In an insightful conversation with Biztech2.0, Bruce Richardson, chief research officer, AMR Research, shares his thoughts on the Indian IT landscape and virtualisation.

There is much talk about virtualisation in the industry today. What is your take on it and how realistic do you think it is?

My interest in virtualisation was stirred by a conversation with the CEO of HCL. During our conversation, he told me about a large virtualisation project that he was doing for a major bank where the number of servers had to be reduced from 640 to 40, which is a huge decrease in terms of numbers. This conversation encouraged us at AMR Research to look at this space in its entirety, to consider who the dominant players were in this field and how this entire ecosystem worked. Our research covered major technology players such as VmWare, Oracle and Microsoft and what they were doing in this space.

Virtualisation in the current context has become an attractive option as it works towards getting the most out of existing equipment. As attractive as the option might seem, there is also a flip side to it, which is energy efficiency and the cost of energy.

Through our interaction with industry players and other research, we realised that energy efficiency, which is the secondary cost of running the data centre, is emerging as a major concern.

What challenges do you see arising with virtualisation?

Virtualisation requires the number of servers to be reduced. A major issue is that of the organisation’s attachment to servers and their reluctance to part with them. HP is currently going through this exercise of reducing the number of servers. The company is trying to consolidate its servers around the world. This process has been quite difficult for HP because while trying to consolidate servers, a number of random servers can crop up and pose problems. Thus, there could be political issues internally regarding the change. All organisations think that all their systems are mission critical.

Frankly, the argument for virtualisation has not been put forth in the correct manner. The argument does not bring to light its business benefits. As a concept it makes sense, but companies don’t know how or why they should implement virtualisation.

What is the Indian virtualisation landscape like?

The largest Indian companies have already started their journey on the virtualisation path. Almost all companies that I have come across are maintaining multiple data centres, not only in India but also across the world. Most of them are trying to figure out how to get the most out of this kind of an arrangement as they do not wish to merely end up buying several racks of CPUs and storage devices.

What is the level of adoption of ERP in India?

India is going to benefit by being a late adopter of ERP. If you look at some of the early adopters of ERP in the US and western Europe, by now they would have spent billions of dollars already, trying to reach their present position. If a company has been using ERP for more than ten years, it would have easily done more than three upgrades of the system during that period. Companies initially had to set up data centres wherever there were people, now they are trying to consolidate all those data centres into one. Surprisingly, India has been quick to adopt and integrate new data systems. India represents the third fastest growing market for SAP, it is a similar experience for Oracle and Microsoft applications as well. We are now seeing a wider adoption of ERP and definitely at a faster pace than we had assumed.

What are the benefits of having a transparent Supply Chain Management?

The whole issue of transparency in the supply chain is really a function of the way you sit on the supply chain. If you are the customer, then you control all the transactions that take place. If you are a component supplier to another supplier who is closer to the customer, then you have very little leveraging power and no hope for transparency. For instance, a couple of years ago while I was in conversation with a supplier from Dell, he spoke to me about the problems that Dell’s Supply Chain was encountering. He mentioned that Dell had 54 percent forecast errors and due to this they were being swung from one end to the other due to the lack of their ability to plan well.

The idea of a transparent supply chain is that the end-supplier would have visibility into what the consumer is buying and what the future product plans are. This transparency would help in improving efficiencies throughout the chain in terms of cost reduction. We’ve been talking about transparency for twenty years now and we are definitely going to be talking about it for the next twenty years. It’s a great concept, it’s just a little difficult to achieve. There are lots of aspects involved in this such as trust, having the correct IT systems in place, in addition to issues of cost sharing and planning. To sum it up, SCM is a very complex issue.