"Vendors make hay with AMCs"

HYDERABAD, INDIA: V.Srinivas, C.I.O., Nagarjuna Fertilizers & Chemicals Ltd., in this interview with  Pratima Harigunani of CyberMedai News, shares a detailed and comprehensive view of how IT is being deployed at this organization, Nagarjuna Fertilizers and Chemicals Limited, which is the flagship company of the Nagarjuna Group, and is a leading manufacturer and supplier of plant nutrients in India and also claims the distinction of being the single largest private sector investment in Southern India.

Cybermedia News: What was the expenditure on Information Technology (IT) systems in 2006-07 (figures) in your organization?
V. Srinivas: We have a total IT spend of Rs. 5.20 crores (both revenue and capital) for the current financial year 2006-07.

CMN: What will be the expenditure figures for this fiscal year/ What is the growth rate?
V.S: The Expenditure figures for this fiscal year 2007-08 will be in the same range of Rs 5.20 crore (both revenue and capital). We do not foresee any increase on the existing IT spend in the coming financial year. 

CMN: How much budget does your enterprise allocate for IT expenditure each year? What is the expected change with respect to the previous year?
V.S: The Budget allotted by NFCL for the IT expenditure for the year 2006-07 is Rs 5.20 crore. We do not foresee any change on this Budgetary figure for the coming financial year 2007-08. 

CMN: What part of IT implementations plays a more prominent role -- software or hardware or networking? Why? 
V.S: The prominent role played by the major groups i.e. Software, Hardware and Networking does keep changing based on the Organisational business requirements. It is imperative to ensure that IT strategies are aligned with the Organisation's business strategies and this forms the basis for which group would play a prominent role during that year. 

CMN: The top five IT items that you spent on last year?
V.S: a.  Professional & IT Management Consultancy
b.  Facilities Management Services & Maintenance Costs of Hardware & Software
c.  Purchase of Software
d.  Purchase of Hardware
e.  Annual Recurring Costs of VSAT bandwidth, Broadband connections, MPLS Leased Line connections of varied bandwidths, Internet Bandwidth Charges, etc.

CMN: The top five items that you expect to spend on this coming fiscal year?
V.S: a.  Professional & IT Management Consultancy
 b.  Facilities Management Services & Maintenance Costs of Hardware & Software
 c.  Purchase of Software
 d.  Purchase of Hardware including replacement of existing switches & routers etc.
 e.  Annual Recurring Costs of VSAT bandwidth, Broadband connections, MPLS Leased Line connections of    varied bandwidths, Internet Bandwidth Charges, etc. 

CMN: Do you feel that enterprises are spending more on hardware than software? Elaborate. 
V.S: The theory that enterprises may spend more on hardware than software is again dependent on how the organization's business Strategies are linked to the IT strategy. There could be occasions where there is need to increase spending of hardware like replacing the entire critical applications servers along with the desktops and similarly there is a need to increase spending of software over hardware like investing on a comprehensive high end ERP enterprise wide application. 

CMN: Do you feel that the amount allocated for IT is sufficient? If yes, why? If not, why not? How much should you be spending?
V.S: In our Organization, the amount allocated for IT is sufficient at present. We have a thorough exercise at the time of Budget preparation for taking into account the Budget required for the new projects envisaged, maintenance costs of the existing infrastructure, likely purchases of new software / hardware either for a new requirement or for a replacement basis.

CMN: Has the cost of the IT hardware/software been constant or has it been growing? Elaborate on specific hardware / software. 
V.S: Today most of the vendors have shifted their focus from the cost of the IT Hardware / Software to the compelling need for having an AMC over a due course of time in order to have software / hardware updates which are done over a period of time deliberately.  Hence the Hardware / Software Costs have generally not changed and have been constant or even lowered. The catch as mentioned earlier, is the fact that most of the vendors make hay in increased AMC costs based on a certain percentage component of the original retail prices of the Hardware / Software. It would be worthwhile to note that the actual cost of the hardware / software is way below the original retail prices.

CMN: Has the prices of the IT products (hardware/software) been on the decline due to the current stronger rupee against the US dollar?
V.S: There has been only a marginal or no decrease in the price of IT products due to the current stronger rupee against the US Dollar. 

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)? 
V.S: It all depends on the timing of the requirement of the Hardware / Software. There would be no use in purchasing the products today when the actual usage for the purchased products might be a year away. Ultimately it is better to make the purchases in line with the Organizational requirements and which are timed to be closer to the vendor's year end months. 

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.  
V.S: Our Organization has always believed that spending money on the latest IT implementations is absolutely justified when there is a need to automate or refine an existing business process which would help save transactions costs and time while giving the desired output. In addition, it has been the philosophy of the Organization to look at newer ways of innovation in the IT field to address or to simplify the existing business processes which in turn, leads to higher operating efficiency of the concerned personnel and in the long run addition to the top line and bottom line. 

CMN: What are the major implementations made over the years? Please specify.
V.S: Project nSAP :- We have a tough task cut out in the form of customizing our ERP – SAP ECC 5.0 to meet the demands of the highly regulated business process requirements. While we have tried to adapt SAP standard functionality, there has been a good lot of Customizing being done to map the Business process onto the SAP platform. While SAP SD, MM, PP, QM, FI, CO, modules were initially implemented through our consulting partners way back in 1999 on the SAP 4.0B version, additional add-ons like Budgeting, Travel Management, SAP Enterprise Portal, SAP BW, Task Management etc have been implemented by our in-house team along with support from consulting partners during this financial year after the upgrade to ECC 5.0 was completed in 2006. In addition owing to the highly complex nature of the Business Processes in our highly regulated sector related primarily to the Logistics, Production and Finance areas, we have to always tune the configured processes in SAP to be in line with the regulated dynamic Business process. Today more and more Business processes are being automated using the ERP as the IT Glue in our Organization. This is significant in a large Organization like ours since it involves getting a nod on the user buy in addition to investing significant amount of time and money on training and resources for effecting the change. In addition, there has been a high level of commitment and support from the top management in the Organization all along, in addition to having a strong IT team both on the Support front and the Solutions front.

Project nCircle :- This project had originally been initiated more than two and half years back as an extension of our SAP ERP system on an online basis to our Sales Force and Warehouses. Since the days of the pilot phase to its current phase, the project has undergone a lot of metamorphosis owing to the changing business requirements and has now come of shape. Our Sales Force uses the PDA's to logon online Sales Orders related to either Manufactured or Imported Urea (2 SKU's only currently) after online credit checks, access Inventory Information and logs in the daily collections while our Logistics team at the Warehouses uses the PDA's to obtain information of the incoming inventory and the incoming Sales orders and thus able to plan the outgoing Logistics movements in addition to sending the Inventory to the customers with a DC cum Invoice printed right at the Warehouse using Blue tooth enabled printers. The medium of communication between the handheld PDA's and the backend Database server that is integrated with the SAP server is the existing GSM network.

As we now extend Project nCircle to more areas within the organization, we have now been concentrating on conceptualizing, pilot testing and upgrading our nCircle project to handle all our other products that we retail. Until date only Urea both manufactured or imported have been handled as the two SKU's through the nCircle platform, while we would now be adding at least another 30 SKU's of different product category that we retail, to this list. Some of the Business Processes related to areas of Customer Receivable Ageing, Product Quality Complaint logging at Customer site, Sales Returns, Stock Transfers, GRN process etc. would also now be configured on the nCircle platform. In addition, we shall also be extending the nCircle platform to newer application areas like Plant Maintenance, EHS, Fire and Safety etc in the plant.

The operational freedom given to the IT team by the NFCL Management has enabled new ideas to be conceptualized

Project nWAN :- Our Organization has 24 Regional Offices located across 12 Indian states apart from a major Urea manufacturing plant in Kakinada and Micro Irrigation manufacturing plant in Hyderabad. 20 Regional offices and the manufacturing plants are connected to the Head Office through a hybrid WAN network comprising of Leased lines or VSAT terminals or though Broadband. This process of using multiple vendors in addition to multi-technology oriented processes mentioned earlier has increased the complexity of the WAN network in addition to making the network vulnerable with respect to higher recurring costs.

As we look at key areas of cutting down recurring expenditure and increasing the Quality of Service, we will have shifted most of the VSAT operating sites to a Broadband connectivity mode. Thus sites which were earlier getting to use 4 to 6 Kbps for VSAT Bandwidth connectivity now get to use more than 512 Kbps to 1 Mbps Bandwidth connectivity for the same price or less. Once all the sites have move to either Broadband or Leased line connectivity, we shall also be carrying the Voice over the same WAN network in addition to the existing Data, thus bringing down our Interoffice voice calls billing down to a reasonable extent.

IT Help Desk: - We have implemented a Web based IT help desk solution across the entire organization to enable online posting of day to day problems noticed in the IT related and Administration related areas. The problems are directly posted to the concerned associates who then work on a time based deadline for a solution failing which the same would get escalated to his / her superior.

CMN: How big is the IT staff in your organization?
V.S: We have a total IT staff of 23 members, which includes 18 nos. of permanent staff and 5 nos. of staff on retainer ship basis.

CMN: Do you expect your IT staff to grow? Do you feel you are adequately staffed?
V.S: We believe that our IT staff numbers will grow slowly and steadily as we move deeper and deeper into the implementation of newer PDA based applications across the organization. Currently we feel that our department is adequately staffed. 

CMN: Do you outsource a portion of your IT project? What percentage?
V.S: We only outsource the Facility Management system component and the Professional and IT Consultancy component every year. This accounts for about 30 to 35 per cent of our total IT spend every year.

CMN: Has the nature and pattern of IT adoption become more sophisticated? If yes, to what extent?
V.S: In our Industry vertical, the nature and pattern of IT adoption has become sophisticated owing to the fact that our Fertilizer Industry is now currently highly regulated by the Government of India (GOI) and we need to ensure that our processes including the Production and Logistics are in line to meet the reporting requirements of the GOI. There are times when repetitive changes in the policies put a strain on the IT infrastructure since the changes made need to be undone, new processes configured and tested and then put into production within a short period of time.

CMN: Are some enterprises under the myth that modernization processes such as automation and IT deployment can take place only in large enterprises? Elaborate.
V.S: Today all Enterprises, large, medium or small no longer feel that the modernization processes such as automation and IT deployment should take place in their area of operation. The dividing line which was earlier there (i.e. about five to eight years back) about the fact that only large enterprises could afford and handle automation and IT deployment has now disappeared. There is a growing realization among the small and medium enterprises that they can no longer afford to not look at automation or IT deployment since it would directly impact their business in today's global scenario where they need to connect to the medium or large enterprises through IT for enhanced business.

CMN: Do you feel you are getting your money's worth buying the latest IT products in the market?
V.S: We feel that we are getting our money's worth buying the latest IT products since we also ensure that we get "Value for Money" on the investment made after a close scrutiny of the product, the need fulfilled by its usage, ease of use by the key user, purpose for which the product is to used etc.

CMN: What would CIOs like you wish to hear from vendors during the next fiscal?
V.S: While CIO's would like to have vendors giving us practicable, time tested and workable solutions within a reasonable amount of time, note must also be made of the fact that the presented solution must be capable of being scalable, must serve the interests of the Organization for a reasonable amount of time to ensure a good payback and be user friendly. 

CMN: If you were to name five top technologies that you would consider using, what would those be?
V.S: a.  Extension of NFCL's nCircle Mobility solutions from the existing application areas   to new functional areas.
b.  Moving from Wired Communication to Wireless Communication across the entire organization in a phased manner.
c.  Implementation of a DR site and associated solution.
d. A Cost effective CRM solution to integrate with our existing ERP application.
e. A Cost effective SRM solution alongwith an associated E-Procurement Module to integrate with our existing ERP application. 

CMN: If you were to name five key verticals that are heading for growth in the next fiscal, what would those be?
V.S: Mobility Solutions
Data Warehousing and Analytics
Disaster Recovery
Wireless Communication
Add-on Modules in the ERP front like SCM and SRM.

CMN: If you were to name top five vendors in various IT areas, who would those be? (At least name the top two, according to you, in as many technology areas as possible, such as software, servers, routers, networking equipment, mobility solutions, security, storage, etc.)  
V.S: IBM, HP, Microsoft, Cisco