Bringing IT to manufacturing

The Indian manufacturing industry saw a growth of 7.2 percent in the year
2003-04. The invest-ments in new projects by the manufacturing sector jumped to
Rs 3,314 bn from Rs 2,835 bn in 2002-03. This growth also spells a growth for
the IT industry in India. During the same period the spending on IT in the
manufacturing sector grew by about 10 percent to reach a figure of Rs 32 bn. The
major trends, as per IDC India, that accompanied this growth were: higher
spending by pro-cess manufacturers and increa-sed spending on upgrades of
existing systems and addition of new elements like 3D modeling and design
solutions.

In anticipation of the acce-ssion of India to the WTO, man-ufacturers who are
also global suppliers enhanced their spends. The spend, however, is still low.
The share of manu-facturing in the IT spend in the country was about 20 percent
in contrast to the BFSI segment that had a spend of 37 percent (DQ Top 20). In
the US, both these segments have an equal spend. The US, of course, spe-nds a
lot more on IT in manufa-cturing-something like Rs 360 bn each year.

Although the employment of IT for industrial applications is growing, there
are certain inherent features of the sector that make the process of
reo-rganization gradual. For one thing, software development in the
manufacturing industry requires multi-disciplinary and highly specialized
expertise.

This is because a crucial co-mponent of an industrial information system is
its interface to the world. Indian software expertise has been globally focused.

Next, most of industrial information systems have to be real-time. Testing of
these systems is a problem since an industrial process is needed. Software
simulation and laboratory scale prototypes are initial solutions but may not be
considered adequate, especia-lly in view of the mission-critical nature of the
system.

Industrial IT systems often have to be custom designed. This is because the
system is a component of an overall indu-strial plant and must be compatible
with its unique equipment characteristics and operational practices. The cost of
the IT hardware and soft-ware is only a small fraction of the cost of the
installation and the products that is controlled by it. Managers are therefore
reticent about introducing technology that does not come from the most reputed
of the manufacturers and which is not already tested in similar installations.
Unlike the ser-vices industries manufacturing is not as critically dependent on
a well deployed IT infra-structure. It is an important element but not a
mandatory one.

Another issue is that med-ium and small business units have not taken up IT
in a big way.

Most economic observers agree that this is a lop-sided development for a
country like India. The telecom infrastru-cture that drives many appli-cations,
especially in the SCM and CRM areas, has been sketchy and expensive. Large
organizations can set up their dedicated links because their scale of operation
justifies it. Medium and small ones cannot. Web-based applica-tions can play an
important role and that is just about stirring itself.

Despite these challenges, there is no option but to enco-urage the growth of
IT usage in manufacturing. Survival may be possible without it for a few more
years. But prosperity and growth will not be. It will require a lot of changes
in the attitude of enterprises, the IT industry and the government to make the
growth faster and more effective. Only then will the paradigm shift occur.

Shyam Malhotra is the
Editor-in-Chief of Cyber Media publications.