Scotts Company implemented a big-bang ERP project in 2000, and realized that transaction-processing excellence alone would not enable it to achieve much progression towards the corporate goal of increasing Return on Invested Capital (ROIC). They hired Sumantra Sengupta, the leader of Cap Gemini (formerly Cap Gemini Ernst and Young LLC) Consumer Packaged and Retail Supply Chain practice to help create and implement a new supply chain strategy to enable a 100% increase in ROIC. You could say Scotts did a smart thing in March of 2003; when they lured Sengupta to join as Senior Vice President and CIO. Sumantra Sengupta laughs at the idea, but since mid 2003, he has been the CIO at the Marysville, OH-based Scotts Company [NYSE:SMG, market cap $2b], a leading lawn care product company.

A Ph.D. in management science from the Fisher school of Business at Ohio State, Sengupta brings a solid business background to the IT management, while his vast consulting experience with Ernst and Young and then with CGE&Y in the supply chain practice made him an ideal CIO for the Scott’s business. At Scotts, Sengupta heads two functions—the traditional IT division, and the business transformation services division. “The latter is our internal business consulting and innovation group responsible for new business models,” explains Sengupta, who is also very active on the capital structure and steering committee of the company.

“Scotts has followed the philosophy that this function will always be led a business head, and not a technology head,” says Sengupta. Two years ago, when Sengupta was on the other side with Cap Gemini, Scotts embarked on a global implementation of Manugistics as part of its new revised supply chain business model. The U.S. rollout was completed about 10 months, bringing the company very close to its retailers, winning it plaudits from Wal-Mart, Home Depot, Lowe’s and others. “The business philosophy itself had changed,” says Sengupta. “From viewing ourselves as a pure manufacturing company pushing our products in to the seemingly unending capacities of our retailers, we changed to becoming a sensitive, real-time responsive supply partner.”

That one single change in business focus required revisiting the technology, scalability, and response abilities for the company. “We had to move from forecasts based on last year’s data, and respond to real-time data-driven supply demand,” recalls Sengupta. Processing close to a million SKU’s, and facilitating the decision inputs in, say, a four-hour window demanded a different mindset and reliable technology capabilities. “Our forecast accuracy has improved reliability by over 30 percent and our inventory throughput to the market has doubled,” observes the CIO. As a result, Scotts now bases forecasts on POS data, SKUs and historical fill rates at the customer level. This improved method of gathering data enables Scotts to forecast down to the regional level with an accuracy rate in excess of 70 percent.

Next on the agenda is to roll out promotion planning management, and then Sengupta plans to take Manugistics into the plant, augmenting SAP. In the mean time, his team has rolled out the SAP platform across Europe in record time for all the major businesses. “For any ERP to stabilize, I insist on a three-year window, and Scotts is on schedule,” smiles Sengupta. “If there is a business process that will deliver competitive advantages to the company, I am all for best-of-breed solutions, but if it just delivers automation, I will accept an eighty percent solution any day. The philosophy has stood us well so far.” Reviewing every project from a ROIC perspective, the Scotts CIO splits his budgets into four buckets. “The most interesting of these buckets is the cost-avoidance—where a project does not have a substantial business case, which we have brought almost close to zero.” Ten percent of the I.T. capital is spent on maintenance and upgrade—VoIP, desktop refresh, technical upgrades of SAP, Manugistics, server management and so on. Another chunk is spent on what Sengupta calls, “keeping the lights on,” on which he doesn’t demand any returns on the investment. The remaining seventy percent is allocated to the global business platforms—marketing, sales, supply chain and services. “In sales, we typically work on improving our revenue enhancement and productivity, in marketing our focus is on the business intelligence—how can we get more intimate with our customers, market our business better,” reveals Sengupta. In supply chain, IT initiatives work on inventory and cost control; and service has been an emerging business—growing from $5m to about $125m today—which seeks IT strengths to grow further.

“We are flexible enough to appreciate the big picture—the current exercise of piloting a wireless exercise in the Atlanta facilities being a case in point,” says the CIO. Further deployment will be based on a ROI plan being presented convincingly. Sengupta has had his times of nerves too. Soon after he joined Scotts, a virus hit it in mid 2003. Though the company recovered rather well, what it revealed to the team was rather startling. The SAP implementation had engendered tremendous robustness in Scotts’ UNIX environment, but the security management in the NT environment was sloppy, to say the least. “We were lagging in patch management, process discipline and had no security strategy in place, and all this was in the Americas alone—we hadn’t even considered the global environment,” recalls the CIO.

Sengupta was quick to roll out a slew of recovery methods, signing up with Microsoft for a platinum service, and installing a team that just monitored patch management within Scotts. “Now we are in a position to execute a patch update within a few hours across the entire data center,” he claims. After much deliberation, he has chosen to establish spam control outside the firewall—a direct reflection of his strict ROIC audit.
Last year, the CIO shut down two data centers in France and Netherlands, and consolidated them into a single one in America. From over 17 legacy systems that were extent when Sengupta took over as CIO, the enterprise has retired most of them and will replace the mainframe environment within the next couple of months. Scotts is experimenting with a basket of new products and applications in wireless, open source, and so on. In a recent issue of Optimize, he writes, “My hypothesis is that many transformation projects fail because managers often shortchange the level of thought and effort needed to drive change management. The key message for those of us who have to deal with increasing demands on information services and daily fluctuations in customer-service requests is to focus on the two aspects of a large transformation that often get overlooked: people and measurement.

Measurement systems and incentive structures have been debated for years, and people have spent their careers attempting to perfect a system for optimizing human cohesiveness. At Scotts, we rely on a balanced-scorecard approach to optimize business change in all of our major transformations. This encompasses four key elements: strategy, human factors, process redesign, and technology enhancement.”

In addition to the supply chain management, Scotts has been an early adopter of Business Warehouse from SAP for its business intelligence needs. “Today we have 16 global reports, that everybody looks at. We are ready for the next steps, and are exploring tools in content management, portals, and data warehousing solutions,” Sengupta says. “This is in response to the demands from our marketing team that needs to slice data on the fly, and react to business intelligence in real time.”

The business-driven CIO speaks out for a change in the graduate curriculum at academia. “The changing industry is demanding new skill sets, and I see a large disconnect between what the academia teaches and what the industry requires,” comments Sengupta. “As core development moves to other global support centers, the industries here will demand talent that can understand business implications and apply technology as a means to an end, not an end in itself. There has to be a greater cohesiveness between the business and technology streams at colleges.” Sengupta is offering courses in managing IT as a business at the Ohio State from this fall, where he will explore the concept of the value of IT as a business asset.

He also seeks change in the way that software and service providers approach the market and potential buyers like him. “More often than not, they lack clarity of vision and compelling business case that would make me want to listen.” He thinks that smaller companies who have a greater ability to adapt will eventually win in the market. Scotts is working with a number of such companies around innovation. The Scotts CIO has been through many role-plays—faculty, published author, partner at consultancy, and now a CIO. He makes an interesting observation. “IT has not changed businesses, what it has changed is the expectations of the customer. And businesses that gear up to those expectations survive.”