other technology available in the market at this point of time.

Fortunately for India, the front-end applications are now becoming more user-friendly than the earlier systems. The supporting hardware too is maturing. The space requirement for fingerprint and palm scanners has also come down significantly. Even back-end integration with existing Public Key Infrastructure (PKI) and other encryption systems has seen dramatic improvements.

Lack of infrastructureThe basic problem faced by most organisations in implementing a robust biometric security system in India has been that of infrastructure. An enrolment template—a highly distinctive file created from the features of a user’s biometric samples—is created when a user initially interacts with the system. This template is stored for usage in future biometric comparisons. But during subsequent verification attempts more templates are created. The infrastructure problem creeps in when one needs to store all these templates in the system. In the case of access control to sensitive areas it becomes important to store all these templates in a database. Since these files are huge, storage becomes an expensive proposition, especially for smaller organisations.

Privacy conundrumAs the template represents the user’s personal characters, its storage has privacy issues. Many people contend that facial recognition presents an invasion of personal privacy. But biometric authentication technologies actually increase personal privacy by allowing users to maintain their identities across disparate locations. While it is true that the system allows an administrator to keep a tab on the activities of individual users, the technology also allows bonafide users to efficiently assert their identities and obtain immediate access to resources without compromising personal privacy.

The actual threat to privacy arises from the likelihood of an unauthorised user gaining access to the template database. This person can then use information so gained, and link it with other data to obtain a profile of the individual and use it for purposes other than that for which it was actually meant.

However, privacy is still not a contentious issue in India. Says Podar, “One reason for this is that Indians are still not very aware of these issues. Privacy should be respected but it should not be carried too far.” Adds Parikh, “To some extent the industry has to be blamed for positioning biometrics as a surveillance application. We need to change this image and make people aware of the positive aspects of the technology. In certain areas the use of biometric technologies can invade privacy and this cannot be avoided. But we have put safeguards in place, which reduce this likelihood to a large extent. The understanding about the product is very low. Most people still think that fingerprints are only used for forensic purposes and that once your fingerprints are scanned you can get into trouble later on.”

Furthermore, storing the template in a centralised database makes it subject to attacks and possible compromise. The solution to this, Parikh believes, lies in creating a biometric trust infrastructure, a sort of central database which ideally is maintained by the government. This would allow users to move across disparate locations and also maintain their security clearance. However, prohibitive costs and logistics issues make this a pipe dream in India for now. Though the first step seems to be taken with the government having mooted a plan to devise a card for each and every citizen with all their individual data. Not only will this card have information on PAN, ration card number, etc., it will also have facial features and fingerprint scan of every individual. TCS has already been entrusted with developing a prototype for this project.

Also, compared to other security devices like smart cards, biometric devices are highly expensive, mainly because of high import duties. Says Nilesh Parikh, managing director, Print Electronics Equipments, “Though import duties have come down from 250 percent in 1999-00 to almost 40 percent, at times we still end up paying more than 70 percent. Though fingerprint recognition currently enjoys almost 90 percent of market share, even these devices cost up to Rs 2 lakh depending on the features included. To overcome this problem Axis is designing its own fingerprint scanner, which will be out in the market shortly. Even Jaypeetex has developed its own fingerprint scanner, which is expected to hit the market in the next two months. Christened Scan 4000—the device is expected to reduce prices significantly.

Exorbitant price tagSo far no biometric hardware is being manufactured in India. Most of it is imported from the US, Germany, Israel or China. Some of the smaller players prefer to import it from China, as the equipment cost is one-third that of that imported from the other countries. But Parikh feels that the equipment imported from China is of inferior quality and more often than not these systems fail. Because of such incidents people who are interested often lose their faith in the technology.

According to Parikh, even CTOs and CIOs of large corporates are not exactly sure of the technology. People often confuse biometrics as being part of the pharmaceutical and life sciences industry. Moreover, to optimise potential, biometrics has to be coupled with certain allied technologies like encryption and smart cards among others. The absence of a secured framework restricts usage of biometrics to certain segments only. Presence of proper infrastructure will also help in a giving a legal face to biometrics systems.

Absence of standards is another bottleneck for the Indian biometrics industry. If an organisation buys a scanner from one vendor it is practically impossible to migrate to another software application system without going in for a new device. This is not very cost efficient even if the new device provides better facilities. Axis is currently developing a standard device interface, which is independent of the hardware being used. This is expected to ease the migration from one system to another, and also save on the costs of installing a new system. Raghu Raman, practice head with the special services group of Mahindra Consulting feels that standardisation is required at the level of communication between the outer unit, the scanner and the core unit, the database. “In future most biometric products are going to depend on wireless technology for communication between the access device and the database where the verification takes place. This is going to be a weak link. Technologists should focus on fool-proofing or encrypting communication between the two areas.”

However Podar believes that the lack of a single standard is actually beneficial. “Standardisation would entail putting up the nitty gritty of the technology for public consumption. Even criminal elements can get hold of the technology, identify the flaws and devise ways and means to break into systems,” he feels. But the industry is still far from reaching a consensus on the standardisation issue. Most vendors expect to see a standard emerging in the next 2-3 years.

Absence of standards for storage of biometric templates, transport of the templates, usage of encryption technologies, and industry-wise standard for usage of biometric authentication are some of the other factors slowing down the adoption process. The unanimous concern of the vendors is that neither the public sector nor the private sector is making any proactive initiatives in the promotion of R&D of biometrics in institutes.

Man in the middle attack: Here the template is stolen when it is on network and is being used for registration or authentication and then the attacker tries to reuse it to authenticate in a false manner.

Can the system be defeated?Though most biometric vendors claim otherwise, the fact remains that every Biometric system developed can be circumvented. Biometric accuracy rates are measured either through false-acceptance rate or through false-rejection rate. Both these methods depend on the system’s ability to allow limited entry to authorised users. Some systems reject a modest percentage of users as a by-product of extremely high security requirements. Khinvasara of Axis Software lists some types of attacks, which can take place. These include:

Playback attack: A biometric template that has been used for some transaction is obtained and the attacker tries to reuse it to gain access.

It cannot be stated with absolute certainty that images cannot be rebuilt in some fashion. The rebuilt images may be a poor likeness, but it is possible that some features can be reverse-engineered with access to vendor source code.

Despite its faults, most players agree that compared to other existing security systems, biometrics offers maximum protection. Says Podar, “It is true that the system is not completely foolproof. But other than physically disabling the system it is practically impossible to get around it.” Adds Parikh, “Every biometric can be defeated if one allows sufficient amount of time, money and attempts. Employing biometrics increases the security levels to such an extent that more often than not the cost of penetrating the system does not justify the rewards.”

It is possible to vary the security levels depending on person to person, and from transaction to transaction, through a process called “dynamic thresholding”. Based on the security clearance of the person depending on his/her personal and professional profile, this automated process adjusts the levels of security for each user.

But Raman opines that when people think of biometric security, it is limited only to cracking the system by replicating a fingerprint or the biometrics of an authentic user. “Experienced attackers would not focus on trying to replicate a fingerprint or an iris or a retina. The weak link is not the scanner or the outward unit. All an attacker has to do is change the programming at the core unit and he will have easy access to the system,” he feels. The only way to avoid this is by increasing the level of security at this level, as according to him it is practically impossible to replicate the fingerprint or iris of an individual.

But many systems offer fallback authentication, either through a live operator, a password, or another biometric method. Many players are going in for a combination of two or more technologies such as smart cards and encryption to handle the man in the middle attack and the playback attack. While biometrics is concerned with user authentication, smart cards deal with storage and portability of data, and encryption with data security and privacy. Usage of biometrics in smart cards also solves the problem of storing templates. The user’s fingerprints and details are encrypted on the card. Authentication is done after matching the template on the card with the user’s biometrics. Security is higher as individual users control their own template.

The adoption of biometrics is still dismal in India, mainly restricted to defence establishments and a handful of IDCs. Most vendors were relying on the banking sector to be big clients, but the market has not seen much growth from that area. The general lethargy amongst banks towards adoption of new technology seems to be the prime reason for this. However, increasingly visible security breaches will prompt Indian organisations to incorporate biometrics to reassure customers. For internal IT security, similarly, an increased emphasis on best security practices will lead to a revision of authentication processes, currently one of the areas more susceptible to intrusion. It’s quite likely that all kinds of cards, PINs and other security systems will gradually be upgraded to biometrics. And the day may not be far off when biometrics will become the most preferred mode of security measure for India Inc.

This article first appeared in Express Computer.

TCS bullish on BI, set ups Business Objects centre

2011-11-29T12:30:00.001+05:30

A report by Frost & Sullivan estimates the total business intelligence (BI) application market in India at $10.7 million. By 2005, this is expected to touch $30.4 million, growing at a CAGR of 33.9 percent. Both TCS and Business Objects wants to tap this burgeoning space by exploiting their synergies.

The company’s most recent initiative has been its partnership with Business Objects, (BO), a leading provider of BI products and solutions. TCS’ business intelligence practice (BIP) has set up a Business Objects CoE with a separate BO CoE manager to handle operations. According to Dr Santosh Mohanty, global practice head for BI and KM, TCS, the BIP has been contributing significantly to the company’s bottom line over the last three years.Pricewaterhouse Coopers predicts that BI will be the biggest area of growth in the Indian IT space in 2004. A highly competitive market, complex situations and growing databases have today made business intelligence an imperative for many Indian organisations. Many have already implemented an ERP system, and are now deliberating on adding business intelligence systems and enterprise information portals. Considering the gargantuan opportunities presented by this rapidly growing market, it comes as no surprise that India’s largest software services exporter, TCS, has set up various Centres of Excellence (CoE) centred around the products and technologies of the leading players in this space.

The BI practice of TCS offers solutions to industries across the board—from banking, financial services and insurance (BFSI) to fast moving consumer goods (FMCG). Offerings include strategy consulting, end-to-end datawarehousing solutions and system integration (SI). The advantages TCS has over the competition are a large domestic presence and a keen understanding of business intelligence. The partnership with BO will further strengthen TCS’ position in the rapidly growing BI market, by providing strategic advisory and implementation services.

The CoE

TCS has six CoEs in the BI space—one each for Informatica, Cognos, Teradata, IBM’s BI division, BO and SAPBW. Each centre caters to different BI segments—online analytical processing (OLAP), database, extraction transaction loading (ETL) and closed loop technology.

BO is in a leading position in the OLAP and ETL space in India and has a sizeable number of installations in the Indian market.

The key objectives of the CoE are consulting, tools evaluation and selection, and providing a help desk for project teams. Other than this, the CoE will monitor the latest features and offerings of BO in addition to creating a forum of BO experts across TCS. The CoE will offer a host of services to both internal users and customers, encompassing product expertise, planning, training, assistance in tool evaluation, etc. Basically, the CoE will work as a hub for the BO-related activity that TCS is involved in.

It will also act as the hub for assimilating knowledge with reference to BO and disseminating the same to TCS’ consultants. These consultants, a unit of TCS’ BI practice, will investigate how BO can fit into BI opportunities that TCS comes across. The centre will also look at building a central repository of knowledge from the expertise gained during project execution. This experience base can then be leveraged to support ongoing projects.

TCS has made investments in setting up the hardware and software infrastructure to provide internal training, conduct testing as well infrastructure for external training. The manpower resources that TCS has committed will be a floating population headed by a CoE manager.

Of the more than 1,500 consultants at TCS, around 350 will be a part of the BO centre of excellence community. Of these, a five-member team will be dedicated to the BO program, on a rotational basis—they won’t work on any billable project at that point of time. This team will be rotated every three to four months. This will ensure that a large number of consultants will gain strong expertise in BO technology.

Dr Mohanty believes that though implementing the technology is important, exploiting the ETL system to its full potential is even more important. For this a good OLAP tool is required. Says he, “A product is as good as the implementation. Hence, it is very important to have the right systems in place to have more success opportunities.”

Advantage TCS

The CoE has been built to enable TCS to gain an in-depth understanding of BO’s technology. The benefits for TCS include the advantage of tracking and beta testing each new version of BO’s products. This provides the company with an early view of the product, enabling it to be equipped with tools required for faster implementation. This advantage can in turn be passed on to its customers.

Also, all technical queries arising from implementation of the technology would be routed through the CoE, which would also enrich its knowledge repository. This also gives the company a feeling of the technological challenges that its consultants may face during the process of implementation and later. All this information is documented and then circulated among the community. This, according to Mohanty, has helped the company significantly in delivering on time and on budget.

According to Sanjay Deshmukh, business development director, Business Objects, TCS also stands a better chance of winning a project by working with the best-of-breed products provided by BO.

TCS creates business analytical templates for different industries. The CoE then builds a prototype, which helps in marketing. According to Dr Mohanty, this provides the marketing team with something readymade with which the customer can relate. There have also been certain tangible benefits, as was proved by an internal test conducted by TCS. An internal study, which measures customer satisfaction levels, reported that after the setting up of the CoE customer satisfaction levels have gone up from 80 percent to 92 percent.

Other than higher customer satisfaction, the partnership will also enable TCS in building competencies internally. The company will also benefit from the extensive training programmes that will be provided by BO and its own senior consultants.

Advantage BO

For BO the partnership with TCS is of more importance than its partnership with its distributors and independent software vendors, as other than implementing the product TCS drives the solution to customers. Says Deshmukh, “The advantages we have is that we get a good partner in India. We would like to be associated with a company that can add value.” For BO the partnership promises great opportunities. TCS has got a large domestic focus, and according to Deshmukh, present in every single enterprise deal in the domestic market. The company also has the required focus and expertise for business intelligence.

The CoE has generated further business opportunities and even BO gets to keep a piece of the pie. BO gains indirectly whenever its expertise is required by TCS. It profits from the license revenue that will accrue whenever TCS bags a project with a business intelligence opportunity.

Marching together

Today, customers prefer to go in for a single-window technology provider. Customers are more comfortable with such a relationship than opting for best-of-breed products from various vendors.

There are three areas to BI: database, extraction transaction and loading (ETL) and reporting (OLAP). BO has traditionally been strong in OLAP space and has now ventured into the ETL space as well. According to Mohanty these are the two areas seeing maximum demand. This is one reason why TCS decided to invest in building a BO CoE. Says Mohanty, “We want to provide the best service. Hence, it is key for us to have a strategic partner at the highest levels.”

Other than the software and technology there are certain other key deliverables that BO brings to the table, including product training, and access to it’s knowledge base and support centre. And since TCS has invested in setting up a CoE, BO is now more comfortable with sharing its technology with the company.

Road ahead

Currently, BO India’s relationship with TCS is restricted to India and the SAARC region. But both TCS and BO are looking at extending this partnership globally once momentum builds up. Of course, TCS has the option of choosing another player. But, according to Deshmukh for BO the objective right now is to gain more and more mind share and keep TCS from going in for another product.

Out of the 150 BI projects undertaken by TCS worldwide, in more than 40 instances the company has implemented a BO solution. The partnership has already managed to garner two major clients in the Indian market—RBI and Clearing Corporation of India, and is now devising strategies to help the business grow through educatiion of customers.

This article first appeared in Express Computer.

ABN AMRO to Mpower customers

2011-11-29T12:23:00.001+05:30

With a booming cellular base, India represents one of the fastest-growing m-commerce markets in the world. ABN AMRO now wants to take advantage of the ever-increasing reach of cellphones by introducing a new payment mechanism that it says will transform the face of banking. Could this well be the shape of things to come.

Enter Mpower. ABN AMRO Bank’s proprietary technology offering in this space takes mobile banking a step up the evolutionary ladder. The technology promises to provide the much-needed thrust to make mobile banking as commonplace as using your debit or credit card. The best part is it promises enhanced levels of security in comparison to these business channels.MOBILE banking is not a new concept. There are myriad technology offerings that enable customers to avail of banking services using the mobile handset. Unsurprisingly, as is the case with any new technology, not many in India have opted for this mode of conducting business transactions though banks do offer basic services like account balance enquiry, details of the last few transactions, statement and cheque-book requests, stop payment options and fixed deposit enquiry.

Mpower, in the words of Nitin Chopra, head, consumer banking, ABN AMRO, is a comprehensive mobile banking platform providing services similar to those available on the Internet. The technology platform provides the customer access to all the services that are currently available over the mobile handset as well as the Internet. In addition, the customer can now transfer funds from one account to another, and most importantly, make payments at merchant establishments using Mpower.

Debit cards came with the promise of doing away with the need to carry cash around. With Mpower, ABN AMRO promises to do away with the need to carry even those cards. Of course, security is much higher, as none of the other channels provide the option of authenticating the transaction.

To access Mpower the customer needs to own a mobile access device with the short messaging function activated and a mobile banking personal identification number (PIN). The PIN is sent to the customer by the bank once the mobile banking account is activated.

The process begins when the customer tells the merchant that he wants to pay with Mpower. The merchant will then send a payment request to ABN AMRO Bank through a specialised Mpower terminal (installed at the premises of the merchant). The bank will then check the validity and authenticity of the transaction, and send the customer an SMS with the payment details for approval. The messages will come from the number 8877. Any other number can be considered a case of fraud.

The message will contain details such as the merchant’s name, transaction amount, the invoice number and ABN AMRO’s transaction reference number. The customer will then have to validate the transaction by keying in ‘MPA’ and the PIN number. Once the customer confirms the transaction, the amount is deducted from his account and credited to the merchant’s account. An SMS confirming the transaction is then sent by the bank to both the customer and the merchant.

For instance, if you want to order a pizza from Domino’s, the merchant will initiate the whole process. This reduces doorstep cash handling. A customer can even order cinema tickets using this system. A confirmation number will be sent via SMS, which has to be produced half an hour before the commencement of the movie.

Security

Secure payment is paramount to ensure the success of any remote banking solution. Customers are generally reluctant to conduct transactions over the Internet using credit cards primarily because of the fear that their credit card numbers will be misused. Through Mpower, the bank promises to make conducting transactions via SMS a secure process.

In case the customer’s mobile handset is stolen or lost, he can rest easy as the PIN number is required to validate any transaction, which is not the case with credit and debit cards. The PIN gets locked after five consecutive incorrect attempts. It can only be reactivated after calling up the bank and authenticating your identity.

Also, the PIN will work only with the mobile number registered with the bank. This ensures that even in case the secret PIN and account number have been compromised, a third party cannot carry out transactions. The customer has to specify the account number along with the PIN. In case the customer has more than one customer identification number, then different PINs will have to be generated for each. If the customer wants to use Mpower (PIN) from any other mobile, he needs to call up the bank and intimate them about the new number, or do it online using NetBanking.

Advantages

Mpower offers various advantages over credit cards and other channels of payment. According to Chopra, not only is the technology easy to install, but it also promises faster transactions. Says he, “The customer doesn’t have to invest in new technology, since micro-payment via SMS does not require the user to install any new software on his handset. Also, with credit cards, the total transaction time can be a minute and half. With Mpower this has been reduced to 40 seconds.” But the best part, according to Chopra, is that since it is far cheaper than giving a 2 percent discount on a credit or debit card, Mpower helps reduce operational costs.

Security is another key advantage. The customer no longer needs to share credit card information with a third party, hence the fear of someone using the card number to transact over the Net is done away with. The biggest use of this medium, if implemented, could be seen in online transactions.

As of now the credit card is the only channel of payment over the Net. Though transactions over the Net have been gaining in popularity, people are reluctant to use this payment solution. There are a number of sites offering merchandise over the Net, but few of them have actually been able to generate sustainable income. Only those sites that have been able to create trust in the minds of the customer have been able to make any headway.

Strategy

ABN AMRO Bank stands to gain significantly through this initiative. The bank can build valuable and viable business propositions by building cases with banks, merchants and mobile operators. It also stands to gain by jointly branding the account with the telecom operator. The bank can also gain traction with the telecom operators’ customer base, and in the process promote its own customer take-up.

Considering the rapid rate at which mobile phones have been making inroads into India, this technology will slowly but steadily gain mass consumer acceptance. If the way consumers have got hooked to SMS is anything to go by, the chances of them becoming dependent on this channel are quite high. Chopra plans to capitalise on this trend to increase penetration.

Though Mpower doesn’t offer huge revenue potential, at least in the short run, Chopra is looking at growing the mobile commerce market. Towards this end, ABN AMRO has introduced a reward programme similar to those available on credit cards. The customer earns royalties (rewards points) for every transaction made through Mpower.

The bank plans to look at revenue streams as and when customers move on to macro-payments. But as of now Chopra is only looking at increasing consumer acceptance by ensuring a successful and uncomplicated experience. Says he, “Empirically it has been shown that people who engage with you on many platforms see you as a complete bank.”

Mpower ahead

The penetration of the service depends on what mobile instrument people carry. Ideally, Chopra would prefer people to use WAP-enabled handsets. The bank has completed a pilot launch of Mpower in Noida, and already more than 40 percent of its client base has opted for the solution. Geographical expansion of these services is the next step for the bank. Says Chopra, “We are looking at expanding into metros and mini-metros, wherever we have a branch, in the next few months.”

The only glitch Chopra envisages is in case there is a problem with the mobile service providers’ network; if and when this happens, the transaction can’t go through. Inter-changeability and inter-operability is what will propel this technology. But this business model can evolve only if the industry wakes up instead of waiting for yet another player to make a success of it.

This article first appeared in Express Computer.

IT industry gets caught in Indo-Pak crossfire

2011-11-25T16:57:00.001+05:30

Even as the world tears its hair out over a potential nuclear carnage if India and Pakistan go to war, the Indian IT industry is expressing mixed opinions. While the software sector is more confident of riding out the storm, the fledgling IT-enabled services sector is running scared.

Regarded for a while now as among the most dangerous of potential conflict areas, the conflict between India and Pakistan over the latter’s support to terrorists operating in the Indian state of Jammu & Kashmir has resulted in sabre-rattling by hawks on both sides for years. But the present impasse has definitely turned more serious and even threatens to ignite into a devastating nuclear carnage. While previous wars in 1948, 1965 and 1971 did result in a temporary adverse impact on Indian industry, the new conflict threatens to cause havoc to India’s IT industry, an industry which was non-existent during earlier confrontations.
While escalation of tension always has an impact on industry as a whole, the effect can be devastating for export-oriented businesses as compared to those that cater to domestic clientele. The IT sector in India is particularly vulnerable on this count, considering that its spectacular growth over the last decade has been largely dependent on the international market, rather than a strong and vibrant domestic market. Most industry leaders admit that if the current tough posturing and stand-off between India and Pakistan continues for long, it would indeed begin to affect India Software Inc.

The current border tension could not have come at a worse time for the industry, which touched $7.8 billion in exports this year, and was just showing signs of slowly recovering from the effects of the global slowdown and 9/11. Worse, this situation could be even more devastating for the fast growing $1.4 billion IT-enabled services (ITES) industry, more so because unlike the software sector, clients here are relatively new to India.

While most ITES players admit there has been no business loss yet, they are a bit apprehensive as to what might happen in case of a longer stand-off. Says Abhay Chauhan, director- business development, Transworks, “Though call centres continue to serve their current customers as per existing contracts, backed by well-designed and robust contingency plans, prospects in the pipeline may take a little longer to come to fruition, given the tension in the subcontinent.”

Rajeev Kamath, senior projects manager, Intelenet agrees. “Many US companies who are looking at outsourcing contact centre projects to India are in various stages of making their final decisions on who they want to work with as their vendors in India. The recent tensions will definitely delay, if not have an adverse effect, on their decision process.” Sunil Kakodker, vice president-sales and marketing, Tracmail, is even more forthright. “The situation has definitely had an adverse impact. The two events—first the Gujarat riots and now war fears—have both received global coverage and there has been a slowdown in client visits as a result.”

However, Kakodker admits that notwithstanding the threat of war, the overall interest in offshore outsourcing remains strong and it is still too early to gauge the long term impact of the war-scenario on business. Raju Bhatnagar of E-funds and Siraj Irani of WNS share the sentiment. But what could be a possible dampener to this optimism are the travel advisories issued by the US and UK, with other Western nations following suit, urging their nationals not to visit India in the current situation. Chauhan feels that client visits form an important part of the due diligence process in the signing of new contracts, and as client visits get delayed due to the travel advisories put out by the US and several European countries, so do the signing of new contracts. “US/UK travel advisories asking citizens to consider leaving and defer their travel plans to India, though not unjustified, magnify the impact of the current war rhetoric, and are bad for the economy,” he feels.

Bhatnagar feels that the travel advisories have put Indian companies in a piquant position, as they are neither willing to nor able to insist on personnel travelling to the subcontinent. Kakodker feels that a fair amount of confidence building will be required to overcome the negativity caused by this rather drastic measure taken by the US and the UK. The situation is complicated by the fact that the general level of awareness of geographical locations in this part of the world is not too good in the West. Therefore anything relating to India—whether it is the western border or the southern tip, is clubbed together.

The recall may affect ITES companies who rely on foreign nationals for training and other operating activities too. Irani however feels that this issue has been hyped far out of proportion. “Although some governments have urged their citizens to return, it is only a precautionary move to reduce any anxiety that they may have. Each individual should analyse the situation and base his decisions on that.” In fact, many foreign executives like Glenn Goodall, group director of Australian company Rentworks or Ron Cattell, CEO of Datacraft Asia, have decided to visit their Indian operations, notwithstanding the potential risk of war.

Though most players feel that currently clients from Western countries are only deferring their visits, and adopting a wait-and-watch policy for business, they do not rule out their moving to other territories like Ireland, Philippines or Mexico if the stand-off in India continues for very long.

Nasscom president Kiran Karnik feels that the situation would not be that serious for Indian software companies. This is because 60 percent of business that flows into the Indian software and service industry is repeat business and therefore these customers understand the Indian market and are engaged with Indian vendors for the long term. Added to this is the fact that there is a large base of Indian ambassadors abroad by way of marketing offices of Indian software companies, and a significant base of multinational executives working in India, updating their headquarters on the ground situation regularly. For prospective clients who have not travelled here or are unfamiliar with India, there is little one can do. However, those executives and companies that are already familiar with India are more confident about doing business here despite the prevailing tensions. Unfortunately the ITES industry has more of the former clients, who aren’t very familiar with India, while the software industry has more of the latter.

This confidence is keeping senior software industry executives like Satyen Parikh of Novell India from pressing the panic button too soon. “Though there might be some inertia in the momentum which temporarily caught on, such situations also give us the time to better strategise and carry out focused activities-when business momentum gets going again, we would be well placed.” The business impact if any, resulting from the present tension, might last only for the short term since India enjoys strong global brand equity as a cost-effective and quality outsourcing destination. Also, the industry’s fundamentals are robust with many global corporations already having established a significant presence in India and Indian vendors too bagging large multi-year, fixed price, long-term contracts, which are critical.

However, not everyone in the software industry too is willing to share such unbridled optimism. Says Vivek Dayal of Mphasis, “Heightening tension between India and Pakistan is a cause of concern and if the situation deteriorates it can impact business. IT investment decisions will be put on hold, resulting in longer sales cycles. We sincerely hope the situation settles down quickly enough so that there is no impact on business in the long term.” He also feels that the call centres operating from Delhi and adjoining areas need to closely monitor the situation so that they are not caught unawares. Agrees Mohan Reddy of Hyderabad-based Infotech, “We may see some projects taking longer to complete since certain areas like quality assurance which customers were supervising locally will now be managed remotely by them, which could lead to increased turnaround time.”

But Karnik stresses that the software industry in the past has withstood uncertainties such as the 9/11 attacks in the US or the December 2001 terrorist attack on the Parliament House. It has, as a result, built adequate processes in terms of disaster management and business continuity planning to cope with such situations. Even Parikh concurs that such events also result in getting top management attention on vital issues like disaster recovery and business continuity planning, which otherwise are ignored. In fact, Novell is embarking on a nationwide initiative of creating an awareness of disaster recovery and business continuity planning in the coming months. Adds Dayal, “The need of the hour is to ensure that we put our business continuity plan in place. We need to ensure that in case of an emergency we are in a position to move people and data from one place to another. We also need to instill confidence in our customers, both existing and prospective, that we are equipped to handle any emergency situation and that we have a well defined contingency plan of moving people and data onsite.”

Companies like Infotech are using their overseas subsidiaries in California, London and Stuttgart to give them additional options of data back up and business continuity outside India. This is true of even ITES players like WNS, which operates out of two cities in India. Says Irani, “That gives us a strong fall-back plan in the event of any disaster. Obviously, our focus is primarily our customers’ security and we have our contingency plans to ensure that all goes right. In the event a full-scale war breaks out and both our sites are non-operational, we have already identified a third city in very close proximity to our current sites with the capability of maintaining continuity of our business.” This situation has also accelerated WNS’s desire to move to South India as part of its expansion plans and even consider moving outside India as an option. All ITES players are also urging Nasscom to prepare a joint declaration by Indian CEOs as a comfort zone to their customers, that in any eventuality, they would stand together to offer their locations/support so that the image of India is upheld and customers do not suffer.

This article first appeared in Express Computer.