IT Implementation Trends in Indian Companies

Based on the project nominations we received, BFSI is the biggest user of IT, followed by the manufacturing segment, IT/ITES, and Govt. Let's drill down into specifics

Tuesday, May 06, 2008

This time, we received project nominations from more than 150 unique companies. Apart from asking for the project details, we also asked them their annual IT spends. The figures, as expected, were mind boggling. Around 40% of the companies told us their annual IT spending, and it accumulated to a whopping sum of Rs. 3,800 Crores. Out of this, BFSI was the heaviest spender, taking up 61% of this figure. This was followed by manufacturing at 19%, govt. at 11%, and IT/ITES at 6%.

If we were to extrapolate the above data, then the total IT spending for all the IT companies that nominated their projects would go well beyond Rs. 10,000 Crores per year! The next most obvious quest for us was to determine where this whopping amount was being spent, so we decided to go about analyzing IT project deployments across different industries.

The manufacturing, BFSI, Govt, and IT/ITES industries remain the leading users of IT. Out of these four, we received the maximum projects from manufacturing companies, followed by banking and financial services sector. If we combine insurance projects with banking, then it overtakes the manufacturing segment and becomes the number one adopter of IT. Next in line were IT/ITES organizations and the government, followed by education, power and retail segments.

Action in the Banking segment
IT has created a tremendous impact on the banking segment. The biggest evidence of this is the fact that most of us living in urban India have forgotten all the pains we used to go through while banking in the olden days. No more standing in long queues thanks to 24-hour cash availability from ATMs, no more keeping track of so many bills and their deadlines thanks to immediate balance transfers and bill payments over the Internet, no more worrying about opening new accounts when shifting to a new location thanks to any-branch banking, etc. These are all facilities that banks have made available, and moreover, most of us have started taking them for granted. These have all been possible thanks to the heavy usage of IT that the banks are doing. So the obvious question is-what next? Where do banks go from here?

If the IT implementations we saw among banks this time are anything to go by, then you can be rest assured that there will be a lot more action coming from this segment in the near future. For instance, over the past two years alone, we've seen more than 60 different IT projects deployed across 21 leading Indian banking and financial services institutes. That's a ratio of 1:3, which is the highest across any industry. The trend is to use technology to enhance reach.

Using Tech to enhance reach
Core banking deployments are now an old story, because most leading banks have already 'been there, and done that'. The new mantra or trend is to enhance reach. This is being done in two ways with the help of technology. One is to reach out to new customers in new markets more effectively, and the other is to reach out to existing customers in existing markets.

Tapping New Customers in New Markets
Currently, the three hot markets for banks are rural India, SMBs, and overseas customers. Larger banks that already have presence in rural India and smaller cities are at an advantage here, because for them, it's just a matter of extending their core banking solutions to those branches, and start promoting their products and services. That's exactly what some of them are already doing. The others have to first establish their presence in these new markets and then go to the next step. There are many challenges associated with this, like obtaining licenses to open new branches, establishing secure connectivity, setting up an IT infrastructure and integrating the new branches with the central core banking application, etc. Most banks are in the process of doing all this.

Tapping the overseas customer has its own set of challenges, because you don't know whether your product or service will sell in the new market. Even if it does, you have to ensure that it complies with the country's norms.

Tapping Existing Customers in Existing markets
The other part of enhancing reach is to tap existing customers in existing markets. This is easier said than done, because existing customers are far more demanding. They require better customer service, newer and more appealing products and services, and what's more, they have many banks to choose from. This becomes a challenge for most banks, and the solution is innovative use of technology. We're seeing banks go that extra mile and offer newer, better, and more customized services. For this, banks are offering mobile based banking facilities, better integration between different services, and newer services in general. So today, you can perform many banking operations with your mobile phone. You can see your bank, credit card, demat, and even insurance accounts, all from the same interface. We're seeing new initiatives like wealth management services, which allow you to see all your investments in a single place. We're also seeing newer applications that allow faster processing of loans for speedy disbursal.

It's not possible to offer new services without putting your own house in order first. So banks have to ensure that their IT infrastructures don't get stretched and data centers overflow with too much equipment due to so many new services. At the same time, they have to ensure that they comply with new govt. policies. That's why banks need to constantly keep upgrading and optimizing their base IT infrastructure, to save space, improve utilization, become more compliant, and reduce costs. In fact, this time, 60% of the banking projects we received were for IT infrastructure, which included things like Green IT, information systems, messaging and collaboration, migration to better technology, storage and data management, security, networking, virtualization and consolidation, project management, compliance frameworks, etc.

One area where more attention is needed possibly is customer service, and a CRM package alone won't be sufficient there. We've all heard horror stories of people committing suicide for being haunted by loan recovery agents, and just about everyone today gets repeated phone calls from banks for the same issue over and over again. Technology alone won't answer these concerns, though it would be a key enabler. Let's see what banks do in the future.

IT in Indian Manufacturing Companies
According to many sources, India's manufacturing base is the fastest growing in the world, and not without good reason. There's a huge domestic market, which is booming. Indian consumer spending is on the rise, which is naturally creating a demand for products. Looking at this, most multi-nationals are eyeing India as an attractive manufacturing hub, due to availability of both cheap labor and skilled manpower. All of these are positive signs for Indian manufacturing companies, and they need to leverage this advantage.

However, it's not as if everything is hunky dory and that there are no issues to watch out for. If there's so much demand in the market, there's also fierce competition, both internal as well as from China. The only way to combat this situation is to become more agile by using better technologies, improving the infrastructure and automating internal processes. Thankfully, this has started happening, which is indicated by the kinds of IT deployments being done by Indian manufacturing companies.

What's being deployed?
While the banking segment has the widest variety of IT projects being deployed, the Indian manufacturing segment has the widest variety of companies out there. For instance, this time we received nominations from 18 different types of manufacturing companies, ranging from automobile manufacturers to oil and gas, ceramics, textiles, coal, consumer electronics, furniture, paints, paper, spirits, steel, tyres, and many others.

On the IT deployment front, only one word resounds loudly when it comes to Indian manufacturing companies-ERP. That's the going trend amongst most Indian manufacturers. Over the past two years alone, we've received around 80 IT project nominations from Indian manufacturing companies. Out of these, 45% were ERP deployments.

This time alone, we received 32 IT projects from 27 different manufacturing companies. Out of these, 50% were ERP deployments. But then, ERP isn't the only type of deployment happening in this booming sector. Manufacturing companies are also using IT for business process management and automation, CRM for customer management, e-learning solutions for internal manpower training, green IT to save costs and the environment, and the usual IT infrastructure optimization and implementations, which includes networking, security, storage and data management, online portal solutions, etc.

Larger manufacturing setups are of course, going beyond the basics to implement solutions for projects management, integrating complete supply chains, logistics and fleet management solutions, and so forth.

IT usage in the IT/ITES segment
Innovation is the word that comes to mind when we think of IT implementation within the IT/ITES sector itself. This is only natural because these are the companies that offer IT solutions to the rest of the industries. So they obviously have to be ahead of the pack when it comes to creativity, innovation, and better usage of technology. Otherwise, they can't offer innovative solutions to others.

We received around 24 project nominations in this segment, and many of them were making heavy usage of technology for IT infrastructure optimization and management. Technologies being used by this segment need no introduction. Name the latest technology and you'll have it here-Web 2.0, virtualization and consolidation, SOA, remote computing and management, green IT, mobility, etc.

IT usage in the Govt.
The Indian govt. remains a big spender on IT as usual, and most of the investment continues to go in automation projects and information systems. Interestingly though, the govt. has also started using IT more innovatively. We've seen several creative applications of the same in some of the projects this year.

Last year, we saw SMS based solutions being used by utility companies for remote meter reading. This year, things have gone a step further and utility companies are doing on the spot meter reading and issuing the bill to the customer as well. Likewise, GIS and SMS are also being put to some incredible uses. For instance, some of the water departments in India are using GIS and SMS based solutions to monitor water reservoir situation in the country, and SMS is also being used to file and manage citizen grievances.

We've talked about some of these projects in our story, but the bottomline is that the govt. has started putting IT to some very innovative usage. The only thing that doesn't seem to be happening is replication of a successful model across the govt. We still see many govt. departments reinventing the wheel. Hopefully, things will gradually settle down.

IT usage in other industries
ERP once again seems to be the most popular type of project deployment across most industries. More than 25% of the projects we received this time for other industries were ERP implementations. The other two types of projects that other industries are deploying include business process management and automation, and online portal solutions.

The industries that are becoming active in embracing IT are fairly well-known, and therefore come as no surprise. Nevertheless, the ones we found to be more active than others include education, insurance, media and entertainment, power and utilities, and retail.

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