By Sramana Mitra and guest author Shaloo Shalini
SM: Whichever ERP system you are considering, what is their response to this?
RN: I think the response is positive because it makes sense for us to look at such an approach. I will answer your question in just a minute, but I do want to give my perspective here. For us, we separate the cloud into three buckets; from Mahindra Satyam’s perspective, we say there are advisory services, provider services, and brokerage services. We believe that now because of our acquisition by Tech Mahindra and because of Tech Mahindra’s customers in the telecom space, we are extremely well positioned to play a role in all three of those buckets.
SM: I’m not sure I understand what is the role that Tech Mahindra’s telecom practice plays in this scenario you have just described. Is it a consumer packaged goods (CPG) franchise kind of scenario?
RN: For the cloud to be enabled, at a fundamental level it rests on a foundation of telecom, doesn’t it?
SM: Yes, but if you are talking about North America, that is a ubiquitous broadband scenario.
Then the telecom part is built in into the package, right? We live in a reasonably ubiquitous broadband kind of environment, so do all of these small businesses; the small franchises have access to broadband.
RN: That is true. What I am saying is that all of a sudden, you want somebody to host that private cloud and post that application for you.
SM: Oh, so you are talking about it from the hosting point of view?
RN: Correct. Users want to leverage that capability, but you want somebody to host it. They want somebody to be able to run it for you.
SM: I see. So, the architecture that you are talking about here for this particular CPG company, is a private cloud where you are going to bring in an cloud-based ERP system and then have the franchisees work off that private cloud.
RN: Correct! But I just want you to be cautious; I’m not necessarily saying that the entire ERP will be migrated to the cloud because it may not be necessary for a franchisee to run all of the ERP in order to be connected to the mother ship.
SM: Clearly, they need a small piece of the ERP system; they don’t need the full enterprise ERP.
SM: Going back to my question, how does an ERP vendor that will provide you with this capability with the basic capability – how does that vendor respond to this scenario?
RN: I think vendors are excited about it because, all of a sudden, we have become that combination of broker-provider that I talked about earlier. That is why I interjected and put that in perspective because we think that we can work with those ERP vendors, and we are already in discussion with them. What I’m saying is, How can I create an abstraction of services that still runs on ERP, that still uses some of the ERP technology and therefore makes the connection for our clients?
SM: Have you picked an ERP solution to focus on yet?
RN: We actually work with the almost all ERPs in this space, but we have not zoomed in on any one in particular. At a different front door, away from this, we are, for example, fairly deep into what I would call “the early wave with SAP on business by design.” We are looking at how we can put something together. We have a whole bunch of people who are in training in their SAP lab. We are chalking out how to define our market strategy for Asia Pacific, starting with India. We are deliberating over how we can enable business by design. Is the cloud an answer for the SMB sector for SAP? So we are in discussions.
SM: What workloads within business by design are you looking at for this particular effort? Is it ERP, or CRM?
RN: It’s called core ERP for small companies.
SM: Core ERP, I see. Do you have any other comments on the business model topic?
RN: The only other thing is in our opinion, all of a sudden the systems integrators such as Mahindra Satyam will have to be extremely creative in developing new partnership models. They can’t have that same conventional thinking that has brought them success so far. That by definition means we have to keep our eyes open for some of the smaller entrepreneurial companies to sprout and do well.
SM: Talk to me about that. I guess there are two topics for me to segway into based on what you just said: one is integration, and integration is changing for organizations that are moving to the cloud; one of the assumptions is that the integration requirements and integration costs are going to be significantly lower as they move to a cloud environment. Is that a correct statement? Is that something you agree with? The system integration is part of your bread and butter at Mahindra Satyam in terms of business, so how do you view that trend?
RN: I would say the jury is still out on whether we can say the integration costs are going to be significantly less. The reason I say this is, remember with all that has been said and done, nobody has yet put any set of application large enough on the cloud for us to get some data points and say I now have a statistically significant sample such that I can conclude. Again, I maybe wrong, your vantage point is certainly richer than mine. But from what I hear in my conversations with CIOs, nobody has gone large scale on this yet. They all have their toes in the water and they are wading in shallow waters, maybe wet up to their ankles only. However, they are still wading through it. I believe it is early to make a call on integration. If you apply the fundamentals of service-oriented architecture (SOA) properly, and cloud services follow those fundamentals of SOA, I believe integration is going to be easier. It’s going to be faster, and it is probably going to be cheaper.
SM: Let’s say that a lot of CIOs are working with the assumption that broad adoption of cloud computing is going to cut IT costs by, say, to a third to a fifth, and that is a combination of a product and service.
RN: Now, there is some truth to this because you have to ask yourself, are they talking about capex or opex? I would argue that capex costs are going to drop significantly.
SM: Of course they will, because of the business model of cloud computing. It is an opex expense business model.
SM: There is that factor, but I think CIOs are looking at total cost including, I think, at least based on what I have heard across the discussions I have had so far, the expectation that integration charges will get significantly lower.
RN: And I believe that will hold true once we attain a certain level of maturity, so I can use the Capability Maturity Model (CMM) five-point maturity. I think once we cross the third point of the maturity curve, costs will fall to that extent. I will give you another example of why I believe that is going to be true soon. You take the case of testing. Most companies – I have been a CIO at three Fortune 500 companies, I was a CIO at Kelloggs, I was CIO at Philips Medical, later I was CIO for Swift, so I have been there. You take testing. Testing is something where you invest in hardware that is almost as powerful as your production boxes, if not equally powerful, but this hardware is used only about a third of the time.
SM: You are absolutely right. On the infrastructure as a service phenomenon, the question is whether capability of flexible provisioning and de-provisioning of infrastructure, flexible access to maybe even public infrastructures as a service, will result in big cost savings.
RN: I truly believe that costs will come down, but the integrations cost and the reason I keep saying is that I am a bit apprehensive about drawing a conclusion so quickly. The cost of integration depends on how the applications are actually enabled on the cloud, and that is where you know, if you follow the standard, if you follow the guidelines that are fundamental and crucial to organizing yourself. Look at SOA. SOA was born almost a decade ago, nobody paid attention to it, and all of a sudden it is having a resurgence that is almost unbelievable. Why is that resurgent so critical? Because at least the smart CIOs are beginning to pay attention to it and say, If I want to leverage the power of clouds, I need to make sure I follow a robust SOA framework.