5 wise men discover India's IT truths

IRSHAD DAFTARI & CHHAVI DANG

TIMES NEWS NETWORK THURSDAY, MARCH 02, 2006 12:16:39 AM At the India Leadership Forum: Nbuttcom 2006, The Economic Times invited five global information technology heads who handle billions of dollar in IT spend, for a discussion. The roundtable had Ronan McGrath, CIO, Rogers Communications (Canada), Aaron McCormack, vice-president, Network Platforms, British Telecom Global Services, Erik Viens, vice-president and CIO, Invista (USA), Les Dawson, CEO, Southern Water (UK) and Richard Granger, Director-General of IT, National Health Services of the UK.

Since India is clearly on these companies' radar. ET invited the five global IT heads to talk about their IT strategies and spends, on the compebreastiveness of Indian IT services companies, increasing global compebreastion and finally whether outsourcing meant any abdication or reduction in responsibility. Excerpts from the discussion:

Share with us, your strategies and challenges in offshoring and the size of IT projects?

Ronan McGrath: Rogers is the biggest wireless and cable company in Canada. In our industry CIOs would need to understand the product cycle. Our IT budget is $500 million inclusive of product development and IT.

We don't outsource the telecom infrastructure but can outsource some of the non-customer facing areas of business. As far as the challenges are concerned, privacy laws in Canada create significant liabilities for us, to the extent of returning money and rolling back projects.

Aaron McCormack: British Telecom was the first to offshore customer services here and we've been in India for a while. We spent £2 billion a year in infrastructure, product development and systems sup-port.

We're moving away from projects that are based on big delivery 1-2 years down the line, in terms of internal infrastructure.

In our industry we all buy the same infrastructure, for instance, the same Cisco box. The differentiator is about how we put it together and personalise it for the user. We use Indian companies like MphasiS; they do a great job, they're the best people at the right rates. As long as India has companies like that they'll do fine but it won't survive on low-cost labour alone.

Erik Viens: At Invista, we don't sell gigabytes, we sell giga kilograms. As such, we have the old legacy and the baggage of not being an IT-focused company.

The big change for us was cobbling together the pieces to reduce the legacy, and invest in technology. We initially spent $200 million on IT but we currently spend half of that.

We moved a bit of the network to India and got a handsome return on it. The challenge going forward is to make it run cheaper, so that we can invest in new technology that will allow us to integrate better globally. We will see our overall IT spend grow.

Les Dawson: I work at Southern Water but my experiences are across the utility sector in the UK. In the UK, the utility privatisation process saw a huge investment in IT and IT infrastructure. Everyone came to India because it was a TINA (there is no alternative) situation.

What we've got in the utility sector now is a degree of maturity and there's little opportunity to differentiate in this space through IT. Retailers who tried it found it very problematic when they tried cross-selling to individual customers.

The main driver of IT is stability -- the less visible it is the better it is. The IT budget in the utilities sector is diminishing fairly rapidly.

Richard Granger: The NHS spends £70 billion a year in total, of which 2.5-3% is spent on IT. The core transaction networks and systems account for £6.2 billion over the next 10 years.

There are 28,000 locations from which people interact with NHS apart from people's homes. The IT systems consumed approximately £10 billion over the preceding decade prior to starting the programme in 2002. Those were, for the most part, an electronic filing cabinet.

In the next 5-10 years the regulatory boundaries in the clinical world anywhere in the world and sent back.

We've worked with CSC, Accenture, Fujitsu, BT and let them manage the market around specialist suppliers and hardware vendors. I didn't award any large contracts, because then you don't get value but you get an exquisitely expensive form of dependency.

The half-life for this technology is 3-5 weeks so we have to do one hospital every week just to stay ahead of the half-life. Global vendors had not had high volumes of healthcare contracts on their books. So, domain expertise is a limiting factor as well.

What are the strengths and weaknesses of the Indian vendors?

Ronan McGrath: From strengths and weaknesses point of view, we see it as an opportunity to move as much non-product development activity as possible. In telecom, it's impossible to have a separate CIO organisation that takes care of IT. In fact, IT will move to product development in the next three to four years and everything else can be outsourced.

Aaron McCormack: We do a lot of supplies, connecting the successful BPO companies in India and other locations like Philippines, Hungary and Columbia to clients. I think the hardest challenges Indian companies will face in the business is scale, as they will move to newer business models. I think they can meet that challenge. If we believe Mr Friedman, the flat world is tilted towards India for a little while.

Erik Viens: We originally focused on India to translate cost and speed. We were willing to take potential cost savings on labour arbitrage for faster turnaround time. Surprisingly, we got better quality. This was in REP, specifically in SAP implementation. We were quite pleased with that. That sounded like a triplet -- cost, speed and quality.

Les Dawson: I think the challenge facing software companies is how they differentiate themselves to add value in terms of domain knowledge. Ten years back, first movers looked only for cost, quality and speed, now they want to differentiate in their own business. I think they demonstrated over the first period, the ability to take a process, perfect it and optimise it.

Richard Granger: I will take things from a slightly different angle. One of the constraints I think of the large Indian players is that regulatory frameworks don't exist for the processing of personal data.

Organisations which process data here offshore are doing so without involving the customers. In the UK for example, the maximum penalty for data abuse is £5,000, which is completely inadequate. And very little legal framework exists between countries for the same.

The extent to which you can move data around will constrain the outsourcing-offshoring. At the NHS we have not crossed the line in terms of data being processed offshore; data will not go outside the European Union until there is a regulatory framework in place. The absence of an established methodology across the industry will affect not just the Indian companies but any extra territorial delivery.