India is well known as an outsourcing location, but the country is emerging as an economic power and a location ripe for business opportunities. India is a huge market with a middle-income population of more than 100 million people. According to Krishan Dhawan, managing director of Oracle India, a wholly owned subsidiary of Oracle Corporation, "The size of the economy, the size of the population base, and the recent trends of sustained economic growth mean that the consumption and need for IT will increase significantly over the next 10 to 30 years." Oracle has made a big investment in India, staffing the subsidiary with the largest number of Oracle employees outside the United States. Doing business in India takes understanding where opportunities are and how India has changed in recent years. Continued economic growth means a strong need for enterprise applications and IT infrastructure. Industry experts indicate that enterprise resource planning (ERP) is the dominant type of enterprise application purchased in India, followed by customer relationship management and supply chain management.

As Published In November 2006

Sophisticated and Savvy
By David A. Kelly

India is handling red-hot growth with real business intelligence.

India was everywhere at the Davos World Economic Forum earlier this year, as Indian executives and government officials used the event to promote India's position as the fastest-growing democratic economy in the world. Beyond its borders, the country is sometimes seen as an immense and exotic land. For many consumers, it's also the voice on the other end of the phone when they call technical support for their computers, telephones, or television sets.

But call centers are far from the only area that Indian businesses are focused on. Businesspeople who are paying attention know that India's best years are still ahead, and opportunities are there for the taking.

"For the last three or four years, India has definitely been more than just outsourcing—there is great potential for local business," says Raj Ganesan, director, Hackett Group, a global benchmarking and consulting company. "It's a huge market—in fact the middle-income group of Indians is larger than the comparable population in the U.S.—it's more than 100 million people and growing fast. There's a lot of business opportunity and growth there."

Snapshot Hindalco www.adityabirla.com www.hindalco.net Revenue: US$2.5B in FY05 and FY06 Oracle products: Oracle E-Business Suite, including Financials, Procurement, Process Manufacturing, Oracle India localizations; Oracle Discoverer; Oracle9i Real Application Clusters, Import, Export, and Insurance Add-Ons for India; Oracle's PeopleSoft Human Capital Management; Oracle Consulting Other products and services: Accenture consulting services; IBM AIX 5.3 operating system; IBM p570 servers; IBM TotalStorage DS8100 LG Electronics India Ltd. www.lge.com Oracle products: Oracle E-Business Suite, Oracle Business Intelligence, Oracle Customer Relationship Management, Oracle Partitioning, and Oracle Database HPCL www.hindustanpetroleum.com Revenue: US$16 billion Oracle products: JD Edwards EnterpriseOne, including Sales and Distribution, Manufacturing, Finance, and HR Other products and services: IBM eServer i840 with OS/400; Citrix/Windows TS; Intel servers on a Citrix server farm; IBM WebSphere; MIMIX online replication implemented for high availability; Create!form solutions implemented for output management; hybrid WAN consisting of leased lines, VSATs, virtual private network (VPN), RF links, dial-up connection using PSTN and CDMA mobiles

For example, take Hindalco Industries, the 44-year-old flagship company of the Aditya Birla Group—itself one of the oldest organizations in India, having been founded in 1857 as a cotton trading operation. Hindalco is a vertically integrated manufacturer, extracting bauxite from mines, transforming raw materials into primary metals, and fabricating them into everything from rolled products, extrusions, and foil to alloy wheels for cars. Hindalco's product portfolio consists of more than 50,000 finished goods. Like many businesses in India, one of Hindalco's biggest business challenges is managing exploding growth. To help with that challenge, Hindalco turned to Oracle E-Business Suite in 2003. "When we started the project to convert our business applications to Oracle E-Business Suite five years ago, Hindalco was a [US]$500 million company. Now we've grown to $2.5 billion and our plan is to become a $5 billion company by 2010," says Sanjeev Goel, senior vice president of information technology for Hindalco. "We've been growing very fast, both organically and inorganically. In addition, we've been highly successful with good profit margins."

The results are spectacular: "We've gotten nearly 30 to 50 percent cycle time improvements since migrating to Oracle E-Business Suite," says Goel. "Production and sales have gone up by nearly 18 to 20 percent, but our inventory has come down—we've reduced our outbound inventory by about $12.47 million, while our inbound maintenance, repair, and operations [MRO] inventory has been reduced by about $1.69 million."

These types of results have not only made shareholders happy, they've also caught the attention of many of the world's leading technology companies, such as Oracle.

"India has become a significant market for Oracle over the years. The size of the economy, the size of the population base, and the recent trends of sustained economic growth mean that the consumption and need for IT will increase significantly over the next 10 to 30 years," says Krishan Dhawan, managing director of Oracle India, a wholly owned subsidiary of Oracle Corporation. Seeing the potential, Oracle has made a big investment in India, staffing the subsidiary with the largest number of Oracle employees outside of the U.S., most of whom are engaged in global development and support roles. However, seeing the market potential, the number of market-facing employees has increased significantly over the past couple of years. "Our focus at Oracle India is on serving the broad domestic markets that are already growing quite significantly, including government, financial services, telecommunications, and general industry," adds Dhawan.

Market Dynamics

Doing business in India takes an understanding of where the opportunities are and how much India has transformed in recent years.

"Indian services vendors are rapidly moving upscale. They've gone far beyond application maintenance and are doing sophisticated application development, including SOA [service-oriented architecture]. They're also moving from call center outsourcing to sophisticated business process outsourcing where they redefine and help transform business processes and automate those processes," says Tom Kucharvy, CEO of Summit Strategies. "India is still a relatively small IT market, although it's growing rapidly—much faster than the overall Indian economy, which is growing at about 8 percent a year. And considering that the country has 1.1 billion people, that translates into a lot of additional rupees."

Getting to Know India Person to Person In India, there are 30 million internet connections but 100 million cell phones—short message service (SMS) has become the primary mode of data communication instead of e-mail. Many Indians may have an e-mail account, but they only check it every couple of days or once a week. Using SMS on a mobile phone assures the user that the recipient is going to see it right away. Hit the Road Number of Indian consumers who can afford to buy their own car (a measure of the consuming class in a country) 1996: 30 million 2006: 100 million 2010: 200-250 million (estimated) Coming Up Strong GDP growth in India was 7.8 percent in 2005 and is expected to be greater than 8 percent in 2006. (Source: Sumant Mandal, managing director at Clearstone Venture Partners) Just the Basics The name India is derived from the River Indus. The numeral system, including the number zero, was invented in India. Chess was invented in India. Algebra, trigonometry, and calculus originated in India. The decimal system was developed in India. India is also known for the following: Largest liberal democracy in the world Seventh largest country Second-most-populous country

That growth translates into a robust economy and a strong need for IT infrastructure and enterprise applications. "India has been one of the fastest growth markets in terms of license revenue growth for enterprise application software," says Yanna Dharmasthira, principal research analyst at Gartner. "India registered double-digit license revenue growth for both 2005 and 2004. The same trend is expected for 2006."

According to Dharmasthira, enterprise resource planning (ERP) has been the dominant type of enterprise application purchased in India, followed by customer relationship management (CRM) and supply chain management. ERP applications are typically the priority of first-time buyers because they serve as a business applications foundation.

"Over the next five-year period, India is expected to register CAGR [compound annual growth rates] of 12 percent, in terms of new software license revenues. This is the second-fastest CAGR percentage for the period of 2005 to 2010 in the Asia-Pacific market, after mainland China," states Dharmasthira.

In terms of market segments, Dharmasthira sees auto-related companies, pharmaceuticals, utilities, oil and gas, government, and small and medium businesses as the most attractive sectors in the Indian market. "India is a growing market with lots of potential and opportunities. It will attract businesses, including multinationals," says Dharmasthira.

A good example of the type of growth rates that are possible in such a large market has been the explosion in mobile phone sales. "Indian cell phone usage is growing at rates that are quite unbelievable," says Oracle's Dhawan. "Telephone companies have been adding 3 million to 5 million new users a month for the past year or so."

Managing that growth means managing data. "The overriding theme of India is the numbers. It's a country with a lot of people," says Dhawan. "That means a lot of accounts and a lot of data points—whether that's telephone subscribers or depositors or income tax payers or railway passengers. There's a lot of data and a lot of need for data management, databases, and applications."

But that growth also has implications for technology companies and their products. "India is providing a new threshold for technology companies and their products, because the usage levels and the number of users on any application are quite unprecedented," says Dhawan. "The size of databases or applications in developed countries with larger economies are currently larger, but the size of databases and the number of application users in India are growing rapidly, and the number of users is often much higher than we are used to seeing in more-developed countries."

Dhawan cites examples of growth such as agencies looking at developing a national database that will contain information on 400 million adults, banks that have 30,000 concurrent users, and companies that are growing by 500,000 to 1 million subscribers a month, while the cell phone industry grows by 3 to 5 million subscribers a month. "Our applications and databases are capable of scaling up rapidly to meet these types of customer needs," says Dhawan.

And those needs are coming from a broad range of industries. "It's beginning to occur to everyone that some of the large Indian companies, particularly the fast-growing ones in the automotive, transportation, and banking sectors—plus other sectors—are some of the largest growing in the Indian economy. They're not just absorbing the software talent, they're actually doing some of the largest deployments of enterprise applications on a global scale," says Sridhar Pai, CEO and founder of Tonse Telecom, a Bangalore-based market research company focused on the telecommunications industry. "That means there's a huge opportunity for companies like IBM, HP, Sun, and Oracle."

But it's not just managing the data that's important for Indian companies—they're also learning how important it is to build relationships with customers and respond quickly to market trends. "We're seeing more companies making investments in software to manage human resources—to manage their employees, as they recognize the increasing importance of this key resource," says Dhawan. "As the market becomes more competitive, companies are recognizing that customers are a key ingredient to success, so I think that Oracle's investment in Siebel CRM is very timely for the Indian market."

Increasing Customer Focus

Over the past few years, Hindalco has certainly taken advantage of opportunities in the Indian market. But to support its success, the company turned to Oracle. For Hindalco, Oracle E-Business Suite is the basis not only for its growth, but also for streamlining and improving processes throughout the company and improving profitability.

Teaching Them to Fish with GPS The technology leaps that are happening in India can have a big impact on people's lives. For city dwellers, the prevalence of cell phones and text messaging has made it possible to find out if an office is open or a person is available for meeting before actually navigating dense city traffic jams. For the rural population, technology changes may come less quickly, but they still have a big impact. For example, according to Sridhar Pai of Tonse Telecom, fishermen in remote rural villages have been heading out to fish for centuries without much more than their instincts and their experience of knowing where the fish might be that day—frequently coming back with little or no catch. But recently, fishermen in southern India started using Global Positioning System (GPS) locators and cell phones to transmit information, so that when a fishing boat finds an abundance of fish, they relay the location via GPS and cell phones to other fishermen. "It's an amazing way that technology is actually helping these rural fishermen maximize their catch for the day," says Pai. "It's a big change."

"We started the project about five years ago and went live two years later with Oracle E-Business Suite," says Goel. "We're now using Release 11.5.7 of the Oracle Sales, Order Management, Purchasing, Inventory, Procurement, and Financials, Accounts Payable and Receivable, and Manufacturing modules, across our 53 locations in India, with a base of 2,000-plus users."

Moving forward, one of Hindalco's challenges—even in spite of its great growth—is to move from a production-driven company to a more data-driven performance company, to anticipate market and customer requirements, and increase their growth rate. However, those types of changes can be difficult, as the initial migration showed.

"Since we're in a commodity sector, people's exposure to new information systems was limited and that made introducing new systems more difficult," says Goel. "Over time, we've been working to bring in a lot of data-driven decision-making, based on certain analyses and comparisons."

Hindalco decided that the best approach would be to make small improvements in how the organization measured processes, and expand and improve those measurements and control over the processes over time. The reengineering of the company's order-to-dispatch cycle is a good example. "We broke out our order-to-dispatch activities into subactivities, such as how much time it takes from order entry to production allocation or how much time it takes from allocation to grouping," says Goel. "Once we broke down the processes, we identified the owners of the individual steps and could use data to compare how much time they took and how much time they would take using the new approach."

The changes gave employees a basis to compare their performance from one month to the next and methods they could use to track outstanding work and performance improvements.

"We got buy-in from our senior management, we got the employees involved, and worked to define these relatively small key performance indicators [KPIs] at different levels to show some basic results and improvements," says Goel. "Very slowly and systematically we got the employees involved and were able to take it through."

For Hindalco, an important part of the migration was finding ways to increase the level of automation and data-driven decision-making and helping employees move from more traditional, time-intensive solutions to automated ones that rely on Oracle E-Business Suite. But the effort has paid off.

"We've been experimenting slowly and surely by adding additional key performance indicators and metrics for our employees to use," says Goel. "It has taken us nearly two years after going live to really define our optimal KPIs so that we could get the buy-in from the users. Now they can report, at the end of week or month, how well they've done compared to the KPIs."

For Hindalco, the future looks good. "Now that we've achieved these internal results with Oracle, we're planning on extending them to our outside customers and suppliers," says Goel. "As we continue to grow in multiple locations with billions of new investments, we're trying to see how IT can be used as an enabler and more of a force multiplier. IT will play an important and bigger role in our future."

Empowering Your People to Grow

Growing at the speed of the Indian market overall and managing that growth effectively requires a coordinated but distributed management philosophy and a distributed but centralized IT infrastructure. At least it does if you judge by LG Electronics' success in India.

HPCL's ERP Benefits Better visibility of information for faster decision-making Standardization of processes and documentation Transition from manual controls to system-based controls Reduction of duplicate data entry and redundant tasks Improved capital management Increased visibility for customers Platform for e-commerce initiatives

LG Electronics India Ltd., which manufactures and sells consumer electronics, home appliances, and some IT products, started its India operations in 1997 and has since grown to a US$1.6 billion enterprise in the last nine years.

"The main reason why LG Electronics has grown so fast in India compared to our competition is that we've given a lot of empowerment to our people," says Arindam Bose, general manager of information technology, LG Electronics India, a wholly owned subsidiary of the US$45 billion parent LG Electronics Worldwide, headquartered in Seoul, Korea. "For example, we have 46 branch offices, and the branch managers are empowered to make local decisions—decisions backed up by very good control, monitoring, and information systems. Managers get real-time information and that enables them to make good decisions."

Delivering real-time data benefits LG internally—it also benefits the company's suppliers and customers. "Real-time monitoring and [an] information exchange system are really helping our supply chain, including helping our dealers make decisions based on timely data about how much they need to procure, what their payment terms will be, and how quickly they receive credit from LG," says Bose. In fact, LG has been able to extend its B2B platforms to about 70 percent of its vendors, 60 percent of its dealers, and 100 percent of its service franchisees—remarkable numbers for India. "One of the strengths that Oracle has is the ability to talk across platforms to other vendors, other suppliers, and external entities. That's one of the reasons we chose Oracle."

Another critical component of LG's growth comes out of a business requirement common to consumer-oriented retailers in the United States—superior and speedy customer service. "We believe that good service is the best form of advertisement we can have," affirms Bose. "So we've invested in a central monitoring system for customer service that is very, very good. For example, if a customer logs a complaint—even in some remote part of India—managers in the head office in Pune, New Delhi, know about it immediately. Real-time monitoring is critical for us."

Oracle E-Business Suite is the centerpiece of LG's internal IT system. "One of the main reasons we migrated to Oracle E-Business Suite was to overcome the difficulties in integrating with other systems. Instead of having delays between our B2B platforms and our ERP systems, we decided that tying everything into a single system was the best way going forward," says Bose. The resulting Oracle E-Business Suite-based system was installed in August of 2005 and has been a resounding success.

"The first month was a little challenging for us, but after that, it's been very, very stable," emphasizes Bose. "Most of our business processes are up and running now and the users are happy."

An important consideration in choosing an Oracle-based solution was Oracle E-Business Suite's support for customization and its India localization. "Oracle E-Business Suite really helps us reduce the amount of customization we have to do. In addition, it offers India localization, which is important for us because the India tax and duty structures are complex."

Knowing that your ERP vendor is keeping up with tax law changes is certainly a lot easier than having to modify your custom-developed ERP applications each year to adjust for regulatory changes, as LG had been doing previously with its custom applications. "India is an evolving economy, and the government changes all these rules and tax structures and annual budgets almost every year, so having Oracle provide upgrades for the tax and duty structures has really helped us," notes Bose.

As many companies (especially consumer goods-oriented companies) doing business in India find, managing the scalability and growth of the product offering is an important part of success. For LG, this translated into making sure it could handle the huge volumes of customer and business data that rapid growth in such a large economy can generate. "It might sound funny, but the rate of our data growth is actually higher in India than in our global databases in Korea," says Bose. "Our data growth rate is very high, so we try to keep the transactions fast, and we've had to shift reporting to another server."

Pumping Up the Competitive Advantage Through Technology

Just as in the United States, Indian organizations are using technology to achieve a consistent and consolidated view of their customers, suppliers, and business operations—real-time information to make critical business decisions and provide competitive advantage.

"We decided to go for a world-class ERP system that would provide online connectivity to all of our locations and all of our different business lines and business centers," says Nishi Vasudeva, executive director of IT and ERP at Hindustan Petroleum Corporation Ltd. (HPCL), a Fortune 500 company. The result was an implementation of Oracle's JD Edwards EnterpriseOne across all the company's major locations. "Since then, we've streamlined and standardized our processes across the entire enterprise by implementing the system at more than 430 of our locations and across 2,000-plus users."

In keeping with its long heritage of being in the forefront in harnessing technology for maximizing efficiencies, the company decided to implement the JD Edwards EnterpriseOne ERP software. Real-time, online-accessible information from across all the geographically diverse locations of the corporation is now available within a centralized system, which has enabled HPCL to improve efficiencies in the areas of tracking and monitoring customer receivables, managing credit and inventory, and providing enhanced service to customers and other stakeholders.

The transition was no small accomplishment, because HPCL is one of the largest national oil companies in India, with revenues of US$16 billion. Its main businesses include importing and refining crude oil, transporting and marketing bulk products, manufacturing and selling lubricants, and bottling and selling liquefied petroleum gas (LPG). On the retail side, HPCL has more than 7,000 outlets, with a 23 percent market share in motor fuel sales and a 25 percent market share in LPG.

HPCL started the project by implementing the new ERP system at 14 pilot sites that represented all the lines of business, and used Capgemini Consulting India Pvt. Ltd. to help with the implementations. Prior to the pilot, the organization conducted a detailed study of all its processes and how they mapped to the new software. The company also created a standardized template and models (based on different types of HPCL locations) that were used by the HPCL team to roll out the applications to the rest of the locations. HPCL has the distinction of executing the largest and the most ambitious JD Edwards project in India.

Getting all those users and distributed locations on a single system was a challenge for HPCL. "It's given us a tremendous amount of visibility into our operations, especially since our locations are so dispersed geographically and our old systems required so much time and effort for data collection, consolidation, and integration across divisions," says Vasudeva. "As a result of having current information immediately available, we've been able to really make the business processes work for us."

It's also helping HPCL compete more effectively. This is especially important since India has opened up its oil industry to competition through deregulation of the oil sector. "These moves have brought a lot of new companies to an industry that was very protected," says S.T. Sathiavageeswaran, general manager of ERP at HPCL. "That means we have to be more competitive, we have to be more customer focused, and we need to be more responsive to customer demands, customer inquiries, and serving the market. Our JD Edwards system is enabling us to do that."

For More Information Oracle India Web Site The Oracle in India Story

For example, HPCL has approximately 9,000 to 10,000 trucks moving petroleum products around India every day. Previously, customers would not have any information on when new shipments would arrive, other than when the trucks showed up. Now, with the ERP systems in place, HPCL automatically notifies customers of not only when the trucks are arriving, but also the quantity of the product they're delivering and the invoice amount.

"It's one of the many customer conveniences that we've been able to make available because of the new system, and it definitely adds to the value of our company," says Vasudeva. "The fact that our entire organization is on one system really helps in both effectively managing the business and also providing better customer service."

Doing Business in India While the opportunities in India are huge, it does take some knowledge of the Indian market to take advantage of them. "To succeed in the Indian market and penetrate beyond the top 2 percent world-class enterprise market, you need to localize your product or technology in terms of pricing, packaging, and local partnerships," says Sumant Mandal, managing director at Clearstone Venture Partners. Another important aspect for some companies is taking into account the maturity of the IT infrastructure utilized by their target customers. "One of the big issues for Indian companies is that they're at a much earlier stage of the IT lifecycle, they haven't deployed many capabilities before, and they may not have a lot of internal skills," says Summit Strategies' Kucharvy. "The Indian market is also very cost sensitive." To address India's price competitive market, organizations need to create interesting business models. "If you come to a country like India and are trying to get into the second-tier enterprises, price is going to be a huge factor in the decision to deploy something," says Mandal. "When you compare rupees to the dollar, the purchasing power parity is a quarter of the U.S. I think that's one of the biggest challenges for companies coming into the Indian market." In addition, India has a diverse and distributed population, which can make it difficult for companies pursuing the consumer markets once they move outside the major cities. "To reach the full billion-person market you have to go to the villages, so for many companies it's a fundamental change," says the Hackett Group's Raj Ganesan. Businesses in smaller cities and towns can have very different IT challenges. But that's gradually changing. "Some of the newer technologies on the banking side, such as ATMs, have already entered the market in some of these small cities." Setting up shop in India can be easier than in some developing countries, such as China. "Being local is very critical in India—you really need to establish a presence there," says Ganesan. "However, compared to other countries, it can be much easier to enter the market. You can open your shop pretty much within 30 to 60 days and start to enter the market as if you were local. What we've found to be really successful is to have a U.S. manager head the program and a local set of talent run day-to-day field operations, at least at the start." For many companies, the advantages of doing business in India are becoming even more apparent: "The physical infrastructure is only getting better, the communications systems are as good as anywhere in the world, and you have an English-speaking culture that's predominantly U.S.-educated in culture and technology," says Brian Rogan, senior vice president of marketing and strategic business for Sierra Atlantic, an Oracle partner and outsourcing company based in Fremont, California. "From a governmental and compliance perspective, it's rather seamless doing business in India, compared to other locations around the world.