Jamshedpur in Jharkhand is little known for use of cutting-edge technologies. That Radio Frequency Identification (RFID) technology plays a role here is another proof that technology knows no barriers. Tata Steel’s manufacturing facility in Jamshedpur is toying with the idea of using RFID powered solution to track its steel coils as they are transported from the furnace to the warehouse.

Tata Steel’s openness to adopt latest technologies is exemplary and path breaking. Varun Jha, chief information officer is the man credited for embracing emerging technologies ahead of time. Jha’s resolution to use technology to drive business is now helping his company enjoy operational and cost benefits.

“Information Technology plays a catalytic role in driving business. One needs to adopt technologies, which are relatively new so that the organization can derive some competitive advantage from such technologies. The chosen technology should not however be experimental to reduce the risk of large-scale project failure. At Tata Steel, we manage this process of balancing risks and rewards through scanning of new technologies and take the promising ones through an innovation funnel of trial, pilot project and adoption,” says Jha.

It was in 1994 that Jha was handpicked from Tata Steel’s engineering division and given the mandate to lead the Information Technology (IT) make over of the company. It was a challenging task that Jha took up with panache. Technology-wise, Tata Steel was a dead company. Jha’s aim was to make Tata Steel an agile, informed, knowledge based and connected company.

Over the years Jha and his team strategically deployed IT, which resulted in enhanced business benefits. Jha’s conviction that IT is not the only enabler of business processes coupled with his innovative and pioneering efforts has ensured the best advantage out of technology investments.

Jha and his team have put in place a well-defined process of IT governance and investment approval plan. Last year, Jha teamed up with Gartner to develop the new IT strategy for Tata Steel. Today, for approval of any IT initiative, Jha and his team considers financial and non-financial risks, key performance indicators, the relative weightage depending on the type of project as per Gartner’s Investment Model and Portfolio.

And it is such models that are helping Tata Steel achieve its business targets. In terms of capacity, Tata Steel is the 56th largest integrated steel manufacturer in the world and the largest in Asia. Tata Steel today produces about 4 million tons annually and has aggressive plans to produce 15 million tons by the year 2010—an aggressive target, indeed. But the confidence of achieving that target comes from the fact that Tata Steel has implemented a future-proof IT environment across all its manufacturing facilities. Technology initiatives have enabled it to lower production costs, including its cost per ton of steel and the number of hours per person required to produce a ton, as well as the size of its steel inventory—all helping the giant increase profitability through enhanced efficiency and productivity.

Jha doesn’t but the term ‘technology initiative.’ “I see IT as a component of a change initiative aimed at improving some aspect of business performance rather than a technology initiative. The change initiative may include changes in changes in business models, changes in business strategy or objectives and changes in business processes, which in turn may call for changes in roles, organizational structure and changes in relationships with external business partners. IT not only enables such change initiatives but it can also serve as a catalyst for such change initiatives,” he says.

Intranet Initiative
Tata Steel has expanded the reach and range of its communications significantly through the innovative use of communication technology: Intranet and Internet. Although intranet in India was in its nascent stage until 1998, Jha and his team were looking at avenues to utilize Intranet within the company, way back in 1995.

Today, one of the largest users of the intranet within Tata Steel is its knowledge management department, which has “made extensive use of the intranet to bring about a culture of learning and to develop a repository of knowledge available within the company.” The company has also made the intranet the primary platform for employee self-services, which allows an employee to access information relating to payroll, leave status and eligibility for various benefits. Employees on the shop floor access the intranet facility through kiosks, and information is available in local language (Hindi). VOIP, Wi-Fi connectivity and integration with cell phones and PDAs are some of the new initiatives that Jha has taken up.

Infrastructure Management
Jha has been judicious in his outsourcing strategy, where he is sure the internal team does not bring incremental value. For instance, technology-focused companies best manage the infrastructure—the data center and networks—. Four years ago, Tata Steel signed a 10-year strategic outsourcing contract with IBM to manage its business infrastructure. Though Jha doesn’t disclose the size of the contract, he notes, “it was the biggest contract in 2000 in ASEAN Region.”

Two years later, Jha outsourced the management of process and automation areas to Hewlett-Packard. This 5-year contract worth $5 million takes care of Tata Steel’s multi-vendor, distributed IT environments. Steel plants have a large number of process-controlled computers. Managing these complex machines is critical to the success of Tata Steel’s operations since even a single IT failure can disrupt its production schedule.

“Through these two contracts we made sure that there is competitive interest alive among both the parties to bid for new contracts—else you tend to cut yourself off from market signals if you have an alliance with only one party. We benchmark and renegotiate the contract periodically. The relationship is long term, and we expect them to resonate with our market dynamics, even as the commercials of the alliances change,” says Jha highlighting the importance of building safeguards to manage large outsourcing contracts.

Enterprise Applications
Typical of large enterprises, Jha has chosen a mixed basket of solutions in his architecture. The company uses Oracle technologies to run mission critical planning and scheduling applications such as controlling blast furnace. Oracle’s automation solutions helps Tata Steel to operate the blast furnace at peak efficiency by linking controls and sharing information across all major furnace operations. This integrated solution will link the facility’s stoves, cast house, utilities, stock house and weighing systems, raw material handling, coal injection, slag granulation, furnace cooling and gas cleaning plant.

Tata Steel has also adopted ERP to take a lead in the competitive steel industry. It has implemented SAP solutions to manage different processes such as sales, costing, procurement, and production. “SAP is an excellent transaction processing system,” says Jha. Today, the company’s order generation, order fulfillment and marketing development processes are executed in lesser time and with increasing efficiency, facilitating better credit control and reduction of stocks.

Implementing an ERP system is a challenge for any organization. The management of Tata Steel was aware of the declining success rate of ERP implementations and remained wary of any big-bang approaches to implementation. Adopting a process-by-process basis, and then rolling it across 70 geographic locations, Jha has won the commitment of all the business units, and yet has managed to remain within the big picture parameters.
Today, Tata Steel is one of the low-cost producers of steel in the world. Certainly the use of information technology has had its role in achieving this. Jha and his team of 200 professionals are now focusing on areas—supply chain, customer management—where they can add more strategic value to Tata Steel’s business.