Pilots of ERP on in prestigious projects
With delays plaguing many a real estate project, small and mid-sized developers are starting to look at web-based solutions to help them work closer to their deadlines. The move is being seen as an effort to curb cost over-runs.
A case in point is the Bangalore-based SNC Power Corp which specialises in power projects. The company is presently working on a 500 Mw power project in Bellary in Karnataka and a 250 Mw plant in Chandrapura in Jharkhand. It set up a pilot project for an ERP solution for a gas-based power project in Tripura for the ONGC, and based on the results is evaluating deploying it at its other projects as well.
Vybhav Shetty, executive director, SNC Power Corp said the need to shift to ERP comes at a time when delays are prevalent in the industry. “Delays could come about because of several factors in the industry like clients, internal problems, local agitation, material shortage or other delays. We have also been affected by delays in a couple of projects, by at least 15 per cent,” he said.
“We have undertaken an ERP pilot to streamline our processes, collect data from site, remotely fed to the system and process it so that management has access to information. Our cost centres are spread to different regions. We needed to integrate all systems and process the data to facilitate management to take appropriate action,” he said.
Similarly, RDS projects, which is involved in IT and infrastructure projects has also deployed an ERP management solution as a pilot test for a Rs 42 crore aviation project. “There is a greater need for visibility at the central level. Without this, it would be difficult to complete projects on time. We are looking to adapt to an ERP solution in a phased manner for our projects,” he said. The company has an order book of around Rs 500 crore. He added that with prices having come down owing to the financial meltdown, it was essential for companies to keep a tab on the project status and cost control to improve their margins.
It is not surprising that companies are eager to deploy web-based management solutions. On an average, cost over-runs in projects stand around 10-15 per cent and time delays range from three months to 12 months which have negative repurcussions on business, say industry players..
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According to a study by real estate research firm PropEquity, most cities in the country have been plagued with delay issues since 2008. The study found that Bangalore witnessed the highest number of delays among projects scheduled for completion in 2008 where 309 of the 575 projects were delayed and the average delay in these projects was nine months. In places like Ghaziabad and Gurgaon, 71 per cent of projects were delayed, as against the total number of projects scheduled for completion in 2008 and onwards.
“A lot of developers were diverting funds meant for a project to other projects. Hence cash flows are an issue. Their order book was more than what they could actually execute. Many smaller developers jumped into the property sector and they could not complete the projects, resulting in delays,” Samir Jasuja, founder and chief executive, PropEquity said in the study.
Industry experts say that in the race to make competitive bids for projects, companies rarely focus on their implementation process which eventually bogs them down. Balaji Sreenivasan, CEO of Aurigo SoftwareTechnologies, which provides web-based solutions for capital project, facilities, real estate and construction management said that in a globally competitive industry, every move of the company is closely watched and a history of project delays would not bode well for them.
“With effective project management systems in place, a company can expect a 5-7 per cent reduction in cost overruns and curb time delays by a few months,” said Sreenivasan.
It is not just corporate houses shifting to technology, even public enterprises like the Railways are keen on adopting project management systems. The Southern Railway is looking to automate its processes and has deployed a pilot solution in its project to double the railway line from Sengalpet to Villupuram. It is also looking to use the solution for its MRTS project from Velachery to St Thomas Mount in Chennai.
“We spend around Rs 1,200 crore each year in infrastructure projects in the southern region. We want to get into a new type of thinking for speeding up our projects resulting in better management,” said Ramanathan, chief administrative officer, Southern Railway.
With a price tag of anything between Rs 50 lakh to over Rs 2 crore, the cost has so far been a deterrent to small and mid-size companies. However, more and more companies are exploring the option in select projects. “When faced with the alternative of wastage of money and resources due to improper allocation, companies are preferring to invest in a dependable management solution, added Sreenivasan.