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Against the grain: Bucking the outsourcing trend

Kanika Goswami | Nov. 24, 2008
Underneath its distaste for chrome, glass and anything loudly modern, VST's been busy pulling off an IT feat few other modern companies have attempted.

At the back of their mind, what worried management was an attrition VST couldn't solve. The idea of running an ERP with an IT team whose numbers waxed and waned was frightening. N. Sai Sankar, Finance Director and Company Secretary, remembers thinking that outsourcing was a good idea since "we noticed that people kept changing and we needed to ensure that we didn't lag behind with our [ERP roll-out] schedule." Outsourcing would also allow VST to concentrate on business. Hiring a vendor, back then, made sense all around.

So, in late 2001, the ERP got off its feet. Eager to get their act together, the teams worked swiftly. Nemani, who was part of the finance department then, was embedded into the ERP team. By April 2002, six modules covering finance and control, production and planning, sales and distribution, materials management and quality management were complete. "We took the big-bang approach," Nemani remembers.

A year later, Nemani was charged with VST's outsourced IT. He oversaw the implementation of the People Information & Payroll System and the Tobacco Inventory Management System. By 2004, VST had outsourced all its IT processes to three vendors and began enjoying 99.5 percent uptime (from 90 percent earlier).

These were good times, Nemani remembers. VST became a training center for his vendor's new employees (VST has asked not to disclose its vendor's name) and skill retention was easy. "The vendor-customer relationship became a partner relationship," he recollects. Carried by this momentum, VST's corporate office was moved to thin clients, resulting in increased security and a 30 percent cost reduction.

But just as things were going well, the first signs of breakdown appeared. Support started to suffer. Critical situations did not receive sufficient attention. Nemani remembers how the vendor struggled to hold on the people whose skills ran VST's operations. "One of our basic premises for outsourcing was that the vendor might have better retention policies. But our vendors faced similar problems," he says.

As the vendor replaced its people more often, Nemani says that a breach in process knowledge opened up. "When it comes to [ERP], it's not enough to have only technical know-how, domain knowledge is important in solving real-time problems. This was perhaps the reason why during some extremely critical times, we had less support than we needed."

Soon, routine processes like the printing of invoices began slowing down, holding the business to ransom as goods were stopped from leaving the factory. In a bid to get work done, members of each department, led by Nemani, began to takeover, learning to resolve ERP issues on their own. Nemani became stronger in his belief that they might as well run the ERP themselves.


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