How A CIO Increased His Project Budget By 50 Percent

Anil Khopkar, Vice President (MIS), Bajaj Auto, convinced his management to clear not one but two budgets in a single year.

Distinctly Ahead; that's not just Bajaj Auto's tagline, it's also the mantra the company operates by. Take for example, how it created a new record for itself in 2010 when it sold 2.85 million vehicles. It's already the world's fourth-largest two-and-three-wheeler manufacturer and is a leading brand not only in India, but also across several countries in Latin America, Africa, the Middle East, and South and South East Asia. For 2011, it set itself a target of 4 million vehicles (including 1 million in exports). Whether the company will be able to keep its foot to the pedal will depend a lot on the shape of its IT infrastructure.

That's a responsibility 55-year-old Anil Khopkar, VP (MIS), Bajaj Auto takes seriously. It drives him to experiment continually with new ideas, backed by enormous amounts of research. And Khopkar has a track record of getting IT right 9 out of 10 times.

That credibility went a long way in 2009 when he convinced his management to agree to not one, but two budgets and two technology initiatives. It would have been hard for most seasoned managers to digest: A SAP upgrade and a server virtualization project.

The plan to virtualize 17 servers, which ran Bajaj Auto's entire SAP ERP ecosystem, with 38 modules, on just two big irons, isn't something many CIOs would dare attempt. But Khopkar's real achievement was the fact that the virtualization project wasn't part of his original--and approved--budget plan. His 2009 budget plan only included the Rs 80 lakh SAP upgrade. To get the virtualization project off the ground, he would have to convince his management bankroll another Rs 40 lakh-about 50 percent of his budget in a regular year.

But Khopkar was aware that he needed to take this risk to create a launch-pad that would enable Bajaj Auto to move distinctly ahead than its competitors. Here's how he went about getting what he wanted.

Round One: The Rs 80 lakh Upgrade

In the early months of 2007, Khopkar submitted a plan to overhaul the company's SAP ERP: He wanted to upgrade it from R/3 4.7 to ECC 6.0 and introduce new servers to run the databases. The project was essential if the company wanted to hit its projected growth trajectory. It would help the company adopt new processes, devices, more applications and handle larger amounts of data. And, once the company moved to ECC 6.0, further add-ons, specific to particular business functions and processes, would be mere incremental upgrades.

Realizing it's importance to the company's overall strategy, Khopkar made it a priority and ensured everyone in his team invested in the idea. "We tested the entire setup for almost three months. All the while, my team and I gathered data and reviewed its performance. It was very important to me that we had a full grasp over the technology that I would propose before our management," he says.

That approach was in line with the typical budget planning process at Bajaj Auto. As the company runs a fiscal year April to March, Khopkar kick starts his annual budgeting plans around January. The knowledge gathering process ends by the third week of February and a first draft of the budget is submitted to management. This is followed by a review, and another round of meetings with stakeholders. The entire process rounds up with the approval in the third week of March.

After the initial rounds of information gathering and research, which also included intense conversations with vendors and internal stakeholders, Khopkar presented his case to Bajaj's Auto's management. He focused on the various benefits that the SAP upgrade would bring and how it would impact at least 25 different business processes. "A comparative study gave them a clear idea of our current scenario and the promised advantages that we were bringing," recalls Khopkar.Keep

Them in the Loop

He also ensured that management was kept in the loop throughout the conceptualization and data gathering process. "It took three to four rounds of meetings just to propose the idea to management. Catching them by surprise on the final day could have jinxed the project," he says.

Khopkar says it also helps to ensure that management gains insight into the overall IT strategy and not just piecemeal projects. Over the course of the year, he says, he ensured that management was aware of IT's three-year roadmap--and that it was aligned with the business' plans.

"We co-related all the end-points together. It is very important that one has an IT stratagem that seamlessly aligns with the business road-map for the next three years. Disparate infrastructure, added on-demand without completely realizing its significance to the organization, is not a favorable situation to be in," he says.

In addition, Khopkar did not just present a case for a SAP upgrade but demonstrated that his decision was also driven by Bajaj Auto's desire to adopt the SAP Service Parts Planning for Automotive package. This would help improve the company's increasingly complex spare parts planning and distribution process--and an Employee Self-Help Portal--which would smoothen the interaction between employees and the HR and finance departments. Both modules were to go live post the

SAP upgrade.

"Quite often when CIOs propose hardware replacements or upgrades, management usually thinks that it is a vendor-driven IT gimmick. And that perception is precisely the biggest roadblock a CIO faces in an annual IT budget meeting. The only way to get rid of that pre-conceived notion is to be able to talk to management in business terms. The more one can substantiate using facts, benefits, and statistics, the better chances one has," he says.

Thanks to his approach and homework, Khopkar got an 'in-principle' approval to his budgeting plan, including the Rs 80 lakh ERP upgrade project. But little did he know at the point that the project would require more of his persuasive skills before it took off.

Case Study Highlights

The virtualization add-on project required Khopkar to ask his management to change the cash outflow plan. Now, instead of a Rs 80 lakh investment, he needed Rs 1.2 crore.

How to create the stratergies around your annual budget to get in management buy-in.

Round 2: The Rs 40 lakh Add-on

While Khopkar keeps his overall IT strategy intact, he always ensures that his execution plans are more dynamic. This helps him introduce changes to his IT plans and keep aligned to the business. "I am in constant talks with the lines-of-business heads to understand what end users need, what their pain areas are, and what developments they are planning in the coming year or two. I couple it with constant updates in the technology domain. Merging the two helps us address the pain points in the business and support organizational expansion," he says.

It was during one such conversation with his team that Khopkar realized that their original plan to add a server base for the core databases might not provide the long term benefits they had perceived. Based on test environment investigations, they realized that the new server base would create two new challenges: The first was provisioning and scale issues, and the second was the high cost of annual maintenance contract (AMCs). At about 30 percent of the cost of the servers, the opex costs the AMCs added were high. And once Bajaj Auto adopted the spare service parts planning and distribution system and the employee portal module, those costs would rise even higher.

Evidently, their project execution strategy needed a quick but significant turnaround. Khopkar decided to replace the 17 servers that ran various modules of SAP R/3 4.7 and its relational databases with two very high-end IBM Power6 series machines, which were launched around the time, running virtual servers on its AIX platform.

It was a bold move on multiple counts. First, in the automobile sector, completely running core, mission-critical applications in a virtualized environment was unheard of. Second, virtualization meant buying two new servers and Bajaj Auto's hardware refresh cycle was about a year-and-a-half away. Third, re-stacking the execution plan would require significant remodeling which would require Khopkar to go back to his management to not only get their approval but also change the cash outflow plan. Now, instead of a Rs 80 lakh investment, he would need Rs 1.2 crore. Even a veteran like Khopkar knew it isn't going to be a cakewalk.

Know What You Want

On his side, he had a list of benefits. The move to a virtualized environment demonstrated quite a few straightforward benefits. First, it eases server provisioning and improves server capacity utilization. Second, it would help reduce the datacenter's footprint in terms of operational costs, power consumption, and physical space. Finally, it would enable Khopkar to save about 30 to 40 percent in opex costs every year in AMCs.

But Khopkar says that coming up with that seemingly win-win plan was just five percent of the battle. The other 95 percent was convincing management to adopt virtualization and advance the Rs 40 lakh.

He worked on getting his management to understand the value exchange he was proposing: The cost of buying the two new servers was equal to what the company was paying for three year's worth of AMCs for the old hardware. Still, it meant a one-time large payment versus smaller payouts over three years. But, Khopkar argued, if the company paid that money today, he could save them the cost of paying for the AMCs of 17 servers over three years; the price of replacing 17 servers and; the AMCs on the two new servers (he had bargained for a three-year service guarantee with IBM). Moreover, he wouldn't need further hardware investments to support the new service parts planning and employee self-help portal and other future upgrades.

Khopkar also maintains that a sound understanding of just a few salient features of the project helped them sail through the approval processes. He points out that instead of researching and preparing for a hundred different factors, CIOs should be prepared to present the 25 points that they are absolutely sure of.

Post his team's rigorous research, Khopkar prepared for his meeting with the CEO and CFO with a plethora of facts that he could back unflinchingly. Khopkar also emphasizes on maintaining the right body language. "You being in control of the situation should reflect from your expressions because any shakiness could give the management a whole lot of wrong impressions," he says.

Credibility Counts

Khopkar says that his belief in creating a comprehensive IT roadmap with a three-year timeline paid off. He says that it is easier to convince the business when they see that you have a strategic approach that takes cognizance of future developments and addresses issues as they crop up.

"The ability to foresee possible problems is always appreciated. I briefed the management not just about the cost they would have to incur on the upgrade and hardware refresh, but I also mapped out the kind of expected figure they might have to invest in the coming 18-24 months. Once the CFO and CEO have the visibility that IT is going to need a certain amount of capital over the next 18 months and its revenue outlay is in alignment with business goals, they feel like in control," he says.

The hierarchy at Bajaj Auto gives Khopkar one advantage some of his peers don't have: He doesn't need to present his case to the board. Once he convinces the CEO and the CFO, they take his case to the board. But that also means that he needs him to anticipate all the data the CFO might need to present. "I have long-standing credibility in this organization. They have seen the kind of work we have done in the past. If you have credibility with your management, they will fight to get approval from the board," says Khopkar.

So where does he think that leaves CIOs who are new in an organization? "If a CIO is new, he can always rest on his past laurels. Demonstrate the kind of work you have done in a previous organization. If you have proposed something new to management and they are apprehensive about it, make use of your networking skills. Try to arrange a tour for your business people around an organization which has done something similar. When business heads talk to their peers from other organizations and learn about the benefits of the technology, they are more easily convinced," he advises. Khopkar himself has arranged for one of his peers from a reputed organization to meet the CEO and the senior management at Bajaj Auto.

"Right now when I talk about it, it seems like a cake walk," Khopkar smiles, "but it is really difficult when you are trying to fit in all the pieces of the jigsaw to make management see a comprehensive picture. We backed our new case with tons of background research and a plethora of tests. We not only looked at the success stories around the industry, but also spoke to many vendors to gain different perspectives and 360-degree view of the solutions available. It took us about three months to test and gather rock-solid data and references to make our case water-tight. But that's what it took to get our initial budget hiked from Rs 80 lakh to Rs 120 lakh in just two meetings with the management."

This story, "How A CIO Increased His Project Budget By 50 Percent" was originally published by CIO-India.

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