Conglomerates work to get most from IT Budget

Written By Unknown on Jumat, 05 Desember 2014 | 22.23

MUMBAI: Indian conglomerates, which control billions in dollars of IT spending a year, are putting in place centralised processes to get more bang for their buck when they spend on technology and are working on strategies to gain ground in the digital era.

Adjusted for size, large Indian conglomerates spend more on technology than other Indian companies, according to Partha Iyengar, analyst and Gartner India head of research, as they invest to stay ahead of competition. Indian IT spending is expected to grow 9.4% to $73.3 billion in 2015 and, while there's no official figure, conglomerates are expected to account for a significant chunk of that.

By definition, conglomerates have companies that work in different industry segments, where technology needs are vastly different and so much of the buying was decentralised. But that is beginning to change, according to experts. "A relatively new trend is to take a look at what the integrated competencies should be — that really cut across the individual industries or companies within that conglomerate.

There is technological maturity within the companies and technology is also becoming important at the group board level, Iyengar said. He added that group boards were also beginning to put in place strategies to leverage digital technologies such as mobility, cloud and the internet of things. The Tata Group is a case in point.

In July, chairman Cyrus Mistry handpicked a technology veteran from General Electric as the group's first chief technology officer. The appointment of Gopichand Katragadda signalled the group's desire to harness synergies between the group companies. Conglomerates are even looking at getting more value out of their IT organisations and getting economies of scale when they buy technology.

"Some items like data center-related air conditioner, security solutions, etc., are centrally purchased. For the rest, we negotiate the cost with the OEM partners. We have a rate contract with the OEM partners. For instance, if Essar Steel wants to buy 50 laptops there will be centrally-negotiated rate contract and the product and technology is centrally finalised. Then based on the rate contract, the purchase will take place," Jayantha Prabhu, CTO, Essar Group, told ET.

Buying for digital businesses is still being handled at the company level, but that too is likely to change in the future. "Businesses within the group will have different timelines for adoption of digitalisation and hence, buying initially may be distributed. Centralised IT buying due to digitalisation would be a long-term affair," said VS Parthasarathy, CFO and Group CIO, Mahindra & Mahindra.

Godrej Industries on the other hand, is aiming to turn corporate IT into a profit centre . "We have already started to consolidate all our IT operations. In future, we would move to a scenario where the corporate IT team will start charging for the services provided. That's when we will turn corporate IT into a profit centre," said Shailesh Joshi, Head - IT, Godrej Industries. Iyengar,INDIAN CONGLOMERATES,Gartner India,Essar Group,Cyrus Mistry

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