2000-2009: The years of innovation and excess that scarred investors

The first decade of the 21st century has been marked by excess, instability and increased risk taking in Europe’s financial sector and, while lucrative for banks, has been a disaster for many investors, according to a survey by Financial News of some of the most senior industry executives.

IBM deploys analytics for a `Smarter Planet'

With about two lakh servers that it manages worldwide and an ever-growing stream of data from various sources, IBM is developing its strengths in Business Analytics and Optimisation (BAO) to create a `smarter planet'. The IT giant is helping companies and governments tread the green path using sensors and monitoring systems for rivers, water pipelines, electricity grids and road traffic.

"Smarter Planet is an initiative that is based on the digitisation of the world. As transistors have exploded, everything is digitised - the phone, car, appliance and utility network. Now we are seeing the digitisation of the natural world,'' Frank Kern, Senior Vice-President, IBM Global Business Services, told invited journalists at the company's headquarters in Armonk, New York.

Skill incubation

IBM wants to develop the fast-growing area of analytics to offer differentiated solutions. To this end, the company has announced six analytics centres around the world where skills in particular areas will be incubated. Besides, a Business Analytics Centre of Competency has been opened in Bangalore. The expertise gained in specialised areas in these centres will be available to clients globally.

While the Beijing centre is focussed on railways and transport to make them `smarter', Tokyo and Berlin work on smarter cities, New York on healthcare and public services, London on financial systems, and Washington DC on cyber security. Analytics skills are different from classic IT skills. They deal with collection, aggregation, relationships, cause and effect of data; they are a core competence, not just skills on the side.

"The six analytics solutions centres are designed to be hothouses of talent," said Fred Balboni, Global Leader, BAO, Global Business Services, IBM. Applications of analytics include lowering of health insurance fraud, inventory control in supply chains, optimising automobile manufacturing and repair processes, pollution and resource wastage, and even crime reduction.

IBM's work represents a shift over time - from plain information technology to the use of IT in business. That is because a significant part of the economy in several countries is made up of services, enabling new learning in services, productivity, technology re-use, data and analytics.

This understanding moved IBM, which achieved a record revenue of $103.6 billion during 2008, from being a component supplier, to the centre of the clients' business.

The company began to think how it could really make the planet better, smarter, more efficient, and less wasteful. "It placed us in the services economy,'' says Robert JT Morris, Vice-President of Services Research, who was responsible for the development of the Deep Blue chess machine that famously played Garry Kasparov.

Investment in research

IBM today invests $6 billion a year in research. The company has spent $12 billion over five years to build capabilities in BAO. A good case study of analytics creating value is its partnership with the city of Dubuque in Iowa, U.S. With a community of 60,000, Dubuque is small; 40 per cent of America's population lives in similar cities with fewer than two lakh people, and the results in Dubuque will have national and perhaps global appeal. So what is IBM doing here?

The city was looking for ways to improve sustainability, covering water management, energy and transport. The goal was to reduce the carbon footprint. Water management is the first area that IBM took up as part of its year-long, 250-house pilot that began in August. A quarter of the households and buildings in the U.S. have some sort of water leak.

The solution planned is to gather data using electronic water meters that record the smallest leaks that conventional meters cannot. "We will bring the data from the meters and do analytics on it,'' says Dr. Mahmoud Naghshineh, Director, IT Services Research at IBM.

Insights

Explosive growth in mobile telephony in India also provided some insights. It convinced researchers that if you "don't make it too complex,'' adoption becomes easier and the results are good. "You can get 60 or 70 per cent with what you already have,'' says Dr. Naghshineh, referring to simple data collection opportunities.

In Chicago, an IBM project deals with one of the largest video security deployments anywhere. The Office of Emergency Management and Communications (OEMC) wanted the technology to develop a video network that monitors traffic patterns continuously, while also being able to detect suspicious activity and potential public safety concerns. The result appears futuristic.

The experience gained from "millions of tickets of work'' around the globe is helping Big Blue pursue its Smarter Planet initiative.

The extensive knowledge base can potentially be deployed for clients worldwide. Analytics and optimisation is driving IBM to create greater value and deliver it globally.

Ratan Tata to group cos: Freeze acquisitions, capex plans

Mumbai, Nov. 12 Warning of hard days ahead, Mr RatanTata has asked all the Tata Group companies to put on hold their acquisition and capital expenditure plans.

In a letter sent to heads of the group firms and their subsidiaries, Mr Tata has asked them to drastically cut operational expenditure and improve efficiencies.

“Put on hold any plans for acquisition unless considered strategically critical and also defer non-essential capital expenditure and capacity expansion,” Mr Tata, head of the Tata group, said in the letter, prescribing a set of belt-tightening measures for the group firms to weather the financial storm that is blowing across the globe.

To shore up as much cash possible, he has told companies to finalise pending loans and funding agreements, even if they involve accepting higher interest rates.

“Some of our companies with substantial foreign operations or those which have made substantial acquisitions are already facing major problems in raising capital or establishing lines of credit for their operations,” Mr Tata said.

The Tata group had made several big ticket acquisitions overseas including Corus Steel and the iconic auto brands Jaguar and Land Rover in the UK. The group had raised large sums in debt to finance these acquisitions.

“In India also many of our companies already are or will soon face major problems in their access to credit due to the lack of liquidity in the domestic market as also their inability to effectively raise equity due to the depression in the stock market and the erosion of investor confidence,” said Mr Tata.

Despite the measures announced by various Governments, liquidity will continue to be a major problem. “This state of affairs is not likely to improve substantially over the next 12 months.”

“I believe each of our companies needs to undertake a critical review of its cash flow requirement. Business plan with defined strategies need to operate in this difficult period. Failure to manage this crisis could result in irretrievable positions.” Mr Tata has advised the top management to form task forces to prepare plans of action by early January with specific targets to face the difficult months ahead.

Mahindra Satyam says not losing clients

IT services firm Mahindra Satyam said customer attrition has stopped and it is not offering price cuts to win new deals, a company executive said.

"We inherited 380 customers and we have not lost any. We have added about 36, so we have about 420 (as of now)," Atul Kunwar, president, global operations, said at the Reuters India Investment Summit held in Bangalore.

Mahindra Satyam, which counts General Electric Co, Cisco Systems and GlaxoSmithKline Plc among its clients, has renewed over 50 deals in the last three months.

"A lot of these are multi-year deals," Kunwar said.

The company, earlier known as Satyam Computer Services, was acquired in April by Tech Mahindra, a unit of tractor and utility vehicle maker Mahindra & Mahindra, after being hit by India's biggest corporate scandal.

Kunwar said the company is not seeing any payment delays.

"In fact, the customers are being overly good to us. No payments are being held up," Kunwar said.

Mahindra Satyam, which is in talks with the World Bank to lift a ban, said it is hopeful of completing the restatement of its accounts by June 2010.

In December last year, Satyam Computer Services was barred from business with the World Bank for eight years.

The firm currently has 35,000 employees, including the virtual pool.

Shares in Mahindra Satyam were trading down more than 7 per cent at 94.25 rupees in the main Mumbai market that was up 0.7 per cent.