Express Computers

IT/ITES, BFSI and Professional Services lead the pack

Posted: May 1 2006

A Rs 100 Cr plus turnover and yet no fixed budget for IT-that's the tale at your average Indian MB. While, the IT deployments are becoming more sophisticated MBs need to come out of the shell and follow in the footsteps of LBs in adopting technology for business growth, writes Varun Aggarwal

Medium businesses (MBs) are preparing for the next round of spending on IT in 2008-09-with not only desktops, notebooks and printers, but also connectivity and server deployments becoming a fact of life at most MBs.

While, the technology adoption greatly increased while moving from small businesses (SBs) to MBs, the IT spend in terms of percentage of total revenue decreased in the case of the MB segment. While SBs are on an average spending one percent of their earnings on IT, MBs are reluctant to shell out anything more than 0.55% with an average of 0.41% across verticals.

We had observed that SBs do not have a proper IT team in place and that no IT budgets are present in this segment of Indian industry. In the MB segment, most of the respondents had a well placed IT team. The level of IT adoption varies across industry verticals. Let us look at the different sectors and understand how IT savvy they are.

Utilities/ Transportation/ Real Estate/ Construction

This industry vertical turned out to be the least IT savvy of all. Be it servers, security or software-the Utilities/ Transportation/ Real Estate/ Construction sector was a laggard with regard to most technologies. On an average companies in this vertical spend Rs 35.8 lakh on IT, 0.24% of the turnover.

Looking at server adoption in this sector, Windows servers show a 67% penetration compared to 88% in the wholesale/ retail sector and 82% each in both manufacturing and IT/ITeS. The overall server deployment in this sector stood at only 88% while all the other sectors had more than 94% server deployment.

However, with multiple offices in different locations, the need for connectivity was felt the most by companies in this sector. That's why this vertical emerges as a leader in the adoption of ISDN, with 48% of the respondents confirming the deployment. The scenario; however, is dominated by the use of leased lines with 61% adoption, and DSL with 41% adoption. The adoption of Wi-Fi is the least among all verticals.

T S Rajagopalan, Director, Caliber Construction Co Pvt. Ltd., said, "For accounting software, we use only Tally. For networking software, Windows-based software is used and as far as the hosted application is concerned, Web-based servers run these."

Base = 194

Manufacturing

"We spent over Rs 2 Cr in 2007 on basic IT infrastructure. Now we are planning to invest in bar coding and a virtual private network from Reliance to connect all of our branch offices"

- Yogesh Chaudhry

Director, Jaipur Rugs

Most manufacturing units in India are often quite old and traditional in the way that they function. The MBs in manufacturing also fall under the same category with less importance given to information technology. This sector is one of the lowest spenders on IT with an average budget of only about Rs 67.6 lakh. However, one area on which most manufacturers appear to be investing in is enterprise applications. About 68% of the respondents in the manufacturing sector already have ERP deployments-something that is now considered a de-facto standard in this industry vertical to ensure better operational efficiency and a streamlined business. It's also the highest rate of adoption of ERP across verticals; only BFSI comes close with 64%.

Bihar Sponge Iron Ltd. has over 200 employees yet there are only 15 desktops in the organization. The company spent about Rs 10 lakh on its IT infrastructure in 2007 and there are no plans for any big deployment this year.

Susheel Kumar Bachheti, Assistant Manager, EDP, Bihar Sponge Iron Ltd. said, "Our work does not require much of IT and therefore we have only 15 workstations. But as regards connectivity, we have in place a Gigabit Ethernet LAN, and we are also using a DSL connection by Airtel offering a speed of 512 Kbps. Our basic requirement from Internet is communication through e-mail with our branches."

In terms of security, the company has deployed only the basic security solutions. Presently they are using an anti-virus solution from Symantec.

Apart from the basic infrastructure like desktops, notebooks and printers, the major technology areas upon which manufacturers spent most of the money were servers, connectivity, software and Internet applications. For the year 2008-09, the top priorities listed by the respondents in manufacturing sector are laptops, notebooks, laser printers, accounting software and LAN.

Wholesale/ Retail

The scenario is not very different in a medium sized wholesale/ retail organization as compared to its smaller counterpart. Technology has not yet taken priority in this much-hyped industry vertical which is the second lowest in terms of IT spend with companies in this vertical spending an average of Rs 56.4 lakh or 0.32% of their turnover on IT.

The survey respondents in this sector had an average of nine offices in different locations. While this sector scores lowest on leased line adoption (58%), is scores second-highest in terms of DSL deployment (71%) behind IT/ITES (74%).

Jaipur Rugs is a 250 strong company that sells carpets and rugs globally. According to Yogesh Chaudhry, Director Jaipur Rugs, "We spent over Rs 2 Cr in 2007 on our IT infrastructure. We try to ensure that we use the best of technology and leverage it as far as possible. We already have basic IT infrastructure in place-with multiple servers running Windows and Linux, Wi-Fi connectivity and a Gigabit LAN. Now we are planning to invest in bar-coding and a virtual private network from Reliance to connect all of our branch offices."

M K Retail is another company that vows by technology for its operational efficiency. Imtiaz, Manager-IT, M K Retail said, "We have already implemented ERP software. 80% of the deployment has been completed, and only the financial module is pending. We are now in the process of upgrading the inventory control software. There is no hosted application as such that we use at present."

Some of the areas that most of the wholesale/retail companies are focusing on are desktops, notebooks, network software and Windows servers.

BFSI

The BFSI sector has been very keen on the adoption of IT-with high investments going into building a robust IT infrastructure and ensuring its safeguard. The survey respondents in this sector spent on an average Rs 83.7 lakh on IT in 2007-08.

Kotak Wealth Management comes across as a good example of a well-integrated IT infrastructure. The company has around 400 employees with an IT team of about 10 people. The company has deployed about 15 servers that run on different platforms depending on the applications running on them.

In terms of security, the Kotak Wealth Management has in place almost all the security solutions from Trend Micro. "We rank security very high on our IT priority list. Today, given the way we have built out security infrastructure I can say that we are 90% secure. As regards the 10% that is left, we do regular checks and take measures to ensure that the security is not breached," said Nagraj Poojari, Manager, IT, Kotak Wealth Management.

The company also follows a strict security policy. According to its terms and conditions, employees cannot access personal e-mail accounts, certain Web sites are also blocked, and there is limited access to USB drives. The company has recently installed security software called Safe Boot in all the laptops. This software asks for password when the laptops boot, and if a wrong password in entered, the laptop is locked..

At Kotak Wealth Management, connectivity is given its due importance. The infrastructure includes, Gigabit Ethernet LAN, a leased line to connect to 13 branches across the country offering a speed of 2 Mbps, three DSL connections, Sify, MTNL, and BSNL, each with a bandwidth of 1 Mbps.

Talking about their investment plans, Poojari revealed, "We are now planning to invest about Rs 25 lakh on a NAS server for our growing database and about Rs 1 Cr to switch from a large number of desktops to notebooks for marketing people who are constantly on the move."

Pioneer Fincap Pvt Ltd., is a division of the Pioneer Group. It deals in insurance related products. Based in Delhi, it also has three branch offices in the vicinity. The company has 100 workstations and at its head office in Delhi. This company also places security on number eight on a scale of 10. Kapil Gupta, Linux System Engineer, Pioneer Fincap Pvt Ltd. said, "On a scale on one to ten, with the higher number assuming greater importance, we rank security at number eight. Having our infrastructure secured is our prime concern. We have around one hundred workstations in our office at Delhi, and all have anti-virus installed. We also use firewall at the server end. In addition, we have blocked access to personal e-mail, and even the use of USB drives is not permitted. The access to certain Web sites has only been given to senior employees." The company has 100 employees and two branches, both in Delh

As regards the connectivity infrastructure, said Gupta, "Connectivity is the most important aspect in out IT infrastructure. In fact, the nature of our business is such that it thrives on connectivity. Presently we are using a DSL broadband connection from Airtel having a speed of 1 Mbps. In addition, we are also using a Gigabit Ethernet LAN, and Wi-Fi."

Base = 194

Professional/ Other Services

Before making any business decision any company in the services, industry looks carefully at its impact on their customers. The companies in this sector are taking best steps possible to ensure a robust IT infrastructure that can help them fight their competition and ensure that they are able to keep their customers apart from making new ones.

The services sector companies are investing a lot in technology with the average IT spend of respondents in this industry vertical found to be an impressive Rs 99.9 lakh which worked out to about 0.52% of the turnover. That's all the more impressive when you consider the fact that some sectors (Utilities) are investing as low as 0.24% of their turnover into IT.

An interesting example is that of Intercontinental Consultancy and Technocrats (ICT) Pvt Ltd, which is a company in the design consultancy business. ICT has an employee strength of about 1,200 globally with over 375 employees and 350 personal computers at its corporate headquarters in New Delhi.

D. Vasudevan, Senior Vice President and Head, Information Technology Services, Intercontinental Consultants and Technocrats Pvt. Ltd. said, “We have mixed use of operating systems that are both Microsoft Windows Server as well as the Linux OS. Microsoft SQL Server continues to be the popular database for our applications. We use open source for mail server and Web server applications."

Vasudevan added, "As far as accounting software goes, we prefer to use the enterprise version of Tally for financial accounting. For all other accounting purposes, we use our own software that has been developed in house. As far as networking software goes, we use the Microsoft Windows Server platform and Office XP desktop on client machines over a secured Local Area Network (LAN). As far as hosted applications are concerned, we have a number of specialized engineering applications hosted on the server in addition to library management and HRMS applications. "

"For accounting software, we use Tally 7.2 and 9.0. We are using Windows Server 2003 for Networking Services. We are also using applications like Wireshark for Network troubleshooting. For hosted application, we have our Web site on Linux. We are also hosting Intranet (ICT Internal Employee Web site) for corporate news and information. In ICT we have a large library of books, manuals and research documents. We have hosted an application through which employees can access library services."

As regards its security infrastructure, it has deployed every solution that has been included in the survey. The list includes anti-virus, anti-spam, anti-spyware, IDS, IPS etc. "We recently upgraded our security and ensured that we have all relevant solutions in place. We also follow a strict security policy. We have blocked access to all music and video sites, personal e-mail, and USB drives. Only senior employees can use USB drives after a virus scan,” said Vasudevan.

Key observations

* Indian Medium Businesses or MBs (companies with Rs. 100 to 300 Cr. turnover) are keen to strengthen their basic IT infrastructure that acts as a support to their ambitious growth plans
* Almost 80% of MBs surveyed mentioned that they plan to hire newer employees in the next 12 months, thus creating huge employment opportunities.
* Almost all of MBs have a basic IT infrastructure in place including desktops, printers and basic networking. Now the stage is set for a greater deployment of existing technologies as well as adoption of more advanced technologies like WAN, VPN, network-storage, enterprise applications
The survey respondents in this sector had an average of nine offices in different locations. While this sector scores lowest on leased line adoption (58%), is scores second-highest in terms of DSL deployment (71%) behind IT/ITES (74%).

* At present, the spending on advanced applications like Enterprise Software, WAN, Security and Storage is still low; however, there is likely to be a rise in their expenditure in the near future as the medium businesses strive to reach the higher technology adoption levels of large businesses.

IT/ITES

The IT/ITeS sector fulfilled expectations and was the top spender on IT. Despite the impact of a fluctuating dollar, IT/ITeS companies are forecasting high growth in the current year. An average company in this sector spent over Rs 1.09 Cr to quench its thirst for technology. Although that still worked out to less than one percent of the average turnover, this was nevertheless significantly higher than that of any other industry vertical. Right from the basic infrastructure like desktops, printers, connectivity to enterprise applications and emerging technologies, the IT/ITeS sector was the front-runner in most technology verticals.

However, there were a few IT companies that preferred to fulfill most of their IT requirements in-house. Comnet Vision, a New Delhi based IT services company houses 80 employees at two offices in Delhi. The company runs just one Windows server, which takes care of all of its requirements. Most software that is used is built in-house including an office automation suite as well as customized ERP and MIS solutions. The company also uses proprietary software like Tally for basic accounting and CRM for contact management. P K Sharma, Proprietor of Comnet Vision says that the company spent only about Rs 4 lakh in 2007 on their IT infrastructure and no major deployments are planned this year.

Final verdict

While MBs have taken off on their IT journey, hurdles remain as they go about building a robust IT infrastructure. As company growth is on the charts, MBs need to pull up their socks if they want to compete with the large enterprises that are already equipped with state-of-the-art IT infrastructure.

Interest in IT is clearly seen with not only desktops and notebooks but also servers becoming a standard in the MBs. Companies in this segment have expressed interest in deploying enterprise applications-more specifically ERP. The value proposition of such expensive software is clearly understood by most MBs. So, while there is a good realization of the value proposition of technologies in MB in India, moving up from the ad-hoc technology deployments to planned IT investments can help MBs to best leverage technology.