Overall IT projections to take a hit

Overall IT projections to take a hit

With budgets getting squeezed in coming quarters, alternate modes are the answer

Thursday, July 17, 2008

Week after week, the inflation figures continue to create havoc in our lives and as the figure looks set to surge past 12 per cent mark, good news remains remote. Even as the government battles prices inflation and with the crude prices coming down a little too late, companies have already begun to run for cover.

For starters, IT projections for the coming quarters are going to take a hit and profits could shrink in. Alternate usage of resources is the name of the game and companies such as Zylog Systems have come up with initiatives such as Recycle Accelerator to fight this menace.

John Mehrmann, vice president--Business Development at Zylog Systems Ltd (ZSL) shares his views with Prasad Ramasubramanian from CyberMedia News. Excerpts:

Companies are increasing looking at alternate mediums of energy and resources. What is your take on this scenario and how should companies and countries approach this?

The rising fuel prices require all organizations to consider the costs of transportation as a critical variable in financial cost structures. In the past, business decisions regarding manufacturing, service, refurbishing, and recycling could be highly predicated upon comparing the cost of labor. However, as the cost of fuel continues to rise, the cost of moving materials can have an even greater impact than the cost of handling them, and this will have an increasingly substantial impact on the world market. As transportation continues to increase, alternative options for labor will be weighed in the balance. The rising cost of fuel impacts more than just the physical labor and handling often associated with manufacturing and industrial jobs. As profits are impacted and organizations feel the squeeze on budgets, there is likely to be a reduction in IT outsourcing, and this can also affect overall IT revenue projections.

John Mehrmann, vice president--Business Development, Zylog Systems Ltd

John Mehrmann, vice president--Business Development, Zylog Systems Ltd

Despite the allure that IT may be used to reduce costs, some budgets may not be able to support the investment. This can also have an impact on economic growth. This means that companies and countries need to be proactive in the approach. Diversification means not only expanding a portfolio of product or services with new offerings, but it also means extending a meaningful investment into local business opportunities. It is necessary to be able to adjust the infrastructure in an organization to maintain profitability, even if revenue is temporarily negatively impacted. ZSL is taking these steps as a technology company, to maintain a robust portfolio in diverse regions, rapidly adapting to geographic challenges. ZSL remains committed to internal, as well as external, infrastructure development.

Fortunately, by taking this approach, ZSL has been in a unique position to weather the storm. With intellectual capital and the diversity of our new platforms, we are poised to grow in a global market, and within India, regardless of external economic conditions. This is the result of a carefully planned strategy, which could be a blueprint for other companies and countries. In a similar manner, countries need to carefully evaluate internal resources, as well as the external resources.

Recycle Accelerator enables companies and countries to reutilize reclaimed materials from obsolete, unwanted, and defective products. Reclaiming the materials reduces dependencies on external natural resources and foreign raw materials that have to be mined, refined, and shipped by expensive transportation methods to manufacturing facilities. Imagine how much copper, gold, silver, steel, and aluminum can be reclaimed from retired products, cell phones, scrap metal, and consumer electronics.

Actively reutilizing the reclaimed resources within the shores is a way to reduce dependency and cost of transportation of elements from foreign shores, and eliminating dependency on transportation is as effective as reducing dependency on foreign oil. Furthermore, as we develop better processes to reduce such dependency, the ability to enable other companies and countries to do the same is a new business opportunity, and that creates new revenue opportunity.

What was the rationale behind instituting Recycle Accelerator?

ZSL has been working with subject matter experts in the Consumer Electronics Industry to develop solutions for connecting and integrating the service supply chain, service providers, spare parts, and warranty service. In this endeavor, Advisory Committees were formed to gather expert experienced input from manufacturers, service providers, third party administrators, and other members of the Consumer Electronics industry. As a result of these activities, ZSL Inc quickly discovered the common escalating concerns for managing a growing amount of e-waste.

Governments are endeavoring to create and implement legislation, but it is diverse and fragmented, making it difficult for manufacturers and recyclers to comply. There is tremendous interest to improve the processes and take control of the hazardous waste, but there is also a lack of standards, and the infrastructure for connecting these parties does not yet formally exist. The rationale for building the Recycle Accelerator began as an initiative to address the concerns from manufacturers and members within the Consumer Electronics industry to manage the issues and create business solutions.

As we investigated the depth and breadth of the problem, the amount of e-waste with hazardous materials being dumped, and the forecasts for continued growth of new products to create more obsolete waste in the future, we recognized the extent of the environmental impact. The rationale started with a business problem, and evolved into a social ecological responsibility. To create a compelling process and platform for all constituents to participate, ZSL recognized that we need to return to the business focus of the process to create incentives for each party to become actively involved. In other words, we recognized the need for an end-to-end solution that benefits each organization, and make it easy for the consumer.

The platform offers cost reduction associated with efficiencies and improved processes that benefit each of the participants. The platform creates opportunities to integrated networks that will enable business transactions to occur, enabling collectors to transfer data and goods to recyclers, and for recyclers to locate appropriate downstream buyers to reuse materials. As a result, materials from obsolete product can be reclaimed and reused at lower cost than mining and refining natural elements from mountains in distant countries. From a business perspective, there are financial benefits to participate.

The result is a positive contribution to minimize hazardous waste, and to reclaim materials to reduce the consumption of natural resources. As we have continued our investigations, we have discovered the global need for answers. This is a new initiative around the world, and there is tremendous enthusiasm to collaborate on a solution.

The WEEE and RoHS directives identified and categorized hazardous materials, but each geographic region has unique challenges, infrastructure, legal systems, and logistical challenges to address. The platform to address these unique geographical issues needs to be flexible and robust for each region to customize the solution to meet a unique set of requirements.

As ZSL started development of the platform to empower recyclers, we discovered a number of individuals who create or supplement their income as collectors. Typically, these are individuals in search of work, in need of revenue, and capable of collecting unwanted electronics to bring to recyclers in exchange for cash. With this in mind, ZSL is also developing a simplified application that connects these entrepreneurs to recyclers, creating a controlled process for collection, while enabling individuals to generate independent income. This creates new jobs, and by developing reporting from this data to the appropriate government agencies, it also discourages theft.

How is ZSL developing platforms that would halt the diminishing supply of metals such as Gold, Copper etc and how are you making people aware of the issues that would creep in the future?

The first stage of development in the comprehensive platform includes applications designed to empower collectors and recyclers to run operations more efficiently. This includes functionality to improve warehouse management systems, dispatch, manage events, accurately identify products and materials, and coordinate outbound shipments. The applications are also being designed to accommodate claims processing for applicable government agencies, and to create consolidated reporting for manufacturers. The first phase will connect these constituents and help internal business management systems to evolve. As a result of the integration and connectivity of the collectors and recyclers, manufacturers will begin to receive information on models collected in a unique manner that has never been available before. Manufacturers will have visibility to collection points, recycling activities, and the product model information. With a comprehensive network of reporting collectors and recyclers, manufacturers will be able to authorize, assign, and refer preferred collectors and recyclers to end-users.

By defining a process, providing see-through visibility, and direct connectivity, manufacturers will be able to provide consumers with exact locations for drop off, as well as dates and locations for collection events. Manufacturers will be able to dispatch collectors to businesses for pick-up of obsolete devices, and manufacturers can be fully integrated with logistics services for pick-up, ship-in, dispatch, or other collection methods. With such awareness, manufacturers will be able to communicate effectively to consumers. In addition, collectors and recyclers that profit from the recycling activity will have incentive to conduct local promotions, and to work with local retail locations to host collection events and programs.

The process and the profit will drive communication and consumer awareness, the platform by ZSL enables this to happen. ZSL is already developing relationships with constituents interested in purchasing and reusing the raw materials reclaimed from recycling efforts. The objective is to utilize the Recycle Accelerator platform to enable a style of online matchmaking and auction alternatives, so sellers of materials can identify the buyers of materials. By simplifying the process of identifying legitimate business partners and routes for materials, it will simplify transactions. Furthermore, by consolidating orders and shipments, buyers will be able to make better use of freight and transportation, which currently accounts for an average of 27 per cent of the cost of acquiring materials. With the rising price of fuel for transporting natural resources as well as reclaimed materials, the ability to significantly impact transportation costs will have a huge benefit to reutilizing reclaimed materials.

In addition, it requires less energy to reutilize reclaimed materials than to refine the raw materials from natural resources. Reducing cost for transportation and refining, and the ability to identify and shop between buyers and seller, creates a new dynamic in this exciting market for precious metals like copper, gold, silver, and now even aluminum.

Green IT has been the buzz word for a few quarters now, what are the main challenges faced by entities like ZSL in bringing forth awareness to nations and companies on Green IT / recycling front?

Green IT is more than a buzzword, but the definition of Green IT is sometimes as diverse at the opportunities to contribute to the environment. Green IT is sometimes associated with reduction of energy or power consumed by a particular device. Green IT is sometimes associated with the selection of materials and vendors to use environmentally friendly materials in the production process, those being materials that can either be reclaimed or disposed without release of hazardous waste. Sometimes the term is also applied to recycling efforts. The common goal for being Green is to contribute to the protection of the environment and natural resources, be it by power, materials, or recycling.

The main challenges that ZSL has encountered in bringing forth awareness has not been a lack of desire, but rather a lack of standards, lack of process, and a lack of an established and connected network. Forward logistics supply chains are highly evolved processes that enable consumers to place an order for ‘just in time’ manufacturing and shipments around the globe.

There is a carefully choreographed routine for supplying raw materials to production, and for shipping products to retail for general consumption. The management of coping with the eventual retirement of obsolete, defective, or unwanted product was historically treated as general trash.

Trash identified as containing hazardous waste was disposed in a locally friendly manner, by disposing of it in non-local geographies, and thereby contaminating the food and water supplies for other geographies. However, with increased awareness, this has all changed. By creating financial incentives of more efficient business systems and higher revenue potential to collectors and recyclers, ZSL anticipates that these constituents will communicate and promote activity in the local markets. By creating an evolved network of connected collectors and recyclers, ZSL anticipates that it will be easier to manufacturers to refer consumers to proper locations and processes. Manufacturers will also benefit by the increase visibility and reporting, sometimes to avoid government fines or other financial burdens. By gathering detailed information and providing reports to government agencies, there is opportunity to reduce theft and fraud.

Having a platform that supports the government and accommodates the local regulations empowers government communication and awareness. Politicians will be able to create regulations and require enforcement with complete confidence that it can be implemented, and that it will actually help grow profitable businesses, as opposed to interfering with business. Imagine a program required by the government that actually enables business to operate efficiently and profitably, while creating new jobs for collectors, and simultaneously preserves the environment and natural resources.

ZSL is very confident that these natural and financial incentives are sufficient for each entity to bring forth awareness. In the meantime, to contribute to awareness and urgency of implementing a solution, ZSL has participated in numerous trade shows, events, speaking engagements, and continues to be actively involved in many venues to bring public awareness to the facts. This is a global issue. Recovery requires collaborative effort and involvement.

Is it high time that we needed a world order or standardization / streamlining of processes involving companies to initiate such initiatives?

It is absolutely essential that we have a world order for standardization of communication and connectivity, with streamlined processes and data exchange. We can use technology to connect constituents and enable the participants to operate effectively together. Data, information, files, and confirmations should flow easily, and enable the product, parts, and materials to flow easily as well.

It would not be appropriate to presume a world order for standardization of the laws, regulations, or execution of recycling in every geographic region. The complex diversity of logistics in each region of the world makes a single solution utterly ineffective. Transporting product and materials between countries in Europe, or across states in India, encounters many logistical challenges. In the US, legislation varies by each state. The physical and logistical requirements for Singapore are not the same as Sydney, and the tracking for product in Chicago may not be effective for China.

The diversity, culture, transportation, economic structure, as well as access to manufacturing and recycling facilities, must all be taken into consideration. Therefore, it is necessary to provide a platform that uses technology to enable standardization of collaboration and networking, without compromising the flexibility required by regional requirements.

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