If the CIO is convinced, CFO is not a hard level

MUMBAI, INDIA: From loom monitoring in weaving, conveyor belt system in garmenting, robotic system for storage management of dyed yarn, recipe management in dyeing swipe card system for attendance and overtime payment, fabric inspection system and a lot more, a true-blue manufacturing organization like Arvind Mills is clearly leveraging IT to its fullest. Bhupendra Shah, CIO, The Arvind Mills Limited shares what has been the CIO action at his end so far and what he plans ahead in this interview with Pratima Harigunani of CyberMedia News.

CyberMedia News: What was the expenditure on Information Technology (IT) systems in 2006-07 (figures) in your organization?

Bhupendra Shah: The amount spent during 2006-07 was Rs.249 lakh with a break up of Rs. 82 lakh of revenue expenses and Rs.167 lakh for the capital expenditure.

CMN: What will be the expenditure figures for this fiscal year?

B.S: The expenditure for the year 2007-08 would be approximately Rs. 300 lakh showing a growth of 20 per cent.

CMN: How much budget does your enterprise allocate for IT expenditure each year? What is the expected change with respect to the previous year?

B.S: In a manufacturing company, the priority of the budget allocation is higher for the business needs compared to IT and other services. Of the overall spending on the capital work, it is less than 5 per cent. However, the IT spending is not based on budgets. It is based on need and its value.

CMN: What part of IT implementations plays a more prominent role? Software or hardware or networking? Why?

B.S: It keeps changing. Like last year, it was networking because there were no major plans for software upgrade. The system response to the users was sub optimal and there was a clear need to tune up the networking set up and reviews the same from all perspective. We got the network audit done by the outside agency and then took up the project to strengthen the set up. Generally, it follows the investment cycle. When the software needs replacement, the focus is higher than other component. This year it will be on software as we have to re-implement the ERP solution. It will also call for augmentation and up gradation of hardware and infra structure.

CMN: Name the top 5 IT items that you spent on last year?

B.S: • Software licenses

• Network up gradation

• Purchase of notebooks

• Upgraded Lotus Notes version

• Implementation of Black Berry server for the senior management.

CMN: Name the top 5 items that you expect to spend on this coming fiscal year?

B.S: • New ERP Business Solution

• BCP / DRP

• VOIP Solution for pan India set up.

• Unified Communication

• Licences

CMN: Do you feel that enterprises are spending more on hardware than software? Elaborate.

B.S: Yes, in general this is true as the refresh cycle for hardware is short. Plus, with continuous changes in product and functional enhancements, every one is tempted to invest on newer products. Take for example, the craze for laptops and Blackberry. Today, no one wants desktop or old fashioned monitors. Laptops and LCDs have made major inroads. Whereas on the software side one does not spend heavily every year except for the annual maintenance.

CMN: Do you feel that the amount allocated for IT is sufficient? How much should you be spending?

B.S: I do not think IT spending should be based on budget allocations. The IT department has to plan his budget, both revenue and capital based on what it is supposed to deliver to the business. There cannot be any compromise on the core component of IT set up. If the AMC is to be in place, it has to be in place. Similarly, if the hardware needs to be upgraded, it has to happen at the right time. It is for the CIO to first convince himself about the need of spending. Once it is done, it will not be difficult to convince the CFO to get funds. I personally do not find it difficult as, being a Chartered Accountant; I know how to use ROI to justify my IT plans. At the same time, I am also sensitive to the business realities and constraints and if need be would work out cost effective alternative plan to defer the proposals for an opportune time.

CMN: Has the cost of the IT hardware/software been constant or has it been growing?

B.S:  The cost, according to me is going down, so far as hardware is concerned. The servers today with much higher capabilities cost lower than what it used to cost few years back. On the other hand, the software cost has remained almost same. Occasionally, it appears to be lower if negotiated in dollar terms due to rupee appreciation.

CMN: Have the prices of the IT products (hardware/software) been on the decline due to the current stronger rupee against the US dollar?

B.S: Yes, I see clear advantage in products like software licences, ERP solutions and some of the high-end servers that have import contents including notebooks.

CMN: Since the rupee is growing stronger against the dollar, don't you think it is the right time to purchase IT products (both hardware/software)?

B.S: IT purchases are not planned or made based on the price movements. They are based on the need basis albeit attractive prices make it easier. Hence the favourable forex position may inspire CIOs to expedite the pending proposals. However to me, this situation is going to last longer time due to improved forex reserves. Hence one should not hurry up unnecessarily only because dollar is weaker against rupee.

CMN: Does your enterprise consider spending money on the latest IT implementations as a burden on your expenditure or do you feel it is an investment and mandatory for any enterprise? Elaborate.

B.S: Of course it is an investment and as such should be evaluated like any capex proposal based on its ROI and payback considerations.

CMN: What are the major implementations made over the years? Please specify.

B.S:  In the last few years, the major one was implementation of SAP R/3. In addition, we have implemented plant specific solutions like loom monitoring in weaving, conveyor belt system in garmenting, robotic system for storage management of dyed yarn, recipe management in dyeing department, automation of all payments through direct transfer in bank accounts, swipe card system for attendance and overtime payment, fabric inspection system for fixing quality grades for finished fabrics, employee travel management, work flow for routine jobs like leave sanction, requisition for office equipments and appliances and company wide intranet for dissemination of information. On core banking, we have good arrangement with all bankers for data exchange and online funds transfer. We have installed ATM machines within campus to help workers withdraw cash any time. On compliance, we have implemented eTDS and eReturns systems to take care of reporting requirements of Income-tax and Provident Fund Acts.

CMN:  What would you pick as the critical usage of any three of your major IT implementations over the last fiscal and define their benefits?

B.S: Online payment system for suppliers, where by the payment on due date is credited to their accounts directly with an sms or mail to the supplier. Approximately 70 per cent of the suppliers have joined this scheme and have been benefitted in terms of almost zero follow up with the Company for payment status. They do not have to engage special staff for deposit of cheques in bank account and for knowing the status of cheque clearing. Next would be the pay rolls through direct transfer to bank accounts for 15000 workers making them use ATM Cards. This has resulted into savings in the form of reduction in staff that used to tender cash, as well as savings on banking cash transaction tax introduced in recent past as the Company has stopped cash withdrawals for wage disbursement. I would also pick implementation of eTDS solution and eReturns for Income-tax as well as the Provident Fund Authority. This has resulted into substantial savings in terms paperless operations and reduced efforts in reconciliation of deductions and payment of tax and other dues. This has also improved the statutory compliance in the form of timely filing of returns with the concerned authority. 

CMN: How big is the IT staff in your organization? Do you expect your IT staff to grow?

B.S: We have almost 34 members across hardware, software and networking. We feel it will go down once we outsource critical applications and functions.

CMN: What percentage do you outsource a portion of your IT project?

B.S: We plan to do it this year for post implementation support of ERP as well as facilities management.

CMN: Has the nature and pattern of IT adoption become more sophisticated? If yes, to what extent?

B.S: Of course it has become more sophisticated. This is primarily due to the immense benefits enjoyed by the units of IT timely adoption of IT. In the highly competitive environment today, timely adoption of IT makes a major impact on existence and growth of a unit. In manufacturing sector, embedded IT has made huge impact on process improvement, automation, innovation, improved and effective management reporting, higher productivity, timely and accurate information for quick corrective actions etc. There are instances where entire business depends on IT adoption and use providing edge over others.

CMN: Are some enterprises under the myth that modernization processes such as automation and IT deployment can take place only in large enterprises? Elaborate.

B.S: This was true in past but not now. Today IT has brought immense benefits as explained above and it has inspired and induced all sectors irrespective of size to go for it. The cost in past was also one of the inhibitors that no longer impact today. Overall cost of IT implementation has gone down and the benefits expected there of has proved real and substantial. Additionally the entry of new generation and technology savvy management has made IT penetration and proliferation much easier and quicker.

CMN: Do you feel you are getting your money's worth buying the latest IT products in the market?

B.S: Sure. Over a longer run, if we include non financial gains in terms of qualitative improvements and advancements, the IT products any time have given more than what it cost. That is the reason; we take IT spending as investment that provides yields for long time rather than as an expenditure that is to be written off.

CMN: As a CIO what would you wish to hear from vendors during the next fiscal?

B.S: About products, services and solutions that are: Relevant, innovative, cost effective, must-to-have type rather than nice-to-have type, capable to pay back as fast as possible and eco friendly.

CMN: If you were to name five top technologies that you would consider using, what would those be?

B.S: RFID, Unified Communication, Virtualisation, Smartcards, KIOSKS.

CMN: What key verticals in your opinion, are heading for growth in the next fiscal?

B.S: Infrastructure, Retail, Education and Training, Hospitality, Entertainment.