Economics behind IT - A Business Perspective

1. Economics Behind IT :
A business perspective
Brajesh C. Kaimal, PMP - COO

2. Overview
Business Economics
Generic Strategies
Verticals business comparison
How IT aligns business economics
Perspectives from the IT tech world

3. Where are these IT guys in India?
2000-1 2001-2 2002-3 2003-4 2004-5 2005-6 2006-7 2007-8
IT Exp. & Services 162 170 205 296 390 513 690 860
Exports
BPO Exports 70 106 180 216 316 415 553 700
Domestic 198 246 285 318 352 365 378 450
Total 430 522 670 830 1,058 1,293 1,621 2,010
(in thousands)

4. Indian IT export distribution – Geography wise
Geography FY 2004 FY 2005 FY 2006 FY 2007
Americas 69.4% 68.3% 67.18% 61.40%
Europe 22.6% 23.10% 25.13% 30.10%
Rest of the 8.00% 8.6% 7.69% 8.50%
World

5. Business Economics…
Prime motive of business ?
Wealth maximisation mantras – Profitability & Scale
Profits!!!
IT can facilitate wealth maximisation value chain the best
Re-defining business models!
Managing scale
Service efficiency
Cost optimisation
Customer relations, communication, feedback
KM, Competition & Performance management
…

6. Generic Strategies
Toyota
Nirma
Price
Mercedes
Differentiation C D Shirts
Ferrari
Focus (both Price & Differentiation) Clinic
(Re.1 Sache)
Strategy execution is the key:
Business sector is decided by knowledge/technology/Competitive
advantage seen in the market
IT comes as an enabler in every function of an organisation
IT strategies to be in line with the business strategies
Developed world is doing their best with IT to gain competitive
advantage

7. Service Industry - Engine of Growth

8. Verticals distribution
Airlines and transportation
Retail 3.4%
Other
8%
4.7%
Media , Publishing and
Entertainment
3.3%
BFSI
40.4%
Manufacturing
15%
-
tech / Telecom
Hi
19.1% Construction and Utilities
Healthcare
3.5%
2.5%
FY07 Vertical market exposure for industry exports

9. Verticals Comparison
Financial parameters Mfg IT Airline
Revenues 100% 100% 100%
Costs
Production costs 65% 40% 75%
Sales & Marketing 10% 12% 6%
Maintenance 5% 3% 6%
Other Costs 12% 20% 12%
Profits 8% 25% 1%
Investor preferences 2 1 3
(other parameters ignored)
IT Strategies
Match up/ excel industry benchmark realisation
Improving the weaker links to address competition
Better IT systems to win and retain customers!

10. Aligning IT to business economics
Key ingredients to IT success
Re-defining business models!
Driven by Finance and business strategy!
RoI Metrics –Cut non value adding components!
Productivity driven initiatives
Service level improvement ; customer feedback!
Usability, transition success and acceptance
Change Management!
Business Issues Solutions
High inventory costs Redesign Inventory systems, Plan JIT,
Poor usability of the mobile phone implement IT systems
s/w leading to a model failure Improve with a better embedded
Poor ATM services – regular cash system, test user acceptance
outage ! BI systems to forecast demand

11. Techworld Perception of the reality
Key ingredients to Project success!
60% of IT projects fail..!
Understanding
The domain
The specific customer
The reason behind the IT project decision
Knowledge dissemination
Change Management!
Technical management decisions Low level issues
The right technology Good architecture
The platforms as humane as possible Usability engineering
The right vendor Testing and fixing

12. The Airline Business Model
Long term planning
Fleet planning
Product & Service planning
Scheduling
planning
Operations control
Pricing, Revenue management In-flight services
Inventory control Airport ground services
Reservation services Engineering & maintenance
OPTIMISING
selling operating

13. Cost Distribution
planning 5%
OPTIMISING
27% 68%
selling operating

14. Customer Direct Interaction
AIRLINE PRODUCTS GDS/CRS
TRAVELLER/
3rd PARTY INTERNET SITES TRAVEL AGENTS
& SERVICES CORPORATION
COST

15. Increased Customer Direct Interaction
16%
14%
12%
10%
8%
6%
4%
2%
0%
1998 1999 2000 2001 2002
Airline Website Online Travel Agents Online Auction Agents
Customer Direct Revenue as a Percentage of Total Revenue For a Typical US Major Airline

16. Reducing Cost of Distribution
20%
15%
10%
5%
0%
1995 1999 2000 2001 2002
GDS/CRS Fees Credit Card Fees Commission & Overrides Res & Other
Total Distribution Costs (North America) as a Percentage of Revenue for a Typical US Airline

17. Reducing Cost of Selling
planning
O P T I M I Z IDirect Interaction
Customer N G
SELLING operating

18. Campus Bridge
Our ‘campus bridge’ program is intented to
prepare the students for the industry and also
equip the faculty to be aligned to the industry
needs.
Faculty Orientation Program
Research Programs (IIT chennai)
Industry grooming workshops
SME sessions
Student project assistance
IIT Chennai, DCSM, CETW

19. Experion Technologies
A new generation technology company
Managed by experienced professionals in Technopark,
Trivandrum, the premier technology park in India.
Focussed on Engineering solutions and business
applications
Absolute customer service focus due to employee
stake holding practices
Engineering Solutions
Embedded Systems
Image Processing
Collaboration Technologies
Business Intelligence – SAP BW, MS BI
Our technology focus is new technologies giving better customer experience and value
Silverlight, WPF, SharePoint, C#/ASP.net, PHP, DJANGO, MS SQL, My SQL, PostGRE SQL

20. Questions are guaranteed in life, answers may not be!

21. THANK YOU