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Many of our readers would remember Krishna Kurup, the CIO of the South Indian Shipping Company (SISC) of Kochi. During the DQ-IDC Emerging Enterprises Survey of 2006, Dataquest listed out Kurup's tale of woes-there was an urgent need to procure servers and NAS for his organization as well as deploy an ERP, but neither his MD nor his CFO was keen to acquiesce to his requests. One year down the line, it is time for the DQ-IDC Emerging Enterprises Survey 2007. Much water has flown down the Kochi harbor over this one year; SISC has deployed Sun servers and NetApp NAS boxes as well as Ramco ERP, but Kurup still remains a worried man.

The main reason for his continuing woes is that notwithstanding the IT purchases made in 2006-07, automation still remains a low priority area for the company. The top management is still reticent to look at IT as a strategic tool; nor is Kurup involved in the actual purchase process of IT tools.

SISC is, however, not an isolated instance. Kurup's frustration is shared by several other CIOs or IT managers of emerging enterprises across the country; the DQ-IDC Emerging Enterprises Survey 2007 proves that though awareness level of IT adoption has improved amongst these smaller organizations, they have still a long way to go before attaining IT maturity.

Is IT Strategic to their Business?
How do you measure if most emerging enterprises in India consider IT as strategic to business? The determining criteria have not changed over the last year. One should still look at whether the CIO/CTO, or at least the IT Manager, is involved either in decision making or in influencing the process of IT purchase and, more importantly, if the CFO/VP-Finance is refraining from the decision making process. Also, it is imperative that the organization should have a separate IT department: not a tall order, considering that any organization having more than one personnel involved in the IT function is considered to have a separate IT department. And, last but not the least, the CIO/CTO must be reporting to the CEO/COO/MD of the organization.

A strict conformance to these parameters presents a dismal picture: only 22% of the respondent organizations confirmed the existence of a strategic IT department. As expected, while 36% of the BPO companies do consider IT as strategic, the numbers drop significantly for services-only 16% of them could boast of a strategic IT department. The picture is particularly bleak in the travel as well as gems & jewelry sectors, where less than a tenth of the companies consider IT as strategic.

The CIO or the IT head cuts a sorry figure in terms of authority for most emerging enterprises. While only 30% of them are involved in the actual decision making process in IT purchase, only half can actually influence these decisions. On the brighter side, at least 68% of the 506 respondent companies acknowledge the existence of a separate IT department and 70% of the CIOs are reporting to the CEO/COO/MD of the organization. The concept of having a federated IT decision-making structure or utilizing the services of IT consultants for IT purchase decisions is still an anathema to most emerging enterprises. In 85% of the respondent organizations, IT decisions are centralized at the head office, while only 12% of them use the services of IT consultants.

Brakes and Accelerators
Though a majority of the emerging enterprises are yet to consider IT as strategic, there is no denying the fact that the picture is gradually changing over 2006-07. Many of these organizations are slowly coming around to the point that IT can help them serve customers better, improve employee productivity and, most importantly, understand their business better and, therefore, judiciously foresee the future.

Some of them have already witnessed more measurable benefits: IT has enabled them to substantially reduce their inventories, improve bottomlines and thereby increasing their market shares. Automation is also enabling many of these emerging enterprises to achieve a complete image makeover: not only is the degree of IT usage of individuals increasing, organizations are adopting IT to move with the current trends and subsequently enhance their company images.

But Kurup and his peers across the 506 respondent organizations in the survey admit that there are still problems.

There is the common litany of complaints against the vendors: they do not provide preferred tailor-made solutions, they make tall claims but do not demonstrate the functions enough and most often end up pushing expensive products down the throats of the CIOs. In addition, different quotations from different vendors for addressing similar problems often create confusion.

Shortage of trained IT manpower is another major bottleneck confronting these emerging enterprises: not only is there a general lack of technical know-how among employees of emerging enterprises, but even the proprietor or CEO is usually a non-IT person who unfortunately takes most of the IT decisions. Since most of these employees lack confidence in operating IT, they naturally resist most IT adoption attempts in these organizations. And as it is difficult to retain IT people in most cases due to lack of career prospects, these emerging enterprises often cannot go for high-end IT products, which require complex management skills.

Tracking the Spending Pattern
The best measure of IT's strategic importance for a growing enterprise could be gleaned from the level of IT penetration, the corresponding spends, and budget allocated under these heads. Quite expectedly, the maximum spending is on hardware, though both manufacturing and IT/BPO have also been spending heavily on software, and plan to do so next year too. Considering the relative maturity of the BFSI segment, a lower level of spending is expected in 2006-07.

Software penetration is fairly low in the services and BFSI sectors, though, IT services penetration seems to be better across all verticals. Storage adoption shows the gulf in IT penetration between large and emerging enterprises-while NAS/SAN are today's hot technologies in large organizations, network storage has weak to negligible penetration amongst emerging organizations.

The average current IT spend of an emerging enterprise is Rs 27 lakh; though this figure might pale in comparison to larger organizations, thankfully the average spend planned for next year is Rs 33 lakh, an increase of more than 20%. Both manufacturing and IT/BPO, that spent an average of Rs 33 lakh this year, plan to spend Rs 39 lakh and Rs 41 lakh on IT, respectively, in the coming year.

The DQ-IDC Emerging Enterprises 2007 survey findings also dispelled some commonly prevalent myths-unlike larger enterprises, BFSI is not really so hot a sector amongst growing enterprises. Their average IT spend can at best be called moderate. Maybe the smaller co-operative banks and stockbrokers who constitute the BFSI sector amongst growing enterprises are yet to catch up with their big brothers on the IT front.

Rajneesh De
rajneeshd@cybermedia.co.in
Graphix: Paras Jain

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