InfrastructureStrategies 2004—inside Indian IT

This year, IS 2004 examines the IT decision-making process, alignment of business and IT, and where the money’s going to flow MUCH has been written about Information Technology as an agent of change in a 21st century corporation. While few doubt that IT has proved beneficial, fundamental questions remain when it comes to understanding the functioning of an IT department. Is IT in corporate India aligned with business objectives? Is the CEO involved in IT decisions and what’s his perception of a CIO’s role? InfrastructureStrategies 2004 (IS 2004) aims to answer these questions.

Focus on strategy

InfrastructureStrategies started off as a survey to quantify IT spends by corporate India across various technologies and industry verticals. Conducted by the eTechnology Group of IMRB on behalf of Network magazine—a sister publication of Express Computer—this year the survey went beyond its initial focus of analysing IT spends by probing the management and strategy issues faced by IT heads. From a CIO’s perspective, the survey aims to address the following:

• What are the likely IT spends across various technologies and industry verticals?
• Do CIOs perceive IT to be aligned with business objectives?
• Is it solely the prerogative of the CIO to make IT-related decisions, or do others, notably the CFO and CEO, take part in this process?
• Explore the transformation of the CIO from a pure technologist to a business strategist.

With IS 2004 we have gone to B-class cities for the first time to identify the spending patterns in these emerging markets for IT. As large corporations begin to shift their IT budgets into second gear, SMEs—especially those located in B-class cities—have taken up the slack.

As in the past, CIOs were interviewed for IS 2004. This time we also tapped business heads (CEOs, CFOs) and assessed their expectations from their organisation’s IT set-up. The CEO survey was designed to:

• Analyse whether CEOs consider IT as a core aspect of their corporate growth or if it was just a business enabler.
• Get their views on IT and business alignment.
• Explore the role played by CEOs in IT decision-making.

Step-by-step

The survey was carried out over three months (March-May 2004) in two phases.

Phase I: This involved personal interviews with over 300 IT decisions makers from top companies. For all practical purposes, the main survey with over 250 CIOs was conducted across Mumbai, Delhi, Bangalore, Chennai, Kolkata, Pune, Hyderabad and Ahmedabad. A smaller sample of 50 CIOs was interviewed in Aurangabad, Chandigarh, Cochin, Indore and Nasik to analyse spending patterns in B-class cities.

Phase II: Phase II involved one-on-one meetings with 50 business heads (CEO, CFO) across Mumbai and Delhi (since most business heads are placed in these two cities, the business and political hubs of India) to get their perspective on IT’s role in their organisations.

Where the money is

If 2002-03 witnessed under-utilisation of IT budgets, 2003-04 saw many organisations exceed their initially defined budgets. As per last year’s survey (IS 2003), CIOs had committed to spend an average of Rs 4.93 crore on IT-related investments. However, 2003-04 saw organisations spending more on IT than they had initially budgeted. The companies surveyed have spent Rs 5.28 crore on an average.

The biggest spenders in 2003-04 were BFSI and government/PSU verticals. The average amounts spent by them were Rs 10.26 crore and Rs 9.93 crore respectively. The services sector (logistics, hospitality, etc.) with an average spend of Rs 5.51 crore, has displaced the telecom/IT/ITES vertical as the third-largest spender.

Among the companies surveyed, 73 percent of CIOs said they invested in connecting their organisations (bandwidth/connectivity), followed by 72 percent in hardware procurement (enterprise hardware). Security came third with 55 percent CIOs investing in this area.

IT budgets

Nearly 67 percent of the CIOs surveyed claim that the actual amount spent has remained the same when compared with the budgeted amount. Only 10 percent of the CIOs spent more on IT than the initial amount budgeted for 2003-04. Of these, chemical/pharma companies (22 percent organisations) seem to have spent more than the allotted budget, followed by BFSI (14 percent) and auto and the auto components segment (10 percent). Telecom/IT/ITES is the main vertical to have under-utilised its budget with 30 percent of surveyed CIOs claiming to have spent less.

Treading with caution

The average IT budget allocated for 2004-05 is more or less equal to that planned in 2003-04. On an average, companies surveyed have budgeted an amount of Rs 4.78 crore for 2004-05. The major spenders are likely to be Govt/PSUs followed by BFSI and manufacturing/engineering. The Govt/PSUs vertical’s average amount allocated to IT has climbed from Rs 9.93 crore in 2003-04 to Rs 10.65 crore in 2004-05, the increase in spending is marginal.

Taking security seriously

More Indian organisations are taking security seriously this year. Security investments seem to be the clear focus area with nearly 61 percent CIOs planning to invest in security in 2004-05. This is an increase over last year when 55 percent of CIOs had spent on security.

Research snapshots

2003-04 saw many organisations exceed their initially-defined budgets. Companies spent Rs 5.28 crore on an average. The biggest spenders in 2003-04 were BFSI and the government /PSU verticals. The average amounts spent by them were Rs 10.26 crore and Rs 9.93 crore respectively. The top three technology areas for investment in the last one year were bandwidth/connectivity (73 percent), followed by enterprise hardware (72 percent) and security (55 percent).

Sector trends
Sector	Trends observed
Hardware	Windows 2000 is the most widely deployed OS. Linux is standing still with 24 percent of Indian organisations planning to invest in Linux-based servers.
Packaged software	Implementation of Infrastructure/Network management tools is gaining significance. Knowledge management has not grown beyond the hype cycle.
Enterprise-wide applications	The use of data warehousing and mining solutions seems to be on the increase.
Storage	NAS is eating into DAS. DAS is dropping off the enterprise radar as less than a fifth of respondents are investing, down from close to half last year. Only one in a hundred companies uses storage virtualisation. However, this is expected to increase with close to five percent of companies looking at adopting the concept of storage virtualisation.
Security	While 71 percent of organisations surveyed have a security policy, almost two thirds (63 percent) of the surveyed base do not conduct any kind of security audit. Existing security infrastructure is dominated by the use of anti-virus (97 percent), firewalls (82 percent) and VPNs (38 percent).
Bandwidth and connectivity	Leased lines rule the roost for both Internet access (78 percent) and campus connectivity (51 percent). Gigabit Ethernet and WiFi adoption are slow to catch on.
Convergence	On an average, companies spent 11 percent of their IT budgets on convergence. Of the companies which have invested in applications supporting convergence, 56 percent have invested in VoIP and 26 percent in video conferencing.
Outsourcing	Nearly 50 percent of small companies see outsourcing as a convenient way to access new technologies. When it comes to selection of a vendor for outsourcing, 93 percent of the companies look for technical competence and 80 percent for support and service.