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Check out  some articles by
freelance journalist Raju Bist

BUSINESS The great Indian software boom
TRAVEL The road less travelled
ENTREPRENEURSHIP Global Telecom goes global
INVESTING Ajay Srinivasan on mutuals
INFORMATION TECHNOLOGY Asian Paints shows the way

The rise of the Indian software industry


AS a Mumbai-based systems engineer for Bay Networks, Raman Negi is the envy of all his friends. For the 25-year-old has the best of both the worlds. He works for a leading international computer software firm and yet does not have to stay away from the familiar environs of his home city.

Like Negi, thousands of Indian programmers are working for international software giants without even having to leave their home country. They have undertaken and successfully completed systems for loading and handling logistics at the container ports at Felixstone, Britain, and Bremerhaven, Germany; the train schedule for London's underground transportation systems; the reservation system for Swissair and the on-line network for the Swiss National Bank, to cite a few prominent assignments.

Indian software companies have shown proficiency in executing turnkey projects in the area of Business Process Re-engineering, System Migration, System Integration, CBT Applications, Multimedia, Networking, Document Management, Client-Server Architecture and Remote Maintenance. Many Western companies are outsourcing programming projects in India and have also established Indian subsidiaries to perform code development. These include the likes of Novell, Oracle, IBM, Mitsubishi International and the big daddy of them all, Microsoft.

In doing so, these multinational corporations (MNCs) are acknowledging Indias growing importance as a leading software player. Other international majors are active participants through major Indian companies as is the case with Dimension Data Holdings. The South African company recently increased its stake in Johannesburg-based Conscripti from 40% to 80%. The remaining 20% is with Mumbai-based Tata Consultancy Services (TCS). Through Conscripti, Dimension Data group divisions will be able to leverage TCS expertise in systems integration and the development of software across all IT platforms and languages.

A division of a multi-billion dollar Indian conglomerate Tata Sons Ltd, TCS currently employs 9,400 consultants who work on projects all over the world. TCS has set up 59 offices across 15 countries over the last 30 years. In all, we have over 40,000 man years of accumulated experience, says a HRD director at the TCS headquarters in Mumbai. Its consultants communicate through 70 satellite data communication links.

Apart from Conscripti, TCS has strategic alliances with other international majors like IBM, Hewlett Packard, Microsoft, Lotus, Netscape and Tandem. It has set up Dedicated Relationship Centres for clients like Singapore Airlines, American Express, General Electric, Lucent Technologies and P&O Containers.

With the backing of TCS, in less than three years, Conscripti has grown into a substantial business supplying vital software consulting, implementation and integration skills to a wide range of South African industries, particularly the banking and financial services sectors. According to co-founder Cor van Vuuren, Conscriptis success is largely attributable to its ability to tap into TCS human resources. We currently have a number of consultants involved in on-site projects in South Africa with several hundred working on SA projects at TCS centres in India.

The growth of TCS has coincided with Indias emergence as a software powerhouse -- one of the most remarkable success stories scripted in recent times. And what a success it has been!

Indian software companies have been heavily involved in out-sourced software development with 130 of the Fortune 500 giants participating. In all, 70 of these software companies have ISO 9000 certification. Many of them are involved in the development of crucial Y2K (Year 2000) solutions. The number of software professionals in India stood at 160,000 last year, compared to 140,000 in the previous year. This number is estimated to increase by a factor of 10 by the year 2000. Today, "software" is India's fastest growing industry.

According to the Department of Electronics (DoE), a wing of the Indian governments Ministry of Telecommunications, Indian software exports increased from $ 4 million in 1980 to $ 54 million in 1988 to $ 1.6 billion last year. Growing at a rate of 55 to 60 percent per year, the exports are estimated to touch $ 3.6 billion by the year 2000. India, with the third largest technical manpower in the world, offers many advantages:

LOW COST OF QUALITY PROGRAMMING LABOUR A well-trained Indian software engineer, very well conversant in English, costs a fraction of an US engineer with the same skill. In India, an entry-level programmer's salary ranges from $2,000 to $5,000 per year. That programmer's US counterpart typically commands $50,000 to $60,000 per year.

ADVANCED TELECOMMUNICATION SETUP High speed datacom links, approximately 500 in the country, are the key to connecting Indian software companies to their customers world-wide.

UNIVERSAL SPREAD OF ENGLISH All higher education in India is in English. India has the second largest English speaking scientific manpower pool in the world, second only to the US. Points out C.N. Kumar, an independent consultant to many IT companies and a former Director of Texas Instruments (India), "In the field of technical and design aspect of software development , the Indians and Chinese have played a great role. The Indians are English speaking. Their basic technical education is strong

PRAGMATIC GOVERNMENTAL POLICIES The Indian government has recognised the special role that India can play in the software sector. It provides incentives for software companies geared towards exporting their software development abroad. In return for helping to increase India's exports and creating jobs in India, these companies benefit from duty free hardware imports and tax holidays, amongst other things.

GROWTH OF COMPUTER EDUCATION Various institutions combined are producing 55,000 students per annum. In addition there are "Bridge Programs" providing computer and software education to professionals with other engineering and science degrees. According to Sam Pitroda, chairman of WorldTel Crporation, India has well-educated young engineers. There is nothing they can't accomplish if given a proper environment to work in.

SOFTWARE TECHNOLOGY PARKS Software Technology Parks of India (STPI), an autonomous organization set up by the DoE, get a fair deal of the credit in providing infrastructure assistance and the communication links. These software development and export centres are provided duty free import, income tax exemptions, dedicated high speed data communication links and single window government clearances.

Most Indian software engineers operate out of Bangalore, fondly referred to as Indias Silicon Valley by locals. India's first Prime Minister Jawaharlal Nehru had many years ago referred to Bangalore as the 'city of the future'. The city has a highly talented pool of manpower thanks to the Indian Institute of Technology (IIT), Indian Institute of Management (IIM) and five Regional Engineering Colleges (RECs) that have come up in the locality. In addition , the city has pleasant weather throughout the year and a decent lifestyle which goes a long way towards helping these companies wean people from outside to come and settle down here.

Says Vinay Deshpande, Managing Director, N'core Technology, "Bangalore is a lively and dynamic city. The people here are friendly and IT literate". Apart from Texas Instruments, which was the first foreign company to set up base in Bangalore, the city is home to IBM, Oracle, Novell, Fujitsu, and Digital Equipment. Bangalore also is headquarters to a large number of Indian software companies like Infosys Technologies, Wipro Infotech Group, Ashok Leyland Information Technology Limited and Sonata Software.

However, it was not Bangalore, but Mumbai, where the Indian software saga really began. The Indian software industry has been active since the early 1970s, but it was only in the mid-1980s that it became visible in the global software services market. In 1985, Citibank established a 100 per cent foreign-owned, export-oriented, offshore software company, Citicorp Overseas Software Limited (COSL) in the Santa Cruz Electronics Export Processing Zone (SEEPZ) in Mumbai. This subsidiary initially undertook software development work for the parent company and later diversified. Soon after, Texas Instruments and Hewlett-Packard established subsidiaries in Bangalore, in 1986 and 1989, respectively.

By doing so, these three companies drew attention to the possibilities available for offshore software development in India. This increased awareness of the capability of Indian programmers and engineers coincided with the severe shortage in the supply of programmers and software developers in the American software industry. With the rapid advancements in telecommunications technology, the increasing difficulty of exporting programmers and the growing reputation of Indian programmers and their ability to handle fairly sophisticated projects on time, Indian firms were soon able to offer the contract programming services offshore, in India. Bangalore, Mumbai and Delhi quickly emerged as the key locations for software development in India. Spurred on by the recognition received by Bangalore and the big investments made there by foreign firms, other Indian cities are emerging as serious Indian software development centres.

Chennai, the capital of the south Indian state of Tamil Nadu is now home to about 60 software companies lured by the city's educated and hardworking manpower base. But the city to watch out for is Hyderabad, capital of Andhra Pradesh, the state headed by an IT savvy chief minister (CM), Chandrababu Naidu. The CM recently announced an IT policy which offers many concessions to investors, a major one being waiver of stamp duty which accounts for 15% of total investment. New projects worth $ 1.3 billion are expected to come up in and around Hyderabad.

That Naidu and Andhra Pradesh are very serious about IT is evident from the launch of Hitec City, a project now under way over 158 acres in a serene suburb of Hyderabad. the State capital. The amenities will include VSAT, ISDN and Internet connectivity; Computer controlled environment; Video conferencing and Multimedia infrastructure and a dedicated mini power plant of 35 MW capacity.

Even as Naidu and other chief ministers weave a magic wand at the state level, the central government's liberalisation policies are also set to continue and the industry is predicted to continue to grow at exponential rates over the next few years. The huge manpower pool of highly educated IT workers like Raman Negi is set to continue increasing as more and more training colleges offer IT courses and more and more students take up careers in IT.

The present cost advantage in terms of cheaper labour may gradually be eroded as salaries continue to increase over the next few years. However, the sheer volume of skilled Indian IT professionals available will continue to represent the single most valuable advantage for Western countries which are plagued with IT skills shortages and high costs.
(This article first appeared in Sunday Times. Johanessburg)


The road less travelled

WHEN Tatiano Oliveira first saw the womenfolk in the Garhwal Himalayas carrying large bundles on their backs, he was not impressed. Only leaves, the 17-year-old collegian from Brazil had thought to himself. They must not be very heavy. Till he stopped one of them, exchanged greetings in his broken Hindi and volunteered to pick up one of the bundles. No go. The young man could hardly lift it half way above the ground. It was then that I realized the daily hardships faced by these brave women. Even fetching fodder for their animals was literally a back-breaking job. Whats more, they had to endure it every day!

Oliveira had come to India as a tourist but he went back with knowledge about our country which even many Indians are unable to garner. Of course, his own curiosity and observations helped. But a large credit for seeing a visited place and people in a different light goes to the travel agency which had arranged his 16 day outing, the Thane-based Atithi International.

Atithi is an unique travel agency. Its founder and chief honcho, Yogendra Kainthola, 33, collects medium budget tourists in Mumbai and personally escorts them to the Himalayas and its environs, about 30 hours away by train. There, he shows them the sights but also actively involves them in his own brand of interactive tourism. Not for Kainthola or his clients the antiseptic, plastic 5-star tours. The young entrepreneur believes in letting foreigners study his country at the ground level. His reasoning? Most of the people who come all the way here are curious, intelligent people. So why not give them an opportunity to form their own authentic, unbiased opinions instead of taking refuge in assembly line tourist guide books?

This opportunity comes through any one of Atithis theme travel packages. So, a participant in one of the Adventure Tours could find himself trekking, skiing, river rafting, water skiing or mountain cycling in pristine, virginal locales in the Himalayas. A Pilgrimage Tour could take you to some of the holiest spots of the country Badrinath, Kedarnath, Gangotri, Yaminotri, Hardwar or Rishikesh.

The name Atithi is derived from the ancient Sanskrit phrase, Atithi Devo Bhava. Translated, it means, Our Guests are our Gods. Kainthola runs a tight ship at Atithi. A large chunk of his administrative work is sub-contracted to relatives and college students so he does not end up carrying large office overheads. The result is that the tourists travelling under the Atithi umbrella can travel further on a modest budget.

Take the case of a typical trekking trip. Spanning over 16 days (Mumbai to Mumbai), one package takes the tourist through remote villages and splendid scenery to some of the most breath-taking spots in the Garhwal Himalayas. These include Gomukh, famous for the glacier which feeds the Ganges and Tapovan, home to only a few sadhus and the place from where you can have a magnificent view of many Himalayan peaks. With seven days of trekking thrown in, the tourist ends up paying $ 800 for the entire tour. At some of the halts during our tours, foreigners have stayed for as low as $ 15 per night. They thanked me later for providing them with such reasonable but comfortable accommodation, says Kainthola.

It all began a few years ago when Kainthola, just fresh from college, was himself taking in the sights in the Far East, USA and Europe. In all the countries I stayed in, I found the newspapers advertising tourist packages to all corners of the world except India, he says. In Singapore, for example, tour operators were promoting tours to Sri Lanka and Nepal but none to the biggest tourist destination in south Asia, India.

Bitten by the patriotic bug, Kainthola decided to amend things in whatever little way he could. He decided to get into travel and tourism and attract foreign tourists to India. But first, he needed some experience. So he started off with small, domestic packages aimed at his friends and relatives. The first one, a four night, five day caravan tour for 14 people to the beach resort of Ganpathi-Phule, about 450 kms away from Mumbai, went off well. Others followed: treks to nearby Lonavala, Khandala and Kanheri Caves; mountain climbing excursions for company executives; nature camps for school children with astronomy, trekking and nature talks thrown in. The trips helped build up self-confidence in the kids. Their fears and prejudices were removed, says Kainthola.

In August 1991, confident that he had the requisite experience in handling large number of tourists, Kainthola took his first big trip outside Mumbai. Over 12 days, he accompanied five tourists to the world famous Valley of Flowers, about 315 kms away from Rishikesh, a centre for ashrams and yoga institutes, and then took them to the holy shrines of Badrinath and Kedarnath. The group, including a 60-year-old, trekked over 55 kms in five days.
 
Other memorable trips have followed. A package to the ice-clad Auli Winter Resort included one week of skiing, two days of river rafting and two days of jungle safari. For the last three years, every June, Kainthola has been taking about 20 tourists to Har-Ki-Doon, located on the border of the Garhwal Himalayas. The tourists have been river rafting, water skiing and climbing mountains and at times, reaching a height of 4,400 metres. Kainthola is just back from Uttar Pradesh, where he accompanied a group to Gangotri, the source of the mighty Ganges river.

In all these trips, Kainthola takes the help of Non-Governmental Organisations (NGOs) to help the tourists become familiar with local people and customs. One of the NGOs, Janadhar, headed by Dr. K. Sunil, is active in the rehabilitation of physically handicapped people in the mountains. Says Dr. Sunil, It is only through participating in community activities that tourists are able to really learn about any new place they have visited.

In an interesting project, Atithi and Janadhar took a group of 19 tourists to Rajgarhi, a village four hours away by road from hill station Mussoorie. Two villagers, acting as local guides, accompanied by a cook and a helper, also from the village, took the tourists on an unforgettable trek. Liquor, smoking and the use of plastics was strictly no-no. Over two days and a night, the group travelled over hills and valleys, with the four locals enlightening them about local culture and history. Back to the village, the foreigners stayed in local houses. Atithi will shortly be diversifying with tours to offbeat south Indian locales like Periyar and Pondicherry. Here too, we will have tourists staying with the locals, says Kainthola.

Most of his new business comes to Kainthola through friends in the United States and Britain and through word-of-mouth publicity. But Kainthola would not like Atithi to grow into such a mammoth organisation that he would be bogged down by administrative work and would be unable to personally accompany tourists on the trips.

Its a great joy to see tired but happy faces on the top of a remote mountain, he says. If, in the process, my foreign friends end up learning something new and unforgettable about my country, my joy is multiplied.
(This article first appeared in The Week, Kochi)


Global Telecom goes global

JUST 15 years ago, Manoj Tirodkar and Fritz DSilva were hawking Korean fax machines in Mumbai through their jointly promoted fledgling firm, Global Tele-Systems Ltd.

Today, they preside over a Rs. 8 billion business that in Executive Vice Chairman Tirodkars words, aims at making computing affordable. Our clients are companies and right now there are many aspects of their telecommunication needs over which they have no control, he elaborates. We want to make all three - hardware, software and solutions - easy for them.

Global is today a leading provider of IT and engineering solutions and services. Its areas of business now include software, e-applications e-business infrastructure and engineering services. The company operates through 19 0ffices in India and seven abroad. For the financial year ending March 2000 (the period for which audited accounts are available), Globals networth was Rs. 6.2 billion and had clocked an export turnover of Rs. 1.2 billion.

As the company grew, new problems crept up. A crucial one: retaining skilled employees. Attracting talented people and retaining them is an exciting challenge -- it means providing a challenging environment and providing ample opportunities for enhancement of skills, says Managing DSilva. Our in-house training is very strong and employees appreciate the value addition it gives them. We also look at the softer side of it by giving international exposure and sabbaticals.

A number of reasons have been attributed for the success of Global. Dsilva points out one of them: In our company the knowledge of the customer, the customer's needs and of vertical industries is given as much priority as the knowledge of technologies, and this is what gives us the edge. From Tirodkar, here are the reasons for Globals success: dynamic environment within the organisation, clear business focus, enormous commitment of employees and entrepreneurship. Global today employs 2500 people. We have long surpassed the stage of a start-up but we like to nurture the culture of entrepreneurship, says Tirodkar. For this entrepreneurship to thrive, we are delegating more and more decision-making powers down the organisation. It is our employees who scout for expansion and diversification opportunities.

But he is quick to add: Having said that, I must stress that running a company is not the same as running a democratic country. I follow a hands-off style of management but when the need arises, one or two people in the organisation are required to take crucial decisions.

And the co-founders have taken some tough decisions when the occasion demanded. Like the time six years ago when they decided to get out of office automation products like fax machines and re-focus on services. Tirodkar explains the rationale behind the decision: There was limited scope for value addition in the product range we were dealing in. The services sector is not very capital intensive. Also, as our customer list increased, we found that each one of them was also interested in solutions.

However, not all tough decisions have had happy endings. Last year, the company decided to get into payment gateways and was banking heavily in providing solutions in this area. But the Reserve Bank of India, the countrys central bank, threw a spanner in the works when its committee on Internet banking declared that it was in favour of allowing only banks and financial institutions to set up payment gateways.

Global also got into a three way joint venture (JV) with Enron and the Maharashtra State Electricity Board for a optical fibre cables (OFC) project. But Enron recently decided to pull out of the project. Global was supposed to invest Rs. 600 million into the JV. The tie-up with Enron for a project which would cover Indias most industrially advanced state (Maharashtra) had created a lot of hype. When it did not materialise, it looked like a failure for Global, says Sheeba Bose, an analyst with brokerage Shantilal Mehta & Sons.

Globals well-wishers are also concerned about the effects of the US slowdown on the company. Even though the company has not been directly affected so far, it is assumed that there could definitely be some fallback in the next few quarters. After all, the US is a giant economy and it has always had a technology impact on other countries, says Ramesh Varadharajan, a key supplier to the company.

But that is not stopping the company from going ahead with its gameplan of increasing revenues from overseas operations. This year, 35 per cent of Globals revenues have come from abroad. The plan is to increase this figure to 50 per cent over the next three years. We would like to make Global a truly global company which means that we explore opportunities in the various markets, says DSilva.

Indeed, it is our success and our proven expertise in the domestic market that has attracted our international clients towards us. The skills developed in the domestic market are the ones, which will be used for garnering the international revenues. We have worked with global majors like Microsoft, Oracle, Cisco, Nortel in their projects in India and our quality of work has made it natural for them to choose us as their technological partners in global markets being addressed by them.

Global currently has offices in seven countries apart from India. We are starting our international operations in newer countries. We are always honing our capabilities since as a global player, we are required to have better skills and high quality deliveries, says Tirodkar.

In other words, Global wants to live up to its name.
(This article first appeared in Asian Business, Hong Kong)


 
Ajay Srinivasan on mutual funds

A graduate of IIM (Ahmedabad), Ajay Srinivasan cut his teeth in project finance at ICICI. He then moved over to ITC where he garnered valuable experience in the group's various financial divisions. When his first employer, ICICI, decided to get into the asset management game three years ago with joint partner Prudential of the UK, it was Srinivasan who was sought out to build up a team to launch one of the first private outfits in the sector after it was opened up. A pragmatic, conservative professional, Srinivasan believes that it takes time and patience in building up an institution, in this case, Prudential ICICI AMC. Here, he talks to Raju Bist of Infolink Worldwide about various issues related to Indian mutual funds and throws some light on the direction in which the industry is headed.

Q

Why is it that the portfolios of most mutual funds are looking similar these days ?

A

I don't think that is the case otherwise you would find all returns were similar as well. There are a few stocks that do find a place in all portfolios, e.g., Infosys, but that's on account of the stock's weightage in indices, its liquidity, its leadership status and so on.

Q

While investing, do you always keep the old economy stocks v/s new economy stocks theory at the back of your mind ?

A

No. Bottom up stock pickers like us look at stocks in isolation and then choose stocks. Every stock has a price at which it begins to look attractive and a point beyond which it looks expensive. Old economy vs new economy doesn't come into the equation. It is also of course becoming a matter of some debate as to what is new economy and what is old economy. Is Hindustan Lever with its plans to use the net old economy? Is Dr. Reddy which does basic research old economy?

Q

As an AMC, how much importance do you give to happenings on the Nasdaq? Do you agree with the recent trend of linking movements on the Nasdaq with those on the Indian bourses?

A

The Nasdaq is a different market with different characteristics and constituents from our markets. It certainly impacts sentiment not just here but around the world. I think it is odd that people here have started focussing so much on NASDAQ and US economic data, forgetting the basic fundamentals of investing, viz., the scrip's fundamentals.

Q

At this moment, where do you see the market headed ?

A

I think the markets are close to their bottom at the 4150-4200 levels and only require a spark to send them northward. Corporate results in the big stocks in technology, Pharma and FMCG have been good and will lead the upswing. We are in a strange market where people are more bothered about outstanding positions, who is buying what and what's happening in the US and ignoring corporate results. The only way to get over this in the medium term is to broaden the market by having more institutional players.

Q

Do you feel that the honeymoon between mutual funds and tech stocks is over?

A

What is over is the ability to make money by buying any stock with the "technology/software" tag since stocks in the sector do not behave as one as they used to a year ago. Yet the sector has some great stocks available at attractive valuations and I think they will continue to attract buying interest

Q

Are you planning to launch any new funds ?

A

Yes. We are planning a Monthly Income Plan subject to SEBI approval

Q

Can you predict the state of the Indian MF industry, say, a year from now and again, three years from now ?

A

At a broad level, I believe the MF industry has grown rapidly in the last two years and needs to consolidate before the next surge. This consolidation implies being able to deal with a larger investor base and with increased consumer expectations. In the overall context, MFs are still a tiny fraction of investible surpluses of households and we see this number increasing steadily over time.

Q

What do you think are the main problems faced by the Indian MF industry today and what are the steps that have to be taken to overcome them ?

A

I think the biggest problems are managing customer expectations, the lack of a large enough base of qualified distributors and the volatility in capital markets as a whole. Even though the average household invests close to 98 per cent of its money in fixed return instruments, when it comes to investing the 2 per cent they expect abnormal returns. Typically an investor in equity funds should be happy with a return greater than his alternate investment opportunity (typically fixed deposits in banks) adjusted for the risk.
The distributor is the major interaction point for the customer and in today's world, needs to be armed with enough tools to be able to recommend the right product for the right investor. And as for volatility, in a regime where people are used to assured returns in some shape or form, swings in debt and equity funds only un-nerves the common investor.

Q

What should a first time investor in mutual funds look at -- the AMCs's pedigree, the reputation of the fund manager, the track record of the AMC, or something else ?

A

As in any investment, the first thing an investor should understand are his own goals and objectives and their fit with any investment product. We find the biggest difficulties arise when there is a mismatch between investor and fund objectives. Thereafter of course it is important to understand all you have mentioned. I would say though that investment styles and the source of return is important to understand as well. If someone for instance has turned out a great performance on the back of a single stock or sector, the chance of that being repeated is less than someone who has picked more stocks across a wide range of sectors.

Q

How much freedom do you give your fund managers in choosing scrips ?

A

Although we work with an Investment Committee that meets and reviews portfolio every week, our fund managers are trained and paid to deliver performance within established rules and controls

Q

How much is the current corpus under your management ?

A

Close to Rs. 4300 crores

Q

What is the break-up (percent-wise) between corporate and retail investors at your AMC?

A

Each fund of ours would have a different mix since the nature of our funds vary. Our equity funds are predominantly retail and our debt funds typically have a greater wholesale participation

Q

What kind of investor do you prefer -- the bigger pursed but volatile corporate investor of the small moneyed yet long term retail investor

A

We have no preferences. We are selling a product and the customer is king. We strive to ensure our customer understands what he is buying when he buys our funds

(This article first appeared in Sify.com, Chennai)


 

Asian Paints shows the way

TRUST Asian Paints to be different. In the early eighties, Indian companies had just discovered the joys of dealing with the faster, more reliable courier companies and had begun giving the Indian Postal Department the cold shoulder. Soon, important business documents were being ferried across the country by the ubiquitous courier delivery boy. Asian Paints also took the courier route but with a difference. Instead of plain typewritten sheets, the company was exchanging computer floppies between its various plants and depots.
 
One of the pioneering paint companies in this part of the world, Asian Paints was, as usual, one step ahead of the competition. In a small way, it was building on the lead it had established by becoming one of the first Indian companies to go in for computerisation. In 1971, when the companys turnover was just Rs. 30 million (it is Rs. 8.83 billion today) its then chairman, Champaklal Choksey, had decided to go in for a mainframe. The ICL 1901 A cost Rs. 5 million, a princely sum in those days. The decision was based on a gut feeling, backed by the knowledge that investment in new technology always pays off. On hindsight, it was simply a visionary move. By 1978, all the account functions of Asian Paints had been transferred to this new machine.

From 1981 onwards Asian Paints decided to do things differently and went in for CP/M machines, highly proprietory systems, manufactured by Zenith Computers, PSI Data Bull and IDM Computers. "We went in for the computerisation of our branches. The new machines handled functions like customer billing and dealers requirements. It paid us very rich dividends with two days work being reduced to half a day," says S.A. Marathe, Systems Manager, Asian Paints.

At Asian Paints, every department presents a three year perspective plan to the top management. At the 1983 meeting, the management decided to extend computerisation to the shop floor. The company was thus able to track the output of every machine on the floor shop at the companys oldest plant at Bhandup in north Mumbai. Asian Paints also became the first Indian company to use Unix on the shop floor. "It immediately began to help. The worker would key in the data and the system would tell him things like which depot the loaded truck had to be despatched to," says Marathe.

All this computerisation brought about direct changes in two areas. The companys clerical staff strength has not gone up much even though other staff requirement like salesmen has increased as the company grew over the years. For example, there were 20 despatch clerks earlier, now there is only one. Similarly, a single excise clerk is now doing the work of the five earlier. In addition to data entry and report generation, the clerical staff also query the system to extract data and take system backups. In Asian Paints, the data is owned by the users and not by the systems.

Computerisation also helped the company tackle competition in a more effective manner. Asian Paints had been set up in 1942 by four Indian entrepreneurs who sold their products initially on bicycles. The Indian paint market then and right up to the early seventies was dominated by MNCs like Berger Paints and ICI who had a stranglehold on the wholesalers and the urban market. The fledgling Indian company decided it would grow by spreading to smaller towns. This it could do by providing better service and also a wider range of stock to the retailers. It had therefore to do two things spread its geographical reach and increase its product range.

All this meant that the company started selling paints in more number of colours, shades and can sizes than the competition to a larger dealer network. This is when the companys top management had its second "attack" of vision in 1982. "Can we not use computers for planning?" the big bosses asked. So between 1982 and 1984, the company developed its first Manufacturing Resource Planning (MRP) application. The paint maker immediately found that it could provide much better service to its customers. By 1984, Asian Paints had developed a robust material planning system which is working well even today. About 25 of its branches were servicing 3000 dealers. Today the figure has gone up to 73 branches and 14,000 dealers one of the largest networks in India. The company sells 2000 shades and pack types in decorative paints and another 1500 in industrial paints.

Branch computerisation has reached to such an extent that Mayur Toshniwal, Branch Manager of Asian Paints Dadar branch in central Mumbai declares, "Today we cannot think of working without computers. My branch will have to down shutters if the computers here break down." The Dadar branch, which clocks in annual sales of Rs. 400 million, carries about 350 tonnes of stock on any given day. Most of the work at Toshniwals branch the receipt and despatch of material, bank accountancy, invoicing, statutory requirements, inter-office corespondence, maintaining sales tax forms, among other functions, is through the computer.

Six Regional Distribution Centres (RDCs), each in one zone of the country, receive the previous days stock position from each of the companys 73 branches. Since each branch is dealing on an average with 300-odd dealers, there is an enormous amount of data being generated. A high level of computerisation comes in handy here too. "The data crunching is done by the salesman, sales supervisor or the branch manager, according to his requirement. We look at all the data very closely. At the most basic level, for example, it can give us a very good idea of which dealer is giving us what kind of business, " informs Toshniwal.

"We went in for VSATs again on a business hunch. Our reasoning was that in tomorrows business world, we had to have access to information very fast. The existing communication means (telephone lines) then were very unreliable," informs Marathe. In 1994, Asian Paints installed VSATs in three plants and 16 branches. Today a total of 49 VSATs, installed at a cost of Rs. 30 million, link six factories and 43 depots. VSATs are now taking care of the accounts, balance sheet and planning. It took about six months to stabilise the system.

Back then, installing VSATs was an expensive option (it still is for many Indian companies). "But it was not a cost-benefit decision. In IT you cannot do cost benefit analysis," says Marathe. "It was imperative for us to act fast. We had a 10-year lead over our competitors as far as distribution systems was concerned but the lead was narrowing. We knew that we would need data later for a weekly planning cycle and after that, for a daily planning cycle. All we needed was to build on the good network system which we already have."

Around the same time as Asian Paints was installing its first lot of VSATs, it decided to make its environment more dynamic and get into databases. The paint giant chose to install a Supply Chain Management System (SCMS). "We went in for a SCMS and not ERP because in 1994 there was no support in India for ERP. And we are convinced that any new technology gives benefits only three years later. We have developed IT infrastructure which gives us a very good idea of our sales growth and right product mix," says Marathe. SCMS is still in the process of being installed at the company and will be fully functional only by mid-2000.

Marathe gives other reasons for bucking the trend. "We did not go in for ERP because it became fully implemented in India only by 1996. And by then we had already redesigned our systems. True, we had been evaluating ERP but we found that SCMS allowed us to plan and re-plan much more easily." According to Marathe, ERPs are good for organisational processes but their implementation takes much longer. He explains: ERP touches every operation of the company, it being the transaction layer. That means almost every person in the organisation has to be trained. Also, the ERP needs to be customised for the organisations needs or the organisation may have to adapt to the ERPs process logic. Either of these changes are big and take a long time. In SCMS implementation also some processes will have to change but since SCMS touches lesser number of people and takes data from the transaction system, it takes lesser time."
 
At Asian Paints, SCMS takes care of the planning system, corporate office, users (at the plants), among other functions. Marathe also feels that SCMS gives better paybacks. Thats because it makes the core business of the company efficient which is the supply chain for a manufacturing or marketing company. It allows us to have shorter planning cycles, and among other things, can determine proper inventory levels based on demand and supply variability. Since it takes the core processes to a higher level, it cuts out a lot of fat in the supply chain and gives faster returns."

SCMS will reduce sales forecasting by the depots from the present 15 days to one week to 1 day. The company will know exactly how much stock each depot will require, and when. "With increasing competition, there is every possibility that if we are stocked out, we may lose out on a sale," says Marathe. There are other compelling reasons. "Branch managers keep on changing. Once we have SCMS in place, we will be able to track the various promotion schemes adopted by a branch manager as well as his predecessor." The full installation of SCMS will lead to a shorter planning system. For example, if earlier only 100 cans were being despatched, now the company will need to send only 20 so that it is not supplying more than necessary.

"The reaction from the plants and depots will be much faster. Suppose the Chennai plant is overselling a paint in Sky Blue colour, we can then ask the Ankleshwar plant to step up production of Sky Blue. SCMS will be able to tell me whether it makes more sense to switch production schedules at a particular plant or whether it will be more cheaper to transport it from a depot, says Marathe. Inventory will be less. "We will be able to shift goods from one depot to another much more quickly in case of need. As it is, we already have production flexibility. You can have flexibility only when you have large capacities and we have that already.

"We will go in for ERP but only later, say after two years after all, there is a limit to what you can chew. We can afford to wait for ERP because at present the ERP paradigm is shifting. Right now, if one were to implement the entire SAP package, he would require the services of 45 experts. Later, we will get ERP packages much more cheaper. Different packages like SAP and PeopleSoft will even be able to talk directly to one another."

Marathe feels that it was only companies which didnt have any experience of good IT functions that went in straight away for ERP. "But we have a very rich in-house IT culture. Right now we have 60 programmers on board." Asian Paints ropes in computer training institutes like NIIT to teach packages like Sybase. "We not only teach skill-based training but also non-skill based training. We dont look at our people as just coders. They also undergo other skills like team building and presentation skills." Asian Paints recruits raw MBAs for executives and BEs (Bachelor of Engineering) for programming functions. In a year, on an average, the company spends about 10 mandays on each person for training.

Still, in spite of the company investing so much into its programmers, even Asian Paints is plagued by that scourge affecting many Indian companies IT professionals leaving for better pastures, particularly the United States. Marathe is candid in admitting, "On an average, a programmer stays with us for about two years. If he leaves for a much better paying job abroad, I dont mind. For, as a result of the rupee-dollar exchange rate, I'll never be able to match the salary offered to him abroad."

Adds Marathe, "We have noticed that in the time that they are with us, our programmers give us their best. Most of them end up in enhancing our existing systems." Which is perhaps why, unlike other Indian companies, Asian Paints does not even ask its programmers to sign contracts which prohibit them from jumping the ship before a pre-determined service period.

Once again, Asian Paints dares to be different.
(This article first appeared in MIS South Asia, Mumbai) 

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