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Issue of March 2006 

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Re-Drafting IT & the ITO

Extracting the most from the least

Consolidation rather than replacement is the name of the game as India Inc focuses upon squeezing out maximum RoI from existing resources. DR preparedness as well as interest levels in SOA, leasing and outsourcing models are on the rise. By Kumar Dawada

Things have come a long way from the early haphazard days of IT deployments. Today the first thing that an organisation thinks of when planning an investment is whether technology investment is crucial to its core business. An IT implementation happens only if it is an indispensable business need.

Once the implementation goes live, the entire focus is on how to extract the maximum RoI and in the shortest possible time. This is because most deployments initially remain underutilised.

The Quest For ROI

Ishwar Jha

Today it is essential that the IT initiative is scalable. It must be based on business needs. “The organisation must get quantitative results from it and optimise costs like maintenance, support and obsolescence costs. In such a case the organisation can extract maximum RoI,” says Ishwar Jha, VP, Business Technology, Zee Network.

Satish Pendse, CIO, Hindustan Construction Company, feels that when IT initiatives go live, there is only 20 to 30 percent utilisation in the initial stage. “A user task force can be formed to ensure better usage, and constant training of business users will lead to better utilisation of the IT resources. Better usage helps get maximum RoI from the existing system,” says Pendse.

Other factors that contribute in getting maximum RoI include sharing resources (especially among the peer group), benchmarking and top management commitment. Benchmarking is also used across industries to improve usage. It is also very essential for the top management to send a signal on an ongoing basis that they are eager to get more out of the existing setup and investment.

However, it is ironic that trying for maximum utilisation does not always translate to maximum RoI. (See Box: Dark Side of Maximum Extraction on how this happens.)

The Consolidation Gambit

Currently there has been a perceptible reduction in WAN setup and associated costs. There has also been a significant increase in the number of service providers. This is why consolidation is the need of the hour for most businesses today.

However, Sam Srinivas, Chief Technologist, Juniper Networks feels that as network access increases due to consolidation, its security decreases. Security costs are decreasing, but downtime is also increasing alongside. This is causing a loss of productivity.

According to Pendse, the best method to consolidate server and network connectivity is to use a new initiative as an opportunity. “For instance, when an organisation changes from legacy to enterprise applications like ERP, there is an opportunity to consolidate and make its network stronger,” illustrates Pendse.

SOA and India Inc
Vikas Gadre, CIO, Rallis India is of the opinion that Service Oriented Architecture (SOA) is not about how IT delivers to business. It is more about how the business likes to use IT.

"You are demanding a service and not how it is done. You are giving service request in the form of an item. It initiates action at the backend and generates an output to give you the demanded service. A Gartner study expects that by 2010, 70 percent of applications will be come with SOA support," says Gadre.

According to Jha, there is a lack of understanding and addressability among CIOs regarding SOA. "Also there is no regulatory and business framework which can support and sit over SOA. It is still a nascent technology," says Jha.

Pendse too feels that though it is a very good concept, it is yet to mature. “Successful implementation of SOA is a change management issue. IT people will have to change themselves,” says Pendse.

Gadre elaborates that to provide SOA, the entire IT mindset and not just infrastructure has to undergo a major change. "You are thinking not only in terms of an application but a service. The change will affect the company itself. It is not something to be understood by IT departments, but also by the management," says Gadre.

Jha feels that the disadvantage of SOA is that many organisations are not ready to accept the service concept. "Connectivity and information exchange issues need to be resolved before it can be used effectively," he adds.

The Data Store

Enterprise-wide applications deal with huge databases where high availability and high performance data storage is required. Moreover, data is spread across the network as well at the user level. In addition to this, when an employee leaves the company there are also issues like safeguarding enterprise data (especially data on user desktops).

“The CIO needs a framework to transfer desktop data on to the network to provide additional safety. It can backup all data or only the crucial data. The aim is to safeguard enterprise data,” explains Pendse. This is where storage consolidation steps in.

Data Purity Is Essential

With storage consolidation and enterprise-wide applications has come the unsuitability of data sources in many cases. This is why present-day Indian enterprises have started to place major emphasis on data quality and cleansing of existing data sources.

“Data crucial to me can be garbage to someone else. The same data can be manipulated due to difference in style of a business professional’s understanding of data,” says Jha. He is of the opinion that a company can set up standard rules in applications to ensure purity of data—especially key data. It is possible to identify critical and non-critical information in transactional data. Therefore, it is possible to have proper validation to prevent users from entering a wrong contact number or e-mail ID.

Leasing Model
Leasing model is a good concept according to Pendse. “If IT infrastructure or applications are leased, then they can be got rid of when not required. It reduces assets in the balance sheet to make it looks healthier. Risk of IT obsolescence is also reduced,” says Pendse.

Jha is of the opinion that this model has not evolved in India due to the greed of Indian companies. For instance, it is well known that a PC costs Rs 20,000, but its rental is Rs 3000 per month. As a result, you spend Rs 36,000 annually on rent. The bank charges Rs 2,000 as interest and the PC is owned by the company after 12 months.

This model is a success in USA, but in India, it is a different case altogether. “Indian leasing companies want to extract the maximum from their clients. So people are not leasing except in case of emergency,” explains Jha.

Pendse provides guidelines on how to make the lease model work in India. “The proposal must be a truly operational lease. Allow me to remove the machine when not needed. Recover over a longer period. Give me an offer which is better than the bank's interest rates. Give me a better proposal than what I get to buy the IT deployment,” says Pendse.

The Take On System Architecture

With the speed at which technology and business scenarios change, there is little room for experimentation. It is not always possible to conduct R&D or develop organisation-specific frameworks. This is where infrastructure management frameworks such as ITIL come in handy

At the speed at which technology and business scenarios change in today’s world, there is no room for experiments. It is not possible due to these constraints to perform R&D or develop brand new frameworks specific to organisations. This is where infrastructure management frameworks like ITIL come in handy.

Adopting such global frameworks enables an organisation to demonstrate its credibility quickly at the global level. This is the due to the widespread acceptance of these frameworks. Vinod Agrasala, Sr. Consultant, QAI-ITSM Practice feels that organisations prefer to look at global best practices and proven frameworks to adapt and adopt.

“ITIL for example, strikes an experienced and knowledgeable mind as a simple, logical, structured and integrated framework. It makes people wonder why did they not think or do something like this till now. The flip side of this is that the detractors ask ‘what is new in this?’” explains Agrasala.

Such frameworks have proven to be successful and they take a holistic view on overall IT service management. “These frameworks do not make anything mandatory. Organisations can adopt and adapt to suit their needs. They do not carry the tag of royalty or pricing with them,” elaborates Agrasala.

Pendse feels that ITIL and other frameworks are used primarily to get access to best practices.

Jha feels that architectural frameworks like ITIL are templates. Suitability of the framework to an organisation depends on the IT initiatives being implemented. “The organisation needs to create the right blend of architectural framework and real-time business requirements suitable to the industry. After all, computing requirements are different across verticals,” stresses Jha.

Dark Side Of Maximum Extraction
A company can use slow and outdated systems, Internet infrastructure and connection. In this way, it can show an IT policy for using the same system over five years and show a good RoI. However, this approach might cost more.

“There is always a hidden cost in terms of wastage of time of key users and loss of opportunity to the organisation due to such policy. In 99.5 percent of the cases it is worth investing in higher spec computing than retaining the slow performers,” warns Jha.

Data Centre-IC

A data centre is no longer an optional component of enterprise IT—it is necessary. “It helps you achieve consolidation. It helps the organisation develop good IT manpower and proper maintenance and utilisation processes,” elaborates Pendse.

To keep things in-house or outsource, the answer to this question lies in whether there is a need to invest in something that is not the core competency. “However the decision to in- or outsource depends on criticality and confidentiality of information and data transactions, internal capabilities and cost,” says Jha.

Improving DR Efficiency

Many organisations have learnt the importance of DR sites the hard way by unprecedented downtime due to natural calamities or unexpected outages. There are also customer and business pressures to have effective DR procedures.

Jha feels that all businesses, especially large enterprises, are completely dependent on IT. Having a good DR site ensures that they do not have a substantial downtime. “The type of DR site depends on how long the business can afford downtime. Whether the organisation needs a hot or cold site depends on its business need,” says Jha.

Pendse is of the opinion that an organisation can manage the DR site in-house or outsource it to a data centre which can handle it better—especially if IT is not its core competency. “Here economy as well as operational aspects play an important role. A better outsourcing partner can deliver better operations,” explains Pendse.

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