DQ TOP 20 Volume II

RankingS VeRticalS SegmentSwww.dqindia.com

Vol XXX No 15 I August 15, 2012 The Business of Infotech

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India Inc is poised for growth. Most verticals show positive outlook

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Government

Automotive

Banking

Education

Construction

Manufacturing

Retail

Telecom

HigH MoMentuM

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THEDQ20

August 15, 2012Contents

The High Momentum Verticals Itor rather part of itis now inseparable from business; DQ top 20 brings you analyses of verticals which are witnessing a potentially high impact of It, both in its approach and growth as well

30 Cover Story

Vol- II

34|AutomotiveIn Search of Frugal-IT?

India is the global auto industrys favorite new engineering center. Indian auto industry is leveraging this trend to market itself globally. And

succeeding. In this new transformation, technology is playing the most crucial role

42|BAnkingBest Foot ForwardIndian banking is world class. But two challenges lie before it to convert Indias cash economy to electronic means and to reach out to the 40% unbanked population. Technology is the prime enabler of both

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60|EducationICT is the Stated Strategy

Education remains the most challenging segment despite its high potential. Unlike other verticals, one

cannot import the models of the developed markets and make them work

here

74|ManufacturingWill IT Bring in the Renaissance?Much of the factors that would make manufacturing in India competitive going forward, are very different from what made some others competitive in the 20th century, and a lot of those factors have to do with IT

87|rEtailContinuing to Grow

In terms of margin, Indian retailers are way above the large retailers in the West and driving growth is far more top-of-the-mind than trying to improve margins

A Lot of Potential Telecom is already one of the biggest spenders on IT. With the lines blurring between telecom and IT, expect more

92|tElEcoM

16|govErnMEntBeyond E-governance While CSCs and SWANs may be dominating the discussions about IT in governance, a fundamentally new approach is underway to meet decades-old economic challenges leveraging technology

97|EvEntNext-gen Technology Finally Making WavesAfter numerous discussions on the validity, need, and concerns about cloud and new infrastructure models, the clear message that came out is that the industry wants them and is working on ways to adopt them

The industry remains largely under-penetrated by IT while the outlook does not seem too great

70|construction

104|cio of thE Month

Vendor Lock-in is as Old as the IT Industry Itself

Sharat Airani, chief, IT (systems and security), Forbes Marshall

fear of the cloud

Move to Cloud has to be a Thoughtful One Rather than Just Riding the BandwagonMehmood Mansoori, head, information technology, HDFC ERGO General Insurance Company

Reliable and Professional User-Vendor Relation is Ideal

for the Industry

Shreesh Patwardhan, vice president (IT), Dynamic Logistics

REGULARSREGULARSEdit ..................................................10

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EDiT

The Corruption Opportunities

Ibrahim Ahmad [email protected]

The other day, I was talking to some industry seniors, and was amused at their perspective of the corruption scenario in India. According to them, if the Government of India decides to fight corruption in government offices and services, it will have to deploy `6,000 crore worth of ICT solutions for the next 15 years. This would include the whole spectrumfrom computerization for e-tendering to check corruption in government contracts, to cameras and storage racks for security and surveillance.

A quick back of the envelope calculation for the private sector (which too is not untouched by this problem) revealed that here also a big amount would go in. Jokingly, one of them said he has been approached by an agent for fixing a multi-crore surveillance camera deal. Its okay to get emotional but corruption is the new opportunity.

Needless to say, like so many others I am not really saddened to see how anti-corruption crusadersfirst Anna and team, and then Baba Ramdevwere packed up last month. This entire movement was really not heading anywhere, and becoming more of a circus. Losing steam is perhaps a more accurate description. Somebody announcing launching a political party, and somebody taking only opposition parties along...created more confusion. Am not sure how many people will take them seriously now.

What is really sad and unfortunate is that the UPA government sees this as its victory. The government seems to be busy settling scores with Anna and Ramdev, but I hope it does not seriously believe that the common man really does not bother about corruption in the country. Corruption is a big pain for all sections of people, from rich to poor. The government should have taken this moment to announce some big and believable steps for tackling this menace. Nobody now believes the story about a constitutional amendment or a white paper. This governments seriousness about challenging corruption continues to be a question mark.

I dont think, in the near term, governments will fall or there will be a peoples revolution, if corruption is not addressed. But if corruption is addressed in a credible time bound manner, and people begin to see results, then let me guarantee that there will be a revolutionperhaps mass voting for this government to come back to power with a thumping majority. Obviously any government which decides to take on corruption, will have to have the courage to take its own ministers and officers head on first.

That IT can bring in more transparency and efficiency in governance is a no-brainer. One suggestion for speeding up and increasing IT deployment would be to select some key areasparliament, judiciary, police etcwhich are perceived to be directly connected to corruption. And go after them whole hog. Once these people get to experience the power of IT, there will be lots of top down. Remember, government spending on IT is expected to be upwards of `30,000 crore, and lots of it is for fighting corruption.

EDITORIAL

GROUP EDITOR: Ibrahim Ahmad

EDITOR: Ed Nair

EXECUTIVE EDITOR: Atreyee Ganguly, Shweta Verma

ASSOCIATE EDITOR: Shrikanth G (Chennai)

SR ASST EDITOR: Shobha Sivakumar

ASST EDITOR: Onkar Sharma, Rukhsar Saleem (Gurgaon)

SR CORRESPONDENT: Shilpa Shanbhag (Mumbai)

CORRESPONDENT: Inder Kumar

SUB EDITOR: Charu, Ruchika Goel

ASST MANAGER DESIGN: Bhagbat Pattnayak, Harnek Singh, Pramod S Rawat

COVER DESIGN: Pramod S Rawat

EDITORIAL ADVISOR: Prasanto Kumar Roy

BUSINESSCORPORATE HEAD of SALES & MARKETING: Satish Gupta ([email protected])MARKETING: Manish Uniyal (Mgr Audience), Gulnar Oberoi (Asst Mgr Mktg), Niketa Chauhan (Exec Mktg), Arvind Razdan (Exec Mktg)

DELHI/NCRAmresh Mishra (Asst Mgr Sales), Ratul Mallik (Exec Sales)

BENGALuRuVenkatesh L (Mgr Sales) T Roshan Sahadevan (Mgr Sales), Pradeep Kumar (Exec Sales)

MuMBAISana Khan (Asst Mgr Sales), Meenakshi Madan (Asst Mgr Sales)

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send your feedback for us to serve you better...

DQ Top20: A Tough YearI enjoyed the last issue of DQ Top20 volume I (Dataquest, July 31, 2012). The ranking methodology used by Dataquest seems to be perfect. And the magazine has adopted a wider perspective, taking actual facts into consideration. The layout was very good and the analysis done on each of the Top20 companies is very apt and informative, with focus on the companys current ventures.

Kavita Kapoor, Bengaluru

I really appreciate the whole Dataquest team for this wonderful edition. (Dataquest, July 31, 2012). It was really a well-defined and well composed edition providing an in-depth analysis of the whole IT industry. I liked the flow of the whole edition. Keep it up guys!

Suchitra Nair, Mumbai

Hearty congragulations to the team for bringing up with an amazing edition. Excellent content with an impressive layout. Great work!

Manoj Sharma, Noida

Dead End...No Way!An interesting article Dead End...No Way! (Dataquest, July 15, 2012) on how the e-commerce market is just heating up in India as numer-ous players are jumping on to the bandwagon. But for the industry to expand further, it is important for the government to recognize it as an industry. I would further like to add that the e-commerce model in India is more price-oriented as compared to the ones operating globally. Re-ports suggest that the e-commerce market has been grown at an average rate of 70% annually and has grown over 500% since 2007. In a nutshell, a well-written piece.

Anju Mahendru, Gurgaon

The Nightmare ContinuesI found your article The Night-mare Continues (Dataquest, July 15, 2012) very interesting. I com-pletely agree that DLP solutions have evolved over the years and have also gained a holistic approach in moni-toring data.

Mayank Agarwal, New Delhi

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Vol XXX No 14 I July 31, 2012 The Business of Infotech

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A tough YeArOverall growth down from

26% to 18%.Exports at 29% growth. Domestic at 9%.

14%2009-10

33%2008-09

29%2011-12

22%2010-11

IT Exports

8%2009-10

23%2010-11

9%2011-12

Domestic

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Vol XXX No 15 August 15, 2012

Corrigendumn This is with refer-ence to The DQ 50 Acer India profile (Dataquest, July 31, 2012). Harish Kohli was the MD of Acer India at the time of

writing and not WS Mukund.n This is with reference to The DQ Top20 Infinite Computer Systems profile (Dataquest, July 31, 2012). In the rankings page, the company CEOs name should read as Upinder Zutshi.Error is regrettedEd

Harish Kohli MD, Acer India


gAnEShA

IT and the God ParticleThe concept of mass and matter could potentially find some purchase within our IT industry today

The fourth of July has always been known for fireworks but nobody quite expected the crackling discovery that CERN announced with the Higgs Boson, coming close to laying to rest all speculation

about the creation of the universe. Of course, the spiritualists in our country can never be denied and after a series of heated debates about the potential negation of the existence of God, a happy co-existence seems to have emerged, at least in the minds of the philosophers.

A recent article by Jaggi Vasudev of the Isha Foundation draws a very interesting parallel between the interaction of Shiva and Shakti leading to the Rudra and Hara stages of cosmic creation. As I was telling my daughters fianc Hugh, a scientist who has spent 3 years of his Cambridge PhD and a year of his post-doc on the CERN team, if only they had asked an Indian Guru first, it would have not needed so many scientists to make this significant discovery!

The concept of mass and matter could also potentially find some purchase within our industry today where every Infosys result puts analysts into a spin, giving them the conviction that the software exports sector will be thrown out of orbit for the foreseeable future. After the depressing Infosys performance and outlook in the first week of the results season, a lens of suspicion seems to have been created through which even good news coming from other companies is being viewedthe excellent outlook presented by TCS and the return to good revenues by iGate are just 2 examples!

In the past, mass was provided to the whirling projects of the industry by a couple of million-dollar deal announcements, but in todays economic situation, it is more likely that there will be multiple

smaller opportunities that will continue to add matter and substance to the companys top and bottom lines but not quite give the assurance to the naysayers that all is well!

There is an old clich that a crisis is too good to waste and most far-sighted companies are using this period of longer business generation cycles to build new and sharply focused value propositions in areas ranging from cloud, enterprise social media, mobility to big data, and business analytics. Re-engineering of end-to-end customer facing business processes and use of technology to transform service delivery in the IT industry will also enable us to steal a march over wannabe outsourcing destinations when the demand does pick up around the world!

Finally back to the God particle and as the real scientific work begins with the analysis of the results of the first phases of discovery, the machinery in CERN will be halted this fall with the promise of a higher speed particle accelerator being set up for the next phase late next year. The new velocity of collisions is also likely to accelerate the discovery process. Hopefully, that will also coincide with the dust settling on Europe and the postelection resolution of the fiscal cliff problem in the US and industry growth will accelerate back to the 20+ levels. Till then, lets keep the faith!

Most far-sighted companies are using this period of longer business generation cycles to build new and sharply focused value propositions in areas ranging from cloud, enterprise social media, etc

The author is vice chairman & CEO of Zensar Technologies and chairman of the National Knowledge Committee of the CII. He can be reached at [email protected]

DR GANESH NATARAJAN

DATAQUEST | ACyberMediaPublication visitwww.dqindia.com August15,2012 | 15

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Government

transforming the way Industry works!

16 | August15,2012 visitwww.dqindia.com DATAQUEST | ACyberMediaPublication

GovErnMEnT

Beyond E-governance While CSCs and SWANs may be dominating the discussions about IT in governance, a fundamentally new approach is underway to meet decades-old economic challenges leveraging technology

Pranab Mukherjee, the former finance minister, and now Indias 13th President, may be known for many things. Among them are his administrative abilities as a minister, his loyalty to the Gandhi family, his effectiveness as the chief troubleshooter in UPA, and his personal integrity in such a long innings in politics. But few would associate Pranabdas name with technologytrying something big with it to solve national problems.

For one, reliance on technology to deliver solutions to problems that the country has been grappling with for decadessuch as subsidizing of


GovErnMEnT

kerosene and fertilizerrequires certain conviction, clear political risk taking, and willingness to invest massively on new projects. All his good qualities notwithstanding, Mukherjee is known to be a fiscal conservative at heart.

But what his 3 years of experi-mentation has shown that while he may not exactly be a reformist, like say P Chidambaramthe man most likely to take over the charge at finance ministryhis willingness to try newer means to achieve the old socialist dream of inclusion, has already achieved significant milestones. For the first time since independence, it seems we are on top of the problems, even though it may take a while before we can completely solve it. While Pranabdas term as finance minister in UPA II has been marked by high inflation, general economic slowdown, the country will realize the long-term impact of these initiatives only in years to come. He has shown that ideology is one thing but pragmatism and openness are another.

But what exactly are we talking about?

We are talking about a new approach to solve huge economic/socio-economic problems, with tech-nology at the core of that solution. We are talking about an old-fash-ioned Nehruvian finance ministers definite decision to traverse that path.

On top of those initiatives, of course, is Aadhaar or the Unique ID project. Not the brainchild of Mukherjee, for sure, it however, has seen huge support from him, not just in generous budgetary allocations year after year, but his willingness to make that as the platform for many of governments development programsbe it NREGA disbursement or direct transfer of subsidy; financial in-clusion or strengthening PDS net-

work. Not only has Aadhaar turned into the platform for development in India under UPA regime, he has used the expertise of its chief Nandan Nilekani to try out much-needed reforms in many areas of economy by asking him to suggest ways and means of carrying out those changes. Nilekani probably is the only person in India whose name has featured in 3 consecu-tive budget speechesfrom 2010 to 2012.

Yes, behind (and somehow a little dissociated from) the more familiar phraseology associated with e-governanceand lest we forget, right in the midst of the now-infamous policy paralysisIn-dia has been trying to break new grounds with how technology could be applied to meet tough economic (and socio-economic) challenges. If Pranabda was the patronizing fig-ure behind that effort, and Nandan Nilekani his trusted lieutenant in creating the blueprints, RBInow globally recognized as one of the best financial regulators in the worldhas been providing able support, working in tandem.

Much of what they have done remains to be implemented, and hence to be tested. But the progress in terms of the planning has been significant.

E-gov 2.0New Governance or Beyond?Wikipedia defines e-governance as the application of ICT for delivering government services, exchange of information communication trans-actions, integration various stand-one systems and services between Government-to-Citizens (G2C), Government-to-Business (G2B), Government-to-Government (G2G) as well as back office processes and interactions within the entire government framework.

Going by this definition, e-gov-ernance is all around government services. Or at best, ensuring (maybe, in the background) all that is needed to ensure efficient and effective government services.

Indian approach to e-govern-ance, too, has been on similar lines. The National e-Governance Plan (NeGP), approved in May 2006, comprises of 27 mission mode projects10 of them in center, 10 in states, and 7 integrated.

Phase I of implementationwhich is by and large overmarked building up of the infrastruc-turethe State Wide Area Net-works (SWANs), State Data Centers (SDCs), State Service Delivery Gate-ways (SSDGs), and the Common Service Centers (CSCs) in villages to deliver multiple government servic-es. While how successful the CSCs

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have been is still being debated, by and large, the basic infrastructure is in place. The objective in this phase was to enable electronic delivery services of government services so that those services become accessi-ble and available to the citizens.

Phase II of the e-governance implementation aims at making those services getting delivered more efficiently. That is not possible without right processes in place, the movement of information within government is faster and artificial bottlenecks are removed. This phase focuses on creating better proc-esses and implementation of G2G networks and integrated systems, as implemented in an enterprise.

While CSCs, SWANs, SDCs did not require major thinking by individual government depart-mentsthough they had to make some changes to make their services availablethis phase requires that

the departments take the ownership. While a few ministries and depart-ments have taken the lead in creat-ing those systems and networks, many others do not even have a basic IT plan in place.

Technically speaking, we are currently in this phase of implemen-tation, but one can hardly name a handful of such systems that have been/are being implemented. Those that stand out are the Crime and Criminal Tracking Network & Sys-tems (CCTNS), driven by the Union Home Ministry but a significant part of the roll out being implemented by states; the National Knowledge Network, a network of universi-ties and educational institutions to share knowledge; and FINNet, the network to curb financial crime by the Finance Intelligence UnitIn-dia (FIU-IND), the central national agency for analyzing information regarding suspect financial transac-

tions. But such systems and still few and far between.

On the other hand, the Ministry of Statistics and Program Imple-mentation (MOSPI), which should have been one of the first ministries to create a solid information system has become at the receiving end for announcing wrong data, more than once in recent past.

In many countries, the next goal of e-governance has all been about opennessopen data, open governance. It is not just about transparency and curbing corrup-tion, open access by all to huge raw data collected by government has also helped in fostering innovative application by third parties, help-ing citizens. India is in a peculiar position as far as open governance is concerned. On one hand, it is yet to join the Open Government Partner-ship programa multilateral initia-tive that aims to secure concrete commitments from governments to promote transparency, empower citizens, fight corruption, and har-ness new technologies to strengthen governance.

On the other, the US has collabo-rated with India to create what is called an open government plat-form to enable open data initiatives (the likes of the US data.gov) by any country that wishes to create it without any hassle. Indias own data.gov.in is not yet launched. Ac-cording to sources, it is ready and is getting tested and may be launched any time soon. Indian cabinet did approve national data sharing and accessibility policy in February and it has since been notified.

But where the initiatives make a slight departure from the tried and tested path is what we have referred to in the beginningthe new approach being tried to solve major national issues that we have grappled for decades using tech-nology. In most cases, it has either involved the RBI or Nilekani or

DATAQUEST | A CyberMedia Publication visit www.dqindia.com August 15, 2012 | 21

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both. This approach goes beyond the traditional approach of first finding a path and then applying technol-ogy to automate. Rather, it takes into account the new capabilities that technology brings in and tries to solve the problem leveraging those capabilities. Whether it can be called e-governance or something much broaderespecially consider-ing the somewhat narrow meaning that e-governance has come to as-sume over the yearsis a matter of debate. But it most certainly is the new, new governance. Its objective is to foster economic growth with more effective governance. This is identified with the following:

n A proactive approach in apply-ing technology

n An earlier involvement of professionals often, though not necessarily, involving multiple areas of governance/multiple government entities

But a vision or a new approach cannot achieve things by them-selves. The implementation has to be in sync with the new approach. Since technology is critical to these new projects, there has to be a whole new way of leveraging the power of technology for these unique projects.

In his budget speech in 2010, Mukherjee announced the set-ting up what was called Technol-ogy Advisory Group for Unique Projects (TAGUP) with Nilekani as the chairman. The brief was to look into various technological and systemic issues. The commit-tee submitted its report in January 2011, suggesting a framework of ways and means that could argua-bly be termed one of the most com-plete and comprehensive publicly available frameworks for handling complex government projects with technology at the core, prepared anywhere in the world. While the group was set up to suggest the approach needed to handle finance

ministry projects, the framework could be applied to any large gov-ernment project.

At the core of its suggestion was to take the middle path in terms of technology partnerships. Instead of the old, inefficient way of in-house projects and its alternative of outsourced/MSP model, it suggested what it called creation of National Information Utilities (see box). Earlier mindset was to solve the problem inside the government and then calling an external vendor to implement the solution.

The new model suggested is to create entities (NIUs) that are partnerships among government, stakeholders, and private entitiesbut unlike the SPVs so popular in construction and other sectors, here the clear recommendation from the group was to keep IT companies out of the ownership, because of con-flicting interests. Some of the exam-plesas the report too quotedthat come close to this model are entities like National Payment Corporation of India (NPCI) and National Secu-rities Depository (NSDL).

While the report touched vari-ous aspects of the structure of the NIUs, the agreements with those NIUs and their obligations, the role of government and govern-ment teams working on the project, governance of the project, ap-praisal criteria, right up to various aspects of technology strategies such as selection, mapping policy changes to technology, data qual-ity, information security, interop-erability, and platforms approach where needed. It even addressed openness separately.

One significant point worth not-ingabout which nothing concrete has been heard from the government after the report was submittedis its recommendation to set up a data-base of all IT projects implemented in the public sector, including the PSUs. This database, according to recommendation by TAGUP, should contain comprehensive details of the individual projects and the key per-sonnel associated with the project.

Such a database will assist in identifying the IT talent available in the country, which can be tapped to meet the specific or general requirements of any similar project of national importance. Further, the task of drawing IT professionals on deputation from different depart-ments and PSUs as also on contract basis from the private sector would be facilitated, it noted.

The US has col-laborated with India to create what is called an open government platform to ena-ble open data ini-tiatives (the likes of the US data.gov) by any coun-try that wishes to create it with-out any hassle


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National Inform ation Utilities T

he Technology Advisory Group for Unique Projects (TAGUP) under the ministry of finance, headed by Nandan Nilekani, chairman, UIDAI recommended formation of what it called National Information Utilities (NIU) to handle all aspects of IT systems for complex projects

The Technology Advisory Group for Unique Projects (TAGUP) under the ministry of finance, headed by Nandan Nilekani, chairman, UIDAI recommended formation of what it called National Information Utilities (NIU) to handle all aspects of IT systems for complex projects. This was to take the advantage of expertise of private sector in implementing projects while retaining strategic control by government.

An NIU, as envisaged by the TAGUP, would participate in high-level design, specification of requirements, proof-of-concept studies. This is in contrast to the traditional outsourced vendor/MSP model where the vendor is called in after all specifications are decided. For actual implementation, the NIU then contracts with vendors from the market for specialized services while being completely responsible to the government for committed deliverables and service levels.

The group believed that the NIU model would substantially overcome the problems faced by the government in implementing the projects with in-house skills or through the MSP/vendor model.

Projects that can benefit from an NIU structure may have one or more of the following characteristics, according to the report:

#1 Projects that span multiple levels of governmentscentral, state, local.#2 Projects that span multiple government departments.#3 Projects that span multiple stakeholders, where the network externalities of a thriving

ecosystem around the government developed platform is essential for success.#4 Projects that require significant business process re-engineering to leverage technology.

#5 Projects that aid a sovereign function of government.As conceived by the Group, NIUs would be private companies with a public purpose:

Profit-making, but not profit maximizing.The TAGUP recommended the following for structuring the NIUs:#1 Total private ownership within NIUs should be at least 51%. As a paying

customer, the government would be free to take its business to another NIU, if necessary. At the same time, the government could moderate the functioning

of the NIU by vir tue of being the owner, through its position on the board.

#2 The ownership share of the government in an NIU should be at least 26%.

#3 No single private entity should own more than 25% of the shares in an NIU. Institutions that have a

direct conflict of interest (IT companies) should not be permitted to be shareholders.

#4 An NIU should not go for an initial public offering or list itself on public

exchanges.


GovErnMEnT

#5 NIUs should be dispersed-shareholding corporations with a professional managementteam who are not owners.#6 A re-mutualization approach may be thought of, wherein the shareholders of an NIU

are the entities who stand to greatly benefit indirectly from its success. This would help align their incentives to the impact of the NIU upon society, as opposed to a focus on dividends and valuation.

#7 An NIU should preferably have a net worth of `300 crore. This will ensure that the NIU is well-capitalized, can hire the best people at competitive salaries, and invest adequately in infrastructure, so that it can manage large-scale national projects.

#8 The articles of association of the NIU may include a cap on dividend payouts, to ensure that the incentives of the owners do not drive it towards profit maximization.

However the group was also sensitive to the fact that because of the nature of task, they are set up as natural monopolies. But in future, there may be need/emergence of a competing NIU. The group also suggested that the NIUs must be obliged to provide access/interoperability to newer merging NIUs, when they emerge.

Some of the desirable features for effective functioning of an NIU, as listed by the report, are:

#1 Self-financing: The NIU should be capable of self-financing its operations and providing for its sustenance in the near future.

#2 Make Reasonable Profits: The NIU should endeavor to generate reasonable profits in order to be self-sustaining. The NIU should levy reasonable charges on its users without abusing its dominant position. The NIU must not maximize profit or valuation. Salaries of employees should not be linked to profits. The salaries should be competitive and market driven, to ensure that the best quality of people for the job can be hired.

#3 Net Worth: The net worth of the NIU should be available as a last resort to meet exigencies and ensure that it is able to remain as a going concern.

#4 Professional Standards and Competitive Practices: The NIU must maintain the same professional standards in all its dealings including dealings with its competitors, its technology providers, and related entities. It must be able to maintain its integrity by being unbiased while dealing with all such entities.

#5 Transparency: The NIU should maintain utmost transparency in its operations. The NIU on its website should at least make disclosures that are mandated for a listed company.

#6 Technology: The NIU should be willing to invest in technology for increasing efficiency, reach, and economies of scale.

#7 Competition: NIUs would have characteristics similar to those of monopolies. Hence, it is essential to create enabling conditions that allow new entrants to enter the market, with necessary safeguards in place.

While the TAGUP report itself gives example of National Securities Depository (NSDL), National Payment Corporation of India (NPCI), and Center for Railways Information Systems (CRIS) as being close to an NIU, CRIS may not be the right model to follow, as it is wholly owned by the railways. NPCI, the newest among the three, is probably closest to what the group has envisaged.

National Inform ation Utilities The Technol-ogy Advisory Group for Unique Projects (TAGUP) under the min-istry of finance, headed by Nan-dan Nilekani, chairman, UIDAI recommended formation of what it called National Information Utili-ties (NIU) to han-dle all aspects of IT systems for complex projects. This was to take the advantage of expertise of private sector in implementing projects while retaining stra-tegic control by government


GovErnMEnT

Apart from TAGUP, Nilekani also headed a task force to suggest direct transfer of subsidies on kerosene, LPG, and fertilizers to the beneficiary. The task force, in its interim report, released in June last year recommended fully electronic service delivery and use of Aadhaar. It suggested creation of a core subsidy management system, like the core banking system in a bank.

Nilekani was also entrusted with suggesting the model for the NIU for GST Network, one of the projects that was part of consideration by the TAGUP. While the final report is expected later this year, a draft report available suggests that NSDL may incubate the NIU.

Nilekani had also recom-mended using of Aadhaar to create a centralized public distribution system network (PDSN) as an NIU. The draft Food Security Bill too endorses this viewpoint. It is extremely important to explore the synergies between these two programs which will go a long way in streamlining the food delivery mechanism, it says.

However, since many states have already undertaken their

PDS modernization system, there has been some concerns by them. There has been media reports that the food ministry is opposed to the Aadhaar-based system and wants to go for the NIC solution already created. Pranab Mukherjee was

backing the UID-based model.

There have been reports that a few other ministriessuch as external affairs minis-tryare creating some such projects, leverag-ing technology. As of now, the Finance Minis-try leads the change.

The Future?So far, so good. But with Pranab Mukher-jee out of the finance ministry, what is the future of these plans? The question is not Pranab or no Pranab;

the question is the future with possibly Chidamabram as the finance minister, says someone familiar with the affairs.

As home minister, Chidambar-am has openly voiced his reservations about UID project. He has even written to the prime minister a few times accusing UID and Nilekani of trying to stall the NPR rollout. In addition to his not-so-cordial relationship with UIDAI, he is also known to have strong opinions.

While Pranab stuck to the core promise of UPA and sin-cerely worked to fulfill thatus-ing professionals like Nilekani to helpChidambarams priority may well be reforms, if he as-sumes charge of the ministry. The corporate lobby is wanting reforms, the middle class was neglected by Pranab. With elec-tions in early 2014, that may be the new FMs agenda. While some areas like GST fit into that agenda, some others like PDS reforms, direct subsidy etc may not be such a high priority.

More importantly, while the TAGUP recommenda-tions had been accepted in principle, much depends on how the projects are rolled out. Whether the new finance ministerand especially if it is Chidambaramwill go by those recommendations is itself a big question.

The problem is, today Aad-haar is so well entrenched in all of governments develop-ment programs that to proceed without it, each of these pro-grams have to go a few steps backward. And for a government already ridiculed for its indeci-siveness and policy paralysis, that will be a huge negative. For India as a country, it will prove the cynics rightyahan kuchh nahin ho sakta.

The problem is, to-day Aadhaar is so well entrenched in all of governments development pro-grams that to proceed without it, each of these programs have to go a few steps backward. And for a government al-ready ridiculed for its indecisiveness and policy paraly-sis, that will be a huge negative


GovErnMEnT

Crime and Criminal Tracking Network & Systems (CCTNS)(Under implementation; http://ncrb.gov.in/cctns.htm)

CCTNS is a ministry of home mission mode project under NeGP, aimed at creating a network that would facilitate smoother informa-tion sharing among police stations across the country, thus helping track criminal activities more effec-tively and helping in speedy inves-tigation of crimes. First conceptual-ized in 2008, during UPA-I, it was approved by CCEA in June 2009, with an allocation of `2,000 crore.

The key objectives of the CCTNS project, as listed by DG, National Crime Record Bureau, in his origi-nal letter to states include:

Providing enhanced informa-tion technology tools for investiga-tion, crime prevention, law and order maintenance, and other functions

Increasing operational ef-ficiency by reducing manual and repetitive tasks (data to be entered only once which would automati-cally prepare all the registers)

Better communication and automation at the back-end

Sharing crime and criminals databases across the country at state and central levels

Sharing intelligence on real-time basis

New Governance ProjectsImproving service de-

livery to the public and other stakeholders

When fully functional, the system is expected to pro-vide the following

Citizen ServicesEase of accessing serv-

ices provided by the police department

Traceability of requests through use of IT

Police Department ServicesQuick responses to inter-district,

inter-state and inter-departmental service requests

Quick response to queries for efficient policing for example unidentified dead bodies, chance finger prints, missing persons, stolen vehicles, stolen arms etc

Generate alarms at police sta-tion and supervisory ranks

Quick feedback from senior officers on identified crime patterns

Easy compilation of crime data and reporting including daily, weekly, fortnightly, quarterly, and annual reports

Less time spent on non-core back office tasks thereby leaving you more time for law and order duties

Increasing the overall im-age of efficient, modern and citizen friendly police

In June 2010, a contract was signed with Wipro to develop the core application software (CAS) for the project.

As of information from the minis-try in May this year, the first version of the Core Application Software has been released to the States/UTs for their study purpose. As many as 17 States/UTs have signed their con-tracts with their selected system in-

tegrators. An agreement with BSNL for providing pan-India connectivity has been signed. STQC has certified the data migration utility for CAS.

According to the Minister of State, a total of `418.87 crore had been released for the project and a total of 4.54 lakh personnel have been trained under various types of training.

GST Network (GSTN)One of the five projects studied by the TAGUP headed by Nandan Nile-kani for ministry of finance, the GST Network is envisaged as an NIU. But since there is still some unresolved issues within GST concept itself among some states, the project may get a little delayed. Planning Com-mission deputy chairman and Bihar deputy chief minister and finance minister Sushil Modi, who heads the empowered committee of state finance ministers on GST rollout, seem optimistic that the system may come into place in 2013. That requires passing off of the 115th Constitution Amendment Bill in either the monsoon or the winter session of the Parliament.

But meanwhile, a draft report of an empowered group headed by Nandan Nilekani to work out IT strategies for GST, which is likely to submit its report in September/Oc-tober, gives a glimpse of the way it is being planned. The group has recom-


GovErnMEnT

mended a common GST portal, oper-ated by GSTN, as that is the most cost-effective way to provide common PAN-based registration, common returns, and common challans for all stakeholders. The group thinks that it can marry the taxpayers standard interface with the varied systems of the tax administrations. Each tax authority will have full flexibility in using this data for in-house automa-tion, integration, and enforcement.

The basic solution architecture suggested by the draft report is as follows:

#1 Taxpayer files through a standardized taxpayer interface.

#2 States and Central Board of Excise and Customs (CBEC) imple-ment tax administration systems for assessments, audits, and enforcement within their domain. This is desir-able but not a pre-condition since the GSTN can provide support for states that do not have the necessary IT systems in place.

#3 The taxpayer and tax authority systems are connected with a Com-mon GST Portal, operated by GSTN.

#4 Policy decisions are captured in GST business rules engine that defines the tax rates, revenue sharing rules, and exceptions for all parties.

The business rules engine is a component of the solution archi-tecture that spans all entities. It codifies policies and business rules such as the rates of taxation, the revenue sharing between states and centre, a framework for exemption,

and thresholds, among other things. All systems in the rest of the solu-tion architecture will be designed so that they load business rules from the business rules engine. This de-coupling of the business rules from the rest of the solution architecture allows for a great deal of flexibility.

At a later date, if rates are changed or new items are added to the list of taxable items, or if existing items are exempted; these changes can be reflected in the business rules engine, without affecting the rest of the system. This also makes it possible to start the design and implementation of all IT systems, even while policies and rates are debated. Once the poli-cies and rates are fixed, they can sim-ply be reflected in the business rules engine, according the draft report.

In addition to common registration, returns, and challans, the common GST portal will provision for selected information needs of states. The group is of the opinion that GSTN could be incubated under NSDL.

(Source: A draft report, The IT Strategy for GST by Empowered Group on IT Infrastructure on GST headed by Nandan Nilekani)

Core Subsidy Management System (CSMS)The basic concept of core subsidy management system (CSMS) was suggested in an interim report dated June 2011 by the Task Force on direct transfer of subsidies on kerosene, LPG, and fertilizers, headed by Nan-dan Nilekani. As of now, it has been launched on a pilot basis in a few states. This was referred to by the then finance minister Pranab Mukherjee in his budget speech in 2011.

The concept is similar to the Core Banking Systems (CBS) implemented by banks. The CSMS would automate all business processes related to direct subsidy transfer. But since the spe-

cific policies and business rules will continue to be framed by the policy makers in the respective ministries, it recommended high customizability for the system so that various stakehold-ers can customize the CSMS for their own requirements, and extend it to integrate with their own processes.

The CSMS would maintain the subsidy accounts of all benefici-aries, and all policies related to subsidy management, the report suggested. The CSMS would be capable to support all forms of direct transfers of subsidies such as non-cash transfers, conditional cash transfers, direct cash transfers, etc.

In addition to maintaining the subsidy accounts, it would need to be integrated with a number of other external systems of other government departments, partners, and service providers to effectively monitor the scheme, and ensure the desired qual-ity of service, the report outlined.

The CSMS will contain the fol-lowing modules, some of which may need to integrate with external sys-tems. The basic modules of CSMS would include:

#1 Business rules engine#2 Beneficiary and family identi-

fication module (adhaar integration)#3 Product movement and stock

tracking module (ERP systems integration)

#4 Direct subsidy transfer mod-ule (integration with nodal bank and payments gateway)

#5 Transparency module (Data.gov.in integration)

#6 Contact Center module#7 Training, education,and out-

reach module#8 Logistics module#9 MIS module#10 Module to integrate with

other subsidy management systemsThe report clarified that the CSMS

would not replace any existing sys-tems, but would complement them, by extending their functionality and integrating various modules. n


CovErSTory

For a long time, DQ Top 20 has been the final word on the IT industrythat is, the supply side of IT. While in the past, there has been some coverage of vertical-wise IT trends, they were limited to analysts views, focusing on narrow areas like IT spend and a few contracts.

Part of the reason was historicalDQ Top 20 has always been an IT industry round-up and hence the vertical analyseseven when we included them, were inside-out views. But a more signifi-cant reason was that IT was an isolated thing as far as business was concerned. It was deployed to automate certain processes and more

The High Momentum Verticals ITor rather part of itis now inseparable from business; DQ Top 20 brings you analyses of verticals which are witnessing a potentially high impact of IT, both in its approach and growth as well

Shyamanuja DaSThe author is ex-editor, Dataquest

[email protected]


CovErSTory

efficiently store and process in-formation. It was never thought of as a solution to a business challenge, a business problem.

That has most definitely changed. IT is now interwoven with business, not only finding solutions to existing business problems but also finding out new opportunities for business. In short, ITor rather part of itis now inseparable from business.

And that explains the funda-mental shift in our approach to analyses of the businesses. Each of the analyses starts with the state of the business, going into challenges and opportunities, and identifies areas where and how IT is being/can be applied, finally, of course, estimating the total IT spend by the industryan outside-in view as far as IT in-dustry is concerned. Ask any IT industry sales guy and he would admittoday he needs to know his clients business better than he needs to know his companys products and services; at least he has specialists to back him up for the latter.

In each of the analyses, you will find:n A rough sizing of the industryn Characteristics of the indus-

try such as competition/fragmen-tation, how global is itn Major business drivers/ma-

jor value driversn Current challenges facedn Use of IT to solve challeng-

es/leverage opportunitiesn What areas of IT the indus-

try is spending on including any specific new trendsn Total IT spend by the indus-

try last yearn Forecast of IT spend for the

current year (FY13)And of course, from segment

to segment certain points are likely to vary; manufacturing is a broad sector whereas telecom is focused and well-regulated; segments like construction and retail are dominated by unorgan-ized sectors; education, that is dominated by government and so on. There is bound to be dif-ference in how the IT industry

approaches these verticals. Not surprisingly, you will find a slight difference in approach when it comes to analyses of these verti-cals.

And of course, the big ques-tion. How did we select these verticals? By and large, we selected the high momentum and potentially high momen-tum verticals as far as IT is concerned. Here is what we considered.

Size: It is only when large sectors like banking, telecom and manufacturing take to IT, the industry moves. A BPO industry may be a far more sophisticated user of IT but it cannot move the industry the way the large indus-tries can move

IT Adoption: An industry can be big but it may be very low on IT usage. However, here we have taken industries that are on the threshold of going for IT in a big way, even if the overall penetra-tion may be low. These industries include education.

Potential of IT Creating Transformational Changes: Some industries like construc-tion may not have yet got too much penetration but the lead-ers have done it and the inter-national experience shows that it can impact a lot. So, they are included. n

IT is now interwoven with business, not only finding solutions to existing business problems but also finding out new opportunities for business

VerticalFY12 IT Spend

(`crore)FY13 Forecast

(`crore)Growth (%) Comment

Banking 7,650 8,278 8 Mature IT user; pockets of white space

Manufacturing 9,150 9,562 4.5 Vast disparity in IT usage; penetration will still drive growth

Telecom 5,300 6,013 13Not-so-good market sentiment, IT growth driven by blurring of boundaries between IT and telecom technologies

Construction 1,050 1,058 0.8 IT usage restricted to a few; huge potential

Education 3,300 3,930 19 Just beginning to spend on tech; IT can transform; sustainable growth

Automotive 1,950 2,200 13 An industry fast globalizing, tech spend helping the globalization

Retail 1,800 2,150 19Both organized and semi-organized sectors offer huge potential; low-hanging fruits would soon get exhausted

Transforming the way Automotive Industry works!

AuTomoTIve


AUTOMOTIVE

Indian automotive industrycomprising of the OEMs and the component makershas surely emerged as the star in the Indi-an manufacturing sector in the last few years. This is probably the only industry that has successfully put to test the oft-dis-cussed engineering-led manufacturing strategy to create a competitive advantage for itself.

Not only has India become the sixth largest producer of motor ve-hicles, overtaking Brazil, it has become a significant exporter of pas-senger and off-road vehicles. Exports accounted for one-seventh of all the passengers vehicles manufactured in the country. That is quite an achievement for a country whose exports was almost negligible just a decade back.

India is the global auto industrys favorite new engineering center. Indian auto industry is leveraging this trend to market itself globally. And succeeding. In this new transformation, technology is playing the most crucial role

In Search of Frugal-IT?


AUTOMOTIVE

consultation with the industry, the target is to reach the $145 bn mark by 2016, accounting for more than 10% of the GDP, and providing additional employ-ment to 25 mn people by 2016. Going by the current industry size, that is about one and half times growth from todaytough but possible.

The exports are growing ex-tremely well and penetration in the domestic market is low. For a country that is the sixth larg-est producer of motor vehicles, Indias position among countries in car penetration is 132nd. Domestic opportunity, in itself, hence is immense. Further, the engineering-led approach is just beginning to gain momentum.

For the Indian engineering services industry, automotive as a vertical remains the biggest, accounting for more than 30% of the total revenue, and contribut-ed an estimated $1.5 bn in FY12. Many of the engineering serv-ices vendors/captives are now working on art-to-part kind of projects whereas they dont just design/engineer the product, but get it manufactured locally.

Most global OEMs now have

their captive engineering/R&D centers in India. Not only has India become a hot destination for frugal engineering cham-pioned by Nissan-Renault boss Carlos Ghosn, most of the new research on hubrid/electric/green technology has an India research component. Nano has also helped to project India as a solid engi-neering center for frugal engi-neering. Played well, India could convert that to a manufacturing oppportunity.

Further, the passenger car itself is going through a transformation, with share of electronics in it increasing. India, already one of the big-gest destinations of embedded design, is now seriously target-ing the ESDM space. Globally, auto industryOEMs and tier-1sremain one of the biggest customers of semiconductors. If India succeeds in attracting semiconductor manufacturing, that will be a further boost to its auto manufacturing dream.

In short, the metamorphosis that the global auto industry is undergoing from an efficiency/supply chain driven industry to a knowledge-driven industry is ac-tually significantly being driven from the shores of India. How well that translates to actual rev-enue of the industry still remains to be seen.

IT Playing a Vital RoleBut one thing for sure, IT will play a far more important role in the evolution of the automo-tive industry from here than it has traditionally played. India, which is just emerging as a manufacturing destination and has a big IT base, will see IT playing transformational role in the industry.

The engineering/design re-mains the first and most impor-

Key TakeawaysAccording to SIAM, the Indian

automakers produced 20,366,432 vehicles in FY12 (April-March), growing by close to 14% over the production last year

According to Dataquest estimates based on financials of top players, the auto industry value for 2011-12 stands at close to $65 bn

In India, automakers have been more mature users of technology than other sectors in manufacturing and are looking at leveraging technology to connect with their end customers

BI/Analytics is being rolled out in most large auto companies, including in some large component companies

According to the OEM in-dustry association, Society of Indian Automobile Manufactur-ers (SIAM), the Indian automak-ers produced 20,366,432 vehicles in FY12 (April-March), growing by close to 14% over the produc-tion last year. Passenger vehi-cles accounted for close to 15% of the total production, while two-wheelers still accounted for a whopping 76% of the total production.

While domestic sales grew about 12%, because of a sub 5% growth by the passenger vehicles segments, exports grew by an impressive 25.5%. Car exports crossed half-a-million mark for the first time. In terms of value, the industry stood at $58.6 bn in FY11, according to SIAM. Ac-cording to Dataquest estimates based on financials of top play-ers, the figure for 2011-12 stands at close to $65 bn.

According to the component industry association, Automo-tive Component Manufacturers Association of India (ACMA), the turnover of the auto compo-nent industry stood at `182,127 crore ($39.9 bn) for the period April 2010 to March 2011. This includes the captive suppliers to the OEMs and the unorganized & smaller players. The figure for FY11, excluding those segments was $26 bn, according to a report by India Brand Equity Foun-dation. Based on the results of listed players, Dataquest esti-mates the organized, third-party component industry size to be close to $29 bn.

The two segments together account for more than 6% of Indias GDP and employ more than 600,000 people directly and more than 12 mn people indi-rectly. According to the Automo-tive Mission Plan 2006-16 pre-pared by the released in 2006, in


AUTOMOTIVE

social media to study consumer behavior/market the new prod-ucts/better connect with them. This is not surprising considering most consumers are now using internet to research while taking a car buying decision.

According to a study by consulting firm, Capgemini, Cars Online 11/12, released earlier this year, the percentage of us-ers who say they use internet to research before buying a car has sharply increased from just

about 20% in 2002 to 94% in 2011. Interestingly, the impor-tance that buyers attach to user-generated content has also gone up substantially. Those buyers who say user generated content is very important/important in influencing their buying decision has gone up from 65% in 2010 to 73% in 2011.

In fact, among all the coun-tries surveyed by the study, Indian buyers seemed to attach the most importance to this, with as many as 83% saying this is important/very important. The findings highlight the increas-ing importance of managing, monitoring (by vehicle brands/models, themes, positive/nega-tive sentiment, purchase intent, consumer demographics, etc) and analyzing social media content.

The report also shows where all this is leading to: Online buying. As much as 42% of the surveyed say that they are likely/very likely to buy vehi-cles online. Surprisingly, it is developing world markets that are more open to buying online, with Brazil, China, and India respondents leading in terms of their openness to buy online. As much as 53% in India say they are likely to buy online. And this number has shown a steady rise in the last three years, unlike in China and Brazil.

No surprise, marketers are increasingly using these chan-nels to reach out to customers. While these decisions are taken by marketing department, unlike the engineering/design IT, it is not isolated from the enterprise IT, as there has to be a smooth integration with enterprise ana-lytics/CRM and decision making. CIOs, in most cases, are involved in supporting these.

And finally, traditional enter-

Sou

rce:

SIA

M

NA

11 11 1418 20

3%26%

27% 14%

FY08 FY09 FY10 FY11 FY12

Total No of Units (mn) Two-wheelers Share Three-wheelers Share

Commercial Vehicles Share Passenger Vehicles Share

37

18

33

18

43

22

59

26

65

29

FY09FY08 FY10 FY11 FY12

OEMs1 Components (Non-OEMs only)2

Sour

ce: 1

SIA

M, 2

IBEF

, * D

Q E

stim

ates

Growth of Automobile Sector (By volume) (All units in mn, share and growth in %)

Growth of Automotive Sector (By value)(All figures are in US$ bn)

tant pillars for the automotive companies as far as spending on technology is concerned. The second area that is seeing a lot of interest from passenger car mak-ers is that, for the first time, they are looking at leveraging technol-ogy to reach out to and connect with their end customers.

The traditional CRM defini-tion synonymous with dealer management system is undergo-ing a huge transformation as car makers now embrace internet/


AUTOMOTIVE

America and Japan spend. In Japan, in some cases, it is even more.

Of course, part of the reason is because Indian companies (and especially the ecosystem) is not as sophisticated. But it is also because the way they have implemented IT. Most Indian automakers have implemented IT in the last 20 years and hence have gone largely for standard-ized software, unlike most large global automakers, which had im-plemented IT before many of the standard software of today made their debut/were not so mature.

So, a large part of the IT in those companies are homegrown. As a result, it is not just high maintenance cost that explains their high recurring expenditure on IT, but also implementations of newer applications that re-quires significant services helpthus costing more. Indian compa-nies typically do not require that. Also, lower cost of manpower makes services cheaper.

Further, in India, since most of the dealers and suppliers are still new to IT, they are influ-enced heavily by the OEMs, for going for standardized software. Many even intervene in terms of negotiating with IT vendors on their behalf.

Outlook on Indian Automotive Sector for 2012-13

Abdul Majeed, leader, automotive practice, PwC India

The Indian macroeconomic environment continues to supply a confounding array of mixed signals (especially the uncertainty in fuel prices), the automotive market will steadily emerge from a temporary slowdown in growth from August, buoyed by the festive demand. Also, the demand for diesel vehicles is likely to remain strong, as long as the steep difference between diesel and petrol prices exists in India. However, capacity constraints (in diesel) can limit sales in the near term.

To maximize opportunity in the current market conditions, companies need to cater to the rising rural consumer base. Few automakers after being exposed to perils of a joint venture/strategic alliance no longer wish to continue that relationship and are instead willing to drive their Indian strategy on their own by pumping in billions of dollars of investment.

Similar to China, India has placed curbing inflation atop its economic agenda. With nearly 3 out of 4 vehicles sold in India being financed, interest rate hikes have had a significant and direct impact on automotive sales. Deregulation of gasoline prices have also impacted the operational costs for vehicle ownership, eroding demand at the entry level of the market. As a net result, Indian light vehicle sales is likely to see a single-digit growth rate in the range of 6 to 8% this fiscal ie, FY13.

Going forward, both OEMs and suppliers should focus on win-win relationships with competitors to exploit strengths as opposed to perceived weaknesses such as the lack of an effective sales and distribution strategy. They should allow both cooperation and competition to exist within the alliance by clearly determining the objectives. Only through such alliances, companies will be able to fill knowledge gaps in areas such as alternative fuels, electric vehicles, and powertrain.

Through such initiative they will be able to implement a new business model balancing precarious near-term volume estimates with long-term visions of sustainable and profitable growth. With long-term demand fundamentals still intact (rapid economic growth, growing middle-class, rising disposable incomes and low penetration rates) the Indian industry will regain its stride by the end of the year.

prise IT remains an important tool (the third pillar) to bring in more efficiency, enable better decision making, running more effective enterprise functions such as HR, enable sourcing and so on. Like most industries, automotive too is seeing a lot of interest in BI and analytics. Newer systems in supply chain functions/sourcing continue to remain important, while one area that has gained momentum is MES-ERP integration.

The automotive industry leads manufacturing industry on this aspect. In India, of late, a lot of focus has gone to HR and with the industry transforming itself

to a knowledge-driven industry (more so in India), the impor-tance of HR will only increase in time to come. This also remains another area for technology ap-plication.

State of the Tech As far as enterprise IT is con-cerned, Indian automotive com-paniesespecially OEMsspend much less than their global counterparts in the West and Japan. On an average, Indian automakers spend less than 1% of their revenue in technology as compared to the 1.5-1.7% of the revenue that many global automakers especially those in

FY12 FY13

1,950 2,200 Sour

ce: D

Q E

stim

ates

13%

IT Spend (Vehicle Makers and Auto Components) (All figures are in `crore)


AUTOMOTIVE

However, to some extent, this is changing, as Indian com-panies acquireespecially in mature markets (like Jaguar Land Rover). Disparate IT sys-tems will come to their fold with acquisitions and that will make it necessary to spend on serv-ices. Many CIOs say that this is where they are looking at how cloud model can be creatively used.

So, Indian auto companies, on an average, spend only about 40-60% on systems, services, and infrastructure, as compared to 70-80% by their global counterparts. Like most industries, auto makers too are looking at getting the best out of their existing IT investment. Tougher economic condition only reinforces that need. BI/Analytics, hence, is being rolled out in most large auto compa-nies, including in some large component companies.

With competition and tougher market conditions, there is pres-sure on margins for most. That is leading them to focus again on enhancing efficiency. Those investments are going towards newer applications in the supply chain. Both HR and finance are being relooked at, with some IT deployment.

Another area that is seeing interest is better integration/in-tegration of MES with enterprise IT for more effective decision systems. On both CRM and SCM side, many automakers in India are exploring to better leverage mobile technologies, though on ground, very little has happened beyond some pilots. In any case, with the slowdown, the atten-tion has shifted to core systems efficiency than new, discretionary systems.

Another interesting trend is beginning to be seen in some

companies: Research on emerg-ing technologies in the interface of automotive/IT areas, such as telematics/navigation systems/newer control systems and so on. We may well see dedicated CoE models in these areas, pos-sibly in partnership with service providers.

While there is a lot of buzz about internet/social media, and some marketing spend is beginning to go towards that, in terms of IT investment, it has not seen any significant trac-tion. In the next 12 months or so, if the economic situation improves, there may be some investment in areas such as mobility and retail. If the con-ditions remain tough, spend on BI/analytics would continue.

In auto components indus-try, that is far less mature in IT implementations, many are still rolling out basic systems such as ERP and SCM. This segment will drive growth of systems and

infrastructure, in the near to medium term.

Industry IT SpendAccording to Dataquest esti-mates, IT spend by the automo-tive sector in FY12, as a whole fell short of `2,000-crore mark. This does not include spend on MES and engineering/design. The latter itself could be almost as high as this. The figure also does not include IT spend by for-eign subsidiaries of Indian auto companies such as Jaguar/Land Rover. Further, it also does not include the IT spend by cap-tive engineering/R&D centers of global auto majors.

As outlined above, internet/so-cial media related IT spend has been negligible. This is likely to see a modest growth of 13% in FY13, assuming the tough economic con-dition prevails. There are already budget cuts happening.

In India, automakers have been more mature users of technology than other sectors in manufactur-ing, partly because of the nature of the industry and partly because of unique factors associated with Indian automotive industrywhich is globalizing fast and has taken a significant lead in trans-forming itself into a knowledge-driven industry.

Yet, use of IT still remains mostly distributed between the most essential IT systems and some tactical solutions. IT is yet to be used for strategic differ-entiationeither in design or customer relationship/retail. One company that has taken some steps along this direction, among automakers, is M&M. The industry, as a whole, has a long way to go. Indian automotive is in an extremely important phase of its evolution. The next few years will see technology becoming far more strategic. n

In India, automakers have been more mature users of technology than other sectors in manufacturing, partly because of the nature of the industry and partly because of unique factors associated with Indian automotive industry

Banking

In a way, the sophistication of the financial system in a country is a pointer to the maturity and robustness of its economy. Indias a typical case. Like in its society, di-versity is the keyword in Indian banking. While some of the banks here are comparable to the best in the world when it comes to their use of technology and newer channels, it is also a fact that, despite quite some progress on the financial inclu-sion front in the last couple of years, as much as 40% of Indian population is still unbanked.

Yet, as a developing country, Indias track record in finan-cial services is better compared to its peers or for that matter, its other institutional frameworks. India which ranked 56th

among 142 countries in the 2011-12 World Economic Forums Global Competitiveness report fared better than most developing countries in the broader area of financial markets, ranking 32nd globally in terms

of soundness of banks, 32nd in affordability of financial services, 35th in

ease of access to loans, and 45th in availability of financial services. This was the only area where all sub-parameters were considered as strengths.

Indian banking industry, in most business parameters, too is comparable to its global coun-

terparts. According to a report by

Best Foot ForwardIndian banking is world class. But two challenges lie before it to convert Indias cash economy to electronic means and to reach out to the 40% unbanked population. Technology is the prime enabler of both


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Boston Consulting Group (BCG), Being Five Star in Productiv-ity Roadmap for Excellence in Indian Banking, released in August 2011, the Indian bank-ing industry stands out for its relatively robust balance sheet and sound performance. The report says that Indian banks profitability leans towards the higher end of the spectrum, while its costtoincome ratio leans towards the lower end. In addi-tion, bad debt charged to P&L remains moderate and valuation is sound. It concludes that on the quality and soundness of financial services sector, India has an edge over other emerging markets.

A lot of this has been made possible by a very balanced approach to regulation by the In-dian regulator, the Reserve Bank of India (RBI). The fact is that it plays 3 rolesone is of an eco-nomic advisor to the government, monetary policy maker, and the regulator of bankingonly adds to its effectiveness.

One aspect of that effective-nessensuring that Indian banks were not too affected by the global financial crisis of 2008-09has been hailed globally. However what is still largely an unsung story is the way RBI

has proactively promoted use of technology in all aspects of banking. It has gone beyond just issuing mandates and guidelines to actually help banks implement key IT strategies by establish-ing a center for excellence in the form of Institute for Develop-ment & Research in Banking Technology (IDRBT), which has helped banks get the benefit of technology in various ways. RBI also worked with Indian Banks Association (IBA) to set up Na-tional Payment Corporation of India (NPCI) which is aimed at creating an affordable payment mechanism. IDRBT and NPCI have succeeded in bringing down the cost of ATM transactions drastically and NPCI is now tar-geting to repeat the story in debit card payments.

To someone familiar with developed markets dynamics, it may sound strange that a regula-tor is championing technology adoption, but in the peculiar landscape of Indian bank-ingwith a significant number of public sector banks that have traditionally not operated with a typical commercial mindsetit would have been virtually impos-sible to ensure adoption of best practices in technology without a

strong regulatory thrust. How-ever, that does not mean that all Indian banks are led by regula-tion/compliance when it comes to technology adoption. Almost all new private sector banks and a few public sector and old private sector banks are using technology for competitive advantage.

Miles to Go, StillWhile the BCG report does indicate that in most business pa-rameters Indian banking indus-try matches the global industry, part of it is due to the peculiarity pointed abovethe large dispar-ity among Indian banks. So, a good arithmetic average does not automatically mean a healthy overall industry. #2, while some of the ratios may look healthy, the banks do not necessarily operate in the most efficient man-ner; the inefficiency gets hidden as banks do not reach out yet to the lower income groups. #3, low cost is often a result of low cost of manpower.

What is worrying, however, is the efficiency of customer processes. The same BCG report points out that most Indian banks83% of themtake more than 3 days to sanction a mort-gage application, while as much

Foreign Banks1.5%

Nationalized Banks32.4%

State Bank Group28.4%

Old Private Sector Banks

6%

New Private Sector Banks

31.7%

Distribution of aTMsShare in %

(As of March 2012) FY12FY11FY10FY09FY08FY07FY06

26%

38%

24%

28%

28%

34%

95,686

20,26727,088

34,789

43,651

60,153

74,505

growth of aTMsATMs Base


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as 55% of the international banks that it took as a sample, do that in less than a daysome 15% within one hour.

The BCG report categori-cally states that process excel-lence critically depends upon the underlying technology platforms. On an average, Indian banks spend only about 2% of their revenues on technology, says the report. The figure is bit higher for new private sector banks, at 4%. The median expenditure on IT as a percentage of revenues in Europe, on the other hand, is about 9%, it says quoting a sur-vey of leading European banks.

Indian banks have already got the benefit of the first phase of technology investmentin ATMs. It has considerably re-

duced the visit to branches. ATM deployment has seen phenom-enal growth in the last 5-6 years, growing almost 5-fold between 2006 and 2012. In 2010-11, the number of ATMs deployed overtook the number of branches for scheduled commercial banks. However, there too, PSU banks other than the State Bank group have to do a lot of catch up. The allowing of white label ATM op-erators by RBI is going to further boost ATM transactions, thereby reducing stress on branches.

ATMs, online banking, and branch office automation/imple-menting core banking solution have shown banks what technol-ogy could do. So far, so good. But to compete, as the BCG study shows, they have to drastically

up investment in IT. Before one gets into where and how, one thing must be clarified. Most take for granted that the CBS implementation phase is over. While that statement may be true for commercial banks, India is home to thousands of RRB and cooperative bank branches. Their story is equally interesting though the numbers involved are much smaller.

CBS Market: Alive and KickingMost commercial banks have, by and large, implemented core banking. But core banking solu-tions vendors still have a field day as a host of regional rural banks (RRBs) and cooperative banks started the journey much later. RRBs, thanks to their more

Financial Inclusion: The ICT PushThe thrust on financial inclusion in India follows directly from the governments thrust on social inclusion. Unlike in mainstream banking, the financial inclusion plans had no proven model to follow. India, after a lot of deliberations, chose to go by the bank-led model. RBI allowed banks to appoint business correspondents (BCs). RBI tried to promote ICT based approach which encouraged BCs and banks to try out ICT based models. RBI relaxed many rules to enable opening up of small, often what is called no-frills accounts. The government linked it with the Unique ID program to ensure that even the government subsidies, loans, and pensions were dispatched through the financial system, encouraging people to come to the banking system. RBI aggressively followed up with banks to ensure that the financial inclusion targets are met.

As a result, all banks created a 3-year financial inclusion plans from April 2010 to March 2013, which included opening up of rural branches and opening up of no-frill accounts through BCs. After completion of 2 years (March 2012), the progress, in terms of numbers, does not look bad. Almost all (99.7%) of the 74,000 plus villages with a population of 2,000 plus that were identified as unbanked, have been covered by banking. In the next phase, the target is to cover villages with less than 2,000 population. A total of 3,171 rural branches opened during the 2-year period. In the same period, number of BCs tripled from 33,000 to more than 96,000. The number of no-frills account more than double from 49 mn to 103 mna net addition of 54 mn. The number of ICT based accounts in that went up from 12.5 mn to 52 mnthat is 25% of the total to 50% of the total no-frills accounts. No denying ICT is playing a major role in achieving financial inclusion.

However numbers tell only half the story. Many banks have seen this more as an obligation than an opportunity and have not taken it seriously beyond opening accounts. RBI realizes this and has announced in the monetary policy of 2012-13 that going forward, the focus will be more on the number and value of transactions in no-frills accounts and credit disbursed through the ICT based BC outlets, and not merely on number of accounts opened.

Some technology issues such as availability of handheld devices and cards remain. Also, the ICT solutions used are mostly point solutions. Today, the transactions in most cases do not happen on banks CBS on real-time. The focus is too much on the last mile technology. While once the data comes to CBS through some batch mode, it is treated like any other customer data, in between, there is no standard approach by BCs. That raises the risk of security and brings in operational glitches. If the bank has to work with multiple BCs, it has to do a lot of consolidation at its end. If banks have to seriously look at the opportunity at the bottom of the pyramid, the ICT approach has to be more standardized, and the accounts have to be full services rather than no-frills.

Part of it would be solved once Aadhaar numbers become widely available and all the accounts linked to the Aadhaar number. The government is now insisting that all large payments would be made to bank accounts and that is likely to push up the usage of these accounts. If subsidies are directly credited to bank accountas it has been done on a pilot basis in some statesthat would also people to use the accounts more.

NPCI, IBA, and UIDAI are working together to create a network of 1.4 mn micro ATMs. Banks will do the authorization while UIDAI will do the authentication.

Indias experimentation in financial inclusion is being followed by the global community with a lot of interest. What works effectively in India has the potential of being taken to other emerging markets.


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DQ TOP 20 Volume II