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Economics behind IT
This document discusses how information technology (IT) aligns with business economics from multiple perspectives. It provides an overview of business economics concepts like generic strategies and compares different industry verticals. It then explains how IT can help businesses maximize profits and scale by redefining models, managing costs and customer relationships. The document also discusses perspectives from the IT industry and challenges of IT project implementation.
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Economics behind IT
- 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 theseIT 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 exportdistribution – 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 tobusiness 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 ofthe 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 BusinessModel 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 DirectInteraction 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 ofDistribution 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 ofSelling 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 guaranteedin life, answers may not be!
- 21.