Computers Today, October 16-31, 1998 Managing IT

ERP projects can yield a return on investment ranging from 25 to 200 percent. Success, however, depends on involvement of top management and the exposure of the real users to infotech.

Until last year, 35-year old Vivek Narang's exposure to infotech was confined to stand-alone PCs and shrink-wrapped software packages from TCS and Wipro. But the recession-hit economy hit Original Equipment Manufacturers like Narang's Calcom group badly. Worse still was his inability to coordinate purchases, sales, delivery and what-not from half a dozen locations spread across three different states.

"We were going nuts and the pressure was mounting. We wanted a good and quick solution which would help us manage our affairs with ease. We did not mind spending money and when the idea of implementing Enterprise Resource Planning (ERP) was mooted, we grabbed it with both hands," says Narang. For the Rs 150 crore company whose product line includes black & white TV sets, fly back transformers, deflection yokes, electronic components, vacuum mixers and hand mixers, the price tag was close to Rs 2 crore.

It was, indeed, a great leap forward: from standalone PCs to a wired network using all kinds of technology--VSATs, ISDN, PSTN, LAN, etc. "Our aim was to move from a 'limping' mode to an effective mode. Price Waterhouse told us two years ago that it's time we upgrade our infotech and suggested we take a look at ERP. Price Waterhouse's recommendations reaffirmed the need to wire up our place in totality," explains Narang.

Once the Calcom management decided to go in for ERP, the pace picked up because the top echelon was involved and understood the need thoroughly. Narang views this as a vital input for success of ERP implementation (see box). And the age factor also played a pivotal role in gearing up for total computerisation. The average age of the administrative staff is 25 years. "The younger the organisation, the greater the success of any computerisation plan," declares the chartered accountant-turned-executive director because, "the real users are not those of us sitting in airconditioned cubicles but the staff at various departments".

Given the fact that what they were embarking on was a major implementation exercise, a select band of 20 staffers from various user departments were picked up for a rigorous 10-week induction course. As the course progressed, Calcom's topbrass realised two things: primarily, the course is not a paid holiday: one has to sit in proper classroom atmosphere from 7 in the morning to 2 in the afternoon with two short breaks. Then, back to work--to catch up with the mounting workload! Second was the cost factor. The cost to the company is a staggering Rs 30,000 per day. "You implement it or not, that is the kind of money we are spending," Narang adds.

Is he regretting the decision? "No way. We browsed through several case studies. One of them was very striking. The most successful companies implementing ERP reaped a bonanza: a 200-percent return on investment. The least successful ones also gained: 25 percent. I am a businessman. Definitely we want to be the top category. But it's going to take time," points out Narang. But, why? The blame is laid on the doorsteps of the technology-providers. "Can you believe that we were forced to change three VSAT service providers? Sounds incredible, but true," remarks Narang. As per the original charter, Telstra was hired to set up VSAT link between Wazirpur (Delhi)-based headquarters and plants at Surajpur (Uttar Pradesh) and Mohali (Punjab). They bungled, forcing Calcom to rope in HCL Comnet. Once again, they were found to be wanting. So, Bharti BT walked in. "I cannot give a definite answer that they are up to the mark. But their understanding is much better," says Narang.

Despite the hardships, Narang today is a happy man. It was an exhilarating experience for him and those whose IT knowledge has gone up by several notches. "Today, I am facing a new problem. Everybody wants a PC on their desk. Originally, it was planned to have a PC for every five persons in the administrative department." Yet, Calcom management is happy with the kind of cultural change that has swept the company.

Has the investment begun to make any dent on his bottomline? "It is too early to measure gains," admits Narang. Purchase orders have gone online. So have receipts and delivery too. Calcom is graduating into a wired organisation in batches. Networking is the culprit. Data collection, naturally, has not gone live yet. Every week, data is brought from distance locations by road to Delhi for inputting. Once Bharti BT succeeds in establishing a good link, things can go live anytime. Until then, Calcom's multilocations are creating databases.

Calcom's objective is clearcut: achieve a 3-day CLIP. What's CLIP, for heaven's sake? Cumulative Line Item Performance, explains Narang. Narang wants his company to satisfy his customers--Samsung, Philips, BPL etc.--by despatching them whatever they ask for in a span of 3 days from the day he receives their order. Today, he is on a 10-day CLIP mode. "Not advisable in a recession-hit economy particularly," he quips. Even otherwise, he adds, he is keen to push up liquidity and profit margins in the emerging competitive environment. For that to happen, the technology-providers should pick up speed soon. Not a tall order for the Indian infotech companies, who dream about becoming global IT powers.

Taking the Inside Track

The hottest tip from Calcom's executive director Vivek Narang to the top management who want to introduce Enterprise Resource Planning (ERP) in their organisation: "Get involved". He sees this as a necessity.

ERP implementation involves bringing diverse departmental heads together and success depends a great deal on how this diverse group adjusts to one another. Entrusting the implementation to the IT department alone is suicidal. Adds B. Sharan, deputy general manager (information technology): "Tell the user departments that the package is their own. Not IT's. This is very vital for success".

This is where Narang sees the need for the involvement of top management. "You get a hang of the technology and its use. At the end, you will be the only person--besides the IT manager--to know all parts. This holistic perception comes in handy to sort out interdepartmental feuds," says he. Today, he functions more like a conflict resolver among various departments. "If I don't know the nuts-and-bolts of the package, how can I resolve other's conflicts?" he asks.

Don't do it piecemeal. Go the whole hog. Be flexible. Don't get carried away by jargons and slick demos, which technology-providers are prone to. Have the courage to show doors to those who don't measure upto their own promises. Last but not least, stay on course and implement the package in toto. Even if you fail, there is the empirical study (25-percent return on investment) to bank upon.