Bringing IT to Manufacturing

The Indian manufacturing industry saw a growth of 7.2% in the year 2003-04. The investments in new projects by the manufacturing sector jumped to Rs 3,314 bn from Rs 2,835 bn in 2002-03. This growth also spells a growth for the IT industry in India. During the same period the spending on IT in the manufacturing sector grew by about 10% to reach a figure of Rs 32 bn. The major trends, as per IDC India, that accompanied this growth were: higher spending by process manufacturers and increased spending on upgrades of existing systems and addition of new elements like 3D modeling and design solutions.

In anticipation of the accession of India to the WTO, manufacturers who are also global suppliers enhanced their spends. The spend, however, is still low. The share of manufacturing in the IT spend in the country was about 20% in contrast to the BFSI segment that had a spend of 37% (DQ Top 20). In the US, both these segments have an equal spend. The US, of course, spends a lot more on IT in manufacturing-something like Rs 360 bn each year.

Although the employment of IT for industrial applications is growing, there are certain inherent features of the sector that make the process of reorganization gradual. For one thing, software development in the manufacturing industry requires multi-disciplinary and highly specialized expertise. This is because a crucial component of an industrial information system is its interface to the world. Indian software expertise has been globally focused.

Next, most of industrial information systems have to be real-time. Testing of these systems is a problem since an industrial process is needed. Software simulation and laboratory scale prototypes are initial solutions but may not be considered adequate, especially in view of the mission-critical nature of the system.

Industrial IT systems often have to be custom designed. This is because the system is a component of an overall industrial plant and must be compatible with its unique equipment characteristics and operational practices. The cost of the IT hardware and software is only a small fraction of the cost of the installation and the products that is controlled by it. Managers are therefore reticent about introducing technology that does not come from the most reputed of the manufacturers and which is not already tested in similar installations. Unlike the services industries manufacturing is not as critically dependent on a well deployed IT infrastructure. It is an important element but not a mandatory one.

Another issue is that medium and small business units have not taken up IT in a big way.

Most economic observers agree that this is a lop-sided development for a country like India. The telecom infrastructure that drives many applications, especially in the SCM and CRM areas, has been sketchy and expensive. Large organizations can set up their dedicated links because their scale of operation justifies it. Medium and small ones cannot. Web-based applications can play an important role and that is just about stirring itself.

Despite these challenges, there is no option but to encourage the growth of IT usage in manufacturing. Survival may be possible without it for a few more years. But prosperity and growth will not be. It will require a lot of changes in the attitude of enterprises, the IT industry and the government to make the growth faster and more effective. Only then will the paradigm shift occur.

The author Shyam Malhotra, is Editor-in-Chief of CyberMedia, the publishers of Dataquest (with inputs from Saswati Sinha).