CHRIST UNIVERSITY INSTITUTE OF MANAGEMENT

Enterprise Resource Planning

BPR used in ERP with example ICICI bank
Renji S George,
0920324
SECTION D
[09-08-2010]
Business Process Reengineering means not only change -- but dramatic change. What constitutes
dramatic change is the overhaul of organizational structures, management systems, employee
responsibilities and the use of information technology. It was introduced by Dr.Michael Hammer
in 1990s. Business Reengineering is the fundamental rethinking and radical redesign of business
processes to achieve dramatic improvements in critical, contemporary measures of performance,
such as cost, quality, service, and speed. Hammer illustrates reengineering with the revolution
that took place in Ford’s system of accounts payable. In the early 1980’s, Ford’s auditors
carefully studied accounts payable activities and concluded that, by consolidating, by
rationalizing processes, and by installing new computer systems, staff could be cut twenty
percent -- from 500 employees to 400.

“We should reengineer our [organizations]; use the power of modern information processing
technology to radically redesign our ... processes in order achieves dramatic improvements in
their performance.... We cannot achieve breakthroughs in performance merely by cutting fat or
automating existing processes. Rather we must challenge the old assumptions and shed old
rules.” – MichaelHammer

Principles of Reengineering

Hammer (1990) has described some of the principles of reengineering the

business processes as follows:
 Organize around outcomes, not tasks.
 Have those who use the output of the process perform the process.
 Subsume information-processing work into the real work that produces the
information.
 Treat geographically dispersed resources as though they were centralized.
 Link parallel activities instead of integrating their results.
 Put the decision point where the work is performed, and build control into
the process.
 Capture information once and at the source.
 Common Steps in BPR

• Project Phases Required For Successful BPR:

• Phase 1: Begin Organizational Change

• Phase 2: Build the Reengineering Organization

• Phase 3: Identify BPR Opportunities

• Phase 4: Understand the Existing Process

• Phase 5: Reengineer the Process

• Phase 6: Blueprint the New Business System

• Phase 7: Perform the Transformation

 Phase –I Begin Organizational Change

• Assess the current state of the organization

• - Explain the need for change(Consolidate the problems which can be

converted into opportunities-Creates potential for trying new technologies)

• - Illustrate the desired state

• - Create a communications campaign for change

 Phase -2 Build the Re-engineering Organization

• Establish a BPR organizational structure

• Establish the roles for performing BPR

• Choose the personnel who will reengineer

•
 Phase3 –Identify BPR Opportunities

• - Identify the core/high-level processes

• - Recognize potential change enablers

• - Gather performance metrics within industry

• - Gather performance metrics outside industry

• - Select processes that should be reengineered

• - Prioritize selected processes

• - Evaluate pre-existing business strategies

• - Consult with customers for their desires --- quality .delivery

• - Determine customer's actual needs.

• - Formulate new process performance objectives

• - Establish key process characteristics

 Phase4 – Understand the existing process

• Understand why the current steps are performed

• - Model the current process

• - Understand how technology is currently used – COBOL – Unix based

system

• - Understand how information is currently used – batch system – non

interactive – text based terminals(NO GUI)

• - Understand the current organizational structure(slow to react to customer

needs)
 • - Compare current process with the new objectives – cycle time reduction –
fast in reacting to customer needs – competitive in mark

 Phase5 – Re-engineer the process

• - Ensure the diversity of the reengineering team – (Top management, User

Group, Developers Group)

• - Question current operating assumptions

• - Brainstorm using change levers – Selecting the correct technology within

Budget

• - Brainstorm using BPR principles

• - Evaluate the impact of new technologies – Competitive Advantage, Cycle

time reduction, Work life enrichment

• - Consider the perspectives of stakeholders – Faith in the information system

• - Use customer value as the focal point – Quality and Delivery

 Phase 6 Blueprint the new Business System

• Activities

• - Define the new flow of work

• - Model the new process steps

• - Model the new information requirements

• - Document the new organizational structure

• - Describe the new technology specifications

• - Record the new personnel management systems

• Phase 7 Perform the Transformation
 • - Develop a migration strategy – A project plan

• - Create a migration action plan – PERT network with important milestones

• - Develop metrics for measuring performance during implementation

• - Involve the impacted staff – Consult Users who are going to use the system

• - Implement in an iterative fashion - Building proto types

• - Establish the new organizational structures

• - Assess current skills and capabilities of workforce

• - Map new tasks and skill requirements to staff

• - Re-allocate workforce

• - Develop a training curriculum

ERP and BPR- Inseparable twins(How ERP facilitates BPR?)

MichaelHammer in his path breaking article “ Reengineering Work: Don’t
automate, Obliterate “ published in Harvard Business Review, defined BPR as-
“use the power of modern information technology to radically redesign business processes
in order to achieve dramatic improvements in their performance “.

For BPR to succeed or achieve the intended benefits information technology has

a critical role to play as the key enabler of business processes

Organisations have following options:

1. Reengineer business processes before implementing ERP

2. Directly implement ERP and avoid reengineering

In the first option of reengineering business processes, before implementingERP, the

organisation need to analyse current processes, identify non valueadding activities, redesign the
process to create value for the customer and then develop an in-house applications or modify an
ERP system package to suit the organisations requirements. In this option employees will
develop a good sense of process orientation and ownership. This would be a customized solution
considering the organisations structure, culture, existing IT resources, employee needs and
promises relatively less disruption to routine work during the change program. It is likely to have
a high probability of implementation. But there engineered process may not be the best in the
class, as organisation may not have access to the world-class research and best practices.
Moreover, this maybe the only chance to radically improve in near future and going for less than
the best may be a costly mistake. Plus developing an in-house application/implementing a
modified ERP can take lot of time.

In the second option of implementing ERP package with minimum deviation from the standard
settings i.e. “one size fits all”. All the processes in a company should conform to the ERP model
and the organisation has to amend its current work practices and switch over to what the ERP
system options offers. This option offers a world-class efficient and effective process with built
in measures and controls and is likely to be quickly installed (need not necessarily be quickly
implemented fully). But if the employees do not have clarity of existing processes and good
understanding of their internal customer needs or current processes are not well defined and
documented, it is quite possible that while selecting the standard process from the ERP package,
employees may not be able to perceive the difficulties likely to be encountered during
implementation stage. Employees would lack process ownership and orientation. Other than
technical issues like organisation structure, culture, lack of involvement of people can lead to
major implementation difficulties and full benefits of standard ERP package may not be
achieved. Situation may arise that after implementing ERP, organisation may have to reengineer
its processes. This could be a very costly mistake.

Theoretically the third option of reengineering business processes during implementation of ERP
also exists. It may sound to be the best option but being an ideal situation it does not seem to be
practical option and is likely to cause maximum disruption to existing working. It should not be
forgotten that during BPR & ERP initiatives, routine work is still to be carried out and customers
served.

Businness Process Re-engineering done at ICICI Bank

Introduction:
BPR (Business Process Reengineering) is all about reinventing, rethinking, redesigning,
redirecting and rebuilding. It touches five segments strategy, processes, organization,
technologyand culture. BPR is an ongoing process critical to a company's success. Faced with a
constantly changing business environment, companies are scurrying to grasp the potency of this
trend -propelled by competition, globalization and need for speed.The most important reason for
companies to launch BPR projects is to gain efficiency and productivity. Once this is achieved,
they can boost organizational efficiency and streamline business and production processes. BPR
helps companies optimize work flow and productivity. A well- executed business process
redesign equips an organization to meet inevitable market challenges. Despite the fact that BPR
is a business stream, IT can be a facilitating agent to it. As IT gets more closely aligned with core
business units, IT-enabled BPR initiatives is a sure-fire way of achieving results. IT has the
inherent capacity to innovate. If IT doesn't get involved in it, the transition will be a mess
because IT knows where the data is. It has the brain power. Once IT realizes what's going wrong,
it can find solutions and address the critical concerns. IT has to become an integral part of BPR
initiatives to ensure a high level of organizational commitment. If IT does not get closely
involved in BPR, business will remain oblivious of the challenges heading its way. When IT
takes charge of PR initiatives it enhances the department's value within the organization and
brings it closer to business. BPR was implemented in ICICI Bank in year 2000 and later when
anytime, anywhere banking came to our country, ICICI Bank had to move away from the
branch-centric model and make its services available nationwide. The solution was to centralize
its applications.
Reasons for BPR Initiative:
 In year 2000 and later when anytime, anywhere banking came to our country, ICICI Bank
had to move away from the branch-centric model and make its services available nationwide.
The solution was to centralize its applications.
 Legacy systems: The traditional systems at ICICI Bank were very centric to the branch. For
example a server at New Delhi was specific to the branch in that city; the ATMs were standalone
catering only to the city branch. The banking transactions were thus limited to the respective
branch offices as customer data was not available in other branches. This made banking a limited
service and very branch specific. ICICI realized the importance of offering nationwide banking
but this would be possible only by having a centralized data repository.

Team Involved:
 Infosys is one of technology partner for ICICI Bank which game the assistance to implement
Finacle for handling all the banking activities
 Bill Desk for online payments
 SYBASE
 SAS
Project Design:
The shift
The basic network was set up for providing the e-mail facility, but none of the
applications were linked to the network. The network comprised of a mix of servers running
different applications at various branches of the bank. With growing business and rapidly
increasing accounts, the company found it extremely difficult to administer and manage the
system.This also resulted in duplication of backend services and procedures, as the systems were
not centralized for the core banking applications.
There was a lot of additional cost being incurred due to the duplication of the backend
procedures at the branch offices. The centralization procedure started around late 1999. ICICI
Infotech (a company promoted by ICICI) made the first network design for the group in 1999—it
was a hub and spoke architecture. Utmost care was taken to design a network with a strong
backbone. The key strength of a network is its back-bone. The group's various centers are
connected by 2 Mbps or 4 Mbps leased lines. The design considerations not only included high
bandwidth availability but also the fact that a single point of failure should not result in lines
going down.
The group realized that it had to enter into the retail space, have local regional presence,
and provide alternate channels to the customer. They needed a solution whereby they could offer
services across the country. Centralizing the operations was not the solution, but centralization of
data was. ICICI Bank had
already centralized some of the operations but still had some branch applications running
independently which were not centralized and had ATMs which were stand-alones. Two major
criteria considered before designing were not only the network, but also the infrastructure
available in our country
In the past, the infrastructure here was such that a company could not rely on leased lines
completely. So ICICI needed backups on ISDN and VSATs, along with the 64 Kbps leased lines.
The leased lines were too expensive then, now the lines are better, more stable and offer good
connectivity. The cost has also come down by around 15 percent.

It was really important was to have a world class data center and centralize everything in
one place, as that's where the network can be used at the maximum. To ensure 24x7 service
access and connectivity to customers one needs to have reliable backups and a robust network in
place. From a business perspective, the main reason to go in for a network was centralization of
data, provide all channels of communication and at the same time provide anytime, anywhere
banking. The problem ICICI Bank faced with our legacy systems was that they were stand-alone
systems and the data from one branch was not available with another branch.
These problems led us to the new design of the hub and spoke architecture.

The big solution

What ICICI was looking for was a robust network, which would enable it to offer
services at the retail level throughout the country. The in-house ICICI Infotech was the obvious
choice for consultation. The ICICI Infotech team designed the initial network topology in 1999.
The team had put forward a series of designs, not radically different from each other.
Eventually, a design with a mix of VSATs, leased-lines, radio-links and ISDN was
selected. A mixed design was selected because of the disparate locations of the group across the
country. There were different technical problems in different locations and the next best available
solution had to be included. The advantage in a hub and spoke architecture is that multiple nodes
(spokes) are connected with a hub location through a ring of single-mode fiber. Each hub-node
connection can consist of single or multiple wavelengths (lambdas), each carrying a full Gigabit
Ethernet channel.
Protection from fiber cuts in the ring is achieved by connecting the hub and nodes through both
directions of the optical ring. Service provider Gigabit Ethernet metro access rings are the main
applications for this architecture. And another advantage is that nodes can be added to the
network more easily.

Methodology
The most important aspect to setting up a network is to have a good relation between the
technology consultant (network integrator), the vendor and the client. The vendors in the market
are more or less capable of giving the same results, like the same amount of redundancy or
strength of the network. What really matters is the relation between the three. If there is harmony
amongst the three, then better results will be achieved. The client plays the most important role
as he has very low time to market, and delivery is required at the earliest.
A series of products are available in the market. As the time to market is so short, ICICI
Infotech selects the products available in the market and integrates them. This takes care of 98
percent of 10 the solution requirement and then ICICI Infotech build the other two to three
percent around it nd deliver the perfect solution to the client.

The Network
The network follows a hub and spoke architecture—a mix of VSATs, leased lines, ISDN and
radio links. It has around 800 leased lines, about 600 VSATs, approximately 800 ISDN lines and
multiple 34 Mbps lines.
The network supports the ICICI group offices, banks, branches, and over 1000 ATMs. There is a
primary site from where spokes go out to the regional branches and the other offices. The
secondary site has the disaster recovery system.
There are around eight hub locations, which have 3, 4 or 8 Mbps lines as per the requirements for
connecting to the branch and regional offices.
High-end Cisco routers and switches have been deployed for connectivity. The network is
monitored using HP OpenView and CiscoWorks. Over 30 portals are operating using a highly
secure state-of-the-art security architecture, which consist of firewalls, intrusion detection
systems, virus protection and various other tools.
The main production site is at Mahalaxmi, Mumbai (the primary site), and has been built to
international standards. The disaster recovery site (the secondary site) is located at ICICI towers
in Bandra-Kurla complex, Mumbai and is used for replication of data. A distance of 25-30 kms
separates the two centers and they are linked with two 34 Mbps leased lines. To ensure reliability
and 24x7 availability, the leased lines pass through separate exchanges. Before the data moves on
to the leased lines, it passes through two CNT storage directors that convert this data into WAN-
related traffic before it is sent on the leased line to the other data center. The high-speed leased
lines make it possible to synchronize data in real-time between the two centers. Hardware at both
these sites varies from low-end NT servers to the high-end SUN E 10K along with 12 terabytes
of data storage at each end connected through a SAN. The group's facilities management team
manages over 9,500 desktops, 500 servers and works around the clock. CAUnicenter is used for
managing the helpdesk, desktops and servers, asset management, software delivery and remote
control. Unix is the preferred OS for most of the hardware while most of the databases use
Oracle with a few on Sybase and MS SQL. Over 200 databases are supported with 24x7
processing. The stateof-the-art technology architecture adopted by ICICI Bank needed robust
security, and this was designed by qualified experts from its Systems Security Cell. This security
design includes preparation, implementation and maintenance of the Systems Security policies
and procedures across all systems, ensuring general user awareness about these policies and
enforcing the policies through systems audits. The security cell has developed several tools,
which are the first of its kind to address several vulnerabilities on Unix, NT and MS-Exchange.
The system security is audited by KPMG.

Conclusion and Recommendations:

ICICI Bank has grown immensely over a period of time. First time in history a private bank has
merged a public sector bank i.e. ICICI Bank announced merger with Bank of Rajasthan. On 23
May ICICI Bank announced merger with Bank of Rajasthan with it through share-swap in a
noncash
deal that values the Bank of Rajasthan at about Rs 3,000 crore. Each 118 shares of Bank of
Rajasthan will be converted into 25 shares of ICICI. It is said that this merger will also expand
ICICI Bank's branch network by 25%. ICICI Bank is also carrying out its activities in Rural
Areas by helping SHGs (Self Help Groups) and in other microfinance acitivities.
Certain recommendations are as follows:
 The ICICI VSAT network is large, with almost a thousand nodes. Keeping it going
turned out to be an even bigger challenge for the group. The entire network is monitored
from one center. Any error in the network at any point is rectified in a short span of time
and the system is up and running with minimum downtime. ICICI must have a proper
control and look over this issue
 ICICI Bank’s name comes in various controversies than any other bank mainly the
method of recovery. This may hinder the BPR process further in future if the bank gets
into any type of legal case. To avoid this ICICI Bank must follow the rules and
regulations.