Indian School of Business

ISB023

June 30, 2013

Deepa Mani | Geetika Shah | Revathi Nehru

IT-Led Business Transformation at Reliance Energy

INTRODUCTION
March 2008. Looking out of the window of his Mumbai office, the Chief Information Officer of
Reliance Energy reflected on the FRPSDQ\¶Vtransformation over the last five years. After the takeover
of Bombay Suburban Electric Supply Ltd (BSES) in 2003, the CIO had spearheaded a technology-
enabled business transformation initiative at Reliance Energy that had culminated in the decision to
spin off the IT department into a third-party technology solutions provider for the infrastructure sector.
The company had also received considerable recognition and many awards for its technology
initiatives.

7KHLQYROYHPHQWDQGFRPPLWPHQWRI5HOLDQFH(QHUJ\¶VVHQLRUPDQDJHPHQWKDGSOD\HGDNH\Uole
LQWKHVXFFHVVRIWKHFRPSDQ\¶V,7LQLWLDWLYHVDVKDGWKHWHFKQRORJ\RULHQWDWLRQDQGILUP-wide IT skills
of the Reliance group of companies. The CIO recalled how Reliance Energy¶V&(2 had emphasized
WKH LPSRUWDQFH RI ,7 WR 5HOLDQFH (QHUJ\¶V JURZWK DQG driven home these points at a recent Board
meeting:

Considering the changing scenario in the power as well as infrastructure sectors and the
plethora of available business opportunities, IT was the need of the hour. Today,
technology has aided us to be a step ahead of our competitors and created important
growth opportunities for the organization.

The CIO was also aware that the business had been a critical partner in this technology-led
transformation. All of the technology implementations were accompanied by structural and process
changes, enabling BSES to take advantage of the enhanced IT capabilities. Senior management
commitment, involvement of the business units and business process redesign all paved the way for
the VWDQGDUGL]DWLRQ DQG LQWHJUDWLRQ RI WKH RUJDQL]DWLRQ¶V EXVLQHVV SURFHVVHV ZKLFK LQ WXUQ OHG WR
significant performance gains relative to its competitors. But were these sources of competitive
advantage sustainable? Was it possible to extend and replicate this success in other companies and
business units within Reliance? Had the company developed the competencies and expertise to begin
considering advisory or consultancy solutions for the infrastructure sector via a possible spin-off of the
IT department? These thoughts took the CIO back to 2003 and he found himself retracing the
FRPSDQ\¶VUHPDUNDEOHMRXUQH\LQKLVPLQG

Professor Deepa Mani, Geetika Shah and Revathi Nehru prepared this case solely as a basis for class discussion. The actual
names of company employees have not been disclosed in the case. This case is not intended to serve as an endorsement, a
source of primary data, or an illustration of effective or ineffective management. This case was made possible by the generous
support of the Srini Raju Centre for Information Technology and the Networked Economy, ISB. This case was developed under
the aegis of the Centre for Teaching, Learning, and Case Development, ISB.

Copyright @ 2013 Indian School of Business. The publication may not be digitised, photocopied, or otherwise reproduced,
posted or transmitted, without the permission of the Indian School of Business.

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 ISB023

THE POWER GENERATION BUSINESS IN INDIA

In 2008, India was the fifth largest power generator in the world, with an installed capacity of 146
GW, or about four percent RI JOREDO SRZHU JHQHUDWLRQ ZKLFK ZDV IDU EHORZ WKH FRXQWU\¶V RYHUDOO
power requirement. The top four countries  the U.S., Japan, China and Russia  consumed nearly
half (49 percent) of the ZRUOG¶V total power. In 2008-2009, the average per capita consumption of
electricity in India was estimated at a relatively low 704 kWh when compared with other countries
1
(e.g. ~15,000 kWh in the U.S. and ~1,800 kWh in China).

Activities in the power sector were divided into three parts: generation, transmission and
distribution. Electrical energy generated in remote locations was typically transmitted over large
distances to inhabited areas over a transmission system. The actual distribution of this electrical
energy to individual homes and offices, as well as commercial and industrial customers, was done by
stepping down the voltage, and distributing the energy through a maze of cables (underground or
overhead), transformers, switchgears and junction boxes.

When India became independent in 1947, it inherited a collection of private companies that
generated and distributed electricity in predefined areas. Post-independence, with the passing of the
Electricity Supply Act, the Government of India organized activities in the power sector through three
types of institutions: State Electricity Boards (SEBs), generating companies and licensees. The
development of the electricity sector was entrusted to the respective states through the creation of
SEBs, which were allowed to generate, transmit and distribute electricity within a state. The SEBs
also took over some of the private companies in their respective states.

Generating companies were responsible for supplying power without the specific responsibility of
retail distribution. Major players involved in the generation of electricity were NTPC (National Thermal
Power Corporation), Damodar Valley Corporation (DVC), NHPC (the Hydro-electric analogue of
NTPC), and NPCIL (Nuclear Power Corporation of India Limited). Existing licensees were private-
sector utilities licensed by the state government for power generation, distribution, or both within a
VSHFLILHG DUHD )RU H[DPSOH *XMDUDW ,QGXVWULDO 3RZHU &RUSRUDWLRQ¶V DFWLYLWLHV ZHUH OLPLWHG WR SRZHU
generation and those of Central Electricity Supply Corporation (in Orissa) to distribution; Bombay
Suburban Electric Supply Limited (BSES) and Tata Electric Company (TEC) were involved in both
2
generation and distribution (see Exhibit 1) .

However, the performance of the State Electricity Boards had typically been far from satisfactory,
with extensive losses, thefts and inadequate power management resulting in long periods of power
outages throughout the country. The SEBs fared poorly and incurred losses due to many factors,
including direct political interference in their operations by their respective governments,
3
mismanagement, poor industrial relations, etc. These circumstances forced the government to
restructure the sector in a phased manner leading to the first phase of electricity reforms in 1991. The
government liberalized the sector to increase the flow of funds to the power sector, and foreign and
private investors were allowed to operate as Independent Power Producers (IPPs) in the power
generation segment with SEBs responsible for the transmission and distribution of power generated
by these IPPs. The first phase of the reform failed with many private players hesitant to enter the
sector because of the uncertainty of returns on their investments due to SEBs¶poor financial health.
The annual commercial losses of the SEBs increased from INR 45.60 billion in 1992-93 to INR 106.84
billion in 1997-98.

In a bid to accelerate progress in the sector, the government initiated the second phase of reform
with the establishment of the Power Trading Corporation (PTC), which encouraged trading of power

1
³3RZHU6HFWRULQ,QGLD´:KLWH3DSHURQ,PSOHPHQWDWLRQ&KDOOHQJHVDQG2SSRUWXQLWLHV.30*-DQXDU\
2 Source: Ramana, D.V., Mishra, Banikanta and Nayak Birendra K., Orissa Development Report ± &KDSWHU;,,,³Power
Sector Reform in Orissa: A Case Study in Restructuring´
http://www.planningcommission.gov.in/plans/stateplan/sdr_orissa/sdr_orich13.pdf, last accessed on May 30, 2013
3
http://www.reliancepower.co.in/power_industry/indian_power_sector/history_and_evolution.html, last accessed on
May 30, 2013
2| IT-Led Business Transformation at Reliance Energy

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 ISB023
4
to achieve economic efficiency and supply security. The new guidelines also made provisions for
privatizing electricity distribution in cities with a population of more than one million. Following these
changes, the Electricity Laws (Amendment) Act was passed in 1998 to enable private participation in
5
the power transmission sector.

The passage of the Electricity Bill in Parliament in 2003, which sought to provide a legal framework
for reforms and restructuring of the power sector, ushered in sweeping changes. The Act was based
RQWKHSULQFLSOHVRISURPRWLQJFRPSHWLWLRQSURWHFWLQJFRQVXPHUV¶LQWerests and providing power to all.
With the sector becoming more attractive to players, the provisions of the Act introduced greater
competition in power generation, which led to a reduction in electricity prices. This gave consumers,
especially large consumers, the choice of buying power from the cheapest and most reliable source.
The Act also provided for increased competition among distribution licensees and ensured better
services for the end consumer as more than one distribution licensee could operate in the same area.
The anti-theft provisions under the Act lowered the commercial losses of utilities, which led to
6
renewed interest among investors . In addition, an increased number of players resulted in a
downward pressure on price and an improvement in efficiencies. The Act, in allowing for open and
competitive electricity trading and ensuring non-discriminatory access to transmission services, led to
7
expanded opportunities in all markets (see Exhibit 2).

5(/,$1&(¶6$&48,6,7,212)%6(6
7KH 5HOLDQFH *URXS ZDV IRXQGHG LQ  E\ 'KLUXEKDL + $PEDQL RQH RI ,QGLD¶V JUHDWHVW
entrepreneurs. Reliance Industries Limited (RIL) spanned diverse businesses, including exploration
and production, refining, petrochemicals and textiles, among others (see Exhibit 3). In 2003, the
company was the largest Indian conglomerate with a gross turnover of INR 650 billion and net profit of
8
INR 41 billion. :LWK RYHUDOO UHYHQXHV RI QHDUO\  SHUFHQW RI ,QGLD¶V *'3 5,/ FRQWULEXWHG five
9
SHUFHQWRI,QGLD¶VWRWDOH[SRUWVDQGSHUFHQWRIWKH*RYHUQPHQWRI,QGLD¶VLQGLUHFWWD[UHYHQXHV.

RIL had long envisioned entering the power sector  an important constituent of the energy sector
 as part of its diversification strategy. The group had made its initial foray into the power industry
with the establishment of power generation plants in Jamnagar, Gujarat (Reliance Power), Orissa
(Hirma Power), and Tamil Nadu (Jayamkondam Power). Through these projects, RIL gained
significant knowledge and experience of operations in the energy industry.

$IWHU WKH GHDWK RI 'KLUXEKDL $PEDQL LQ  WKH JURXS¶V DVVHWV ZHUH GLYLGHG EHWZHHQ KLV WZR
sons, Mukesh Ambani and Anil Ambani. While Mukesh retained control over RIL, Anil took over the
leadership of various sectors ranging from power to communications and entertainment, in addition to
financial services and health. This division of assets led to the formation of a new group  the
Reliance Anil Dhirubhai Ambani (ADA) group. In order to pursue its interests in the power sector, the
Reliance ADA group decided to make a strategic investment in the industry through the acquisition of
BSES Ltd, one of the leading power companies in the country. Commenting on the acquisition, the
&KDLUPDQ¶VVWDWHPHQWWRWKHVKDUHKROGHUVUHDG

The enactment of the Electricity Act 2003 presents a unique opportunity for our company
to pursue growth prospects in the generation, transmission, distribution and trading of
power. We believe that our company is uniquely positioned to pursue these growth
opportunities. We have distinct competitive advantages across the entire value chain that
will provide an enhanced value proposition for customers across the country, through our
integrated business model  µ)URP:HOO+HDGWR:DOO6RFNHW¶

4
http://www.ptcindia.com/index.html, last accessed on May 30, 2013
5
http://www.dnb.co.in/IndiasEnergySector/Regu_Power.asp, last accessed on May 30, 2013
6 Ibid.
7
http://www.mu.ac.in/arts/social_science/eco/pdfs/vibhuti/wp11.PDF, last accessed on May 30, 2013
8
RIL Company Annual Report 2002-03
9
BSES Annual Report 2002-03
IT-Led Business Transformation at Reliance Energy |3

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 ISB023

BSES was one of the few utility companies engaged in the generation, transmission and
distribution of power. Established by British engineers, the company had grown over the years to
service a major part of suburban Mumbai, parts of Orissa and Delhi. In 2002-03, BSES supplied more
than 15 billion units of power to more than five million customers. Its generating plants included a 500
MW coal-fired power station at Dahanu near Mumbai, a 220 MW gas-fired power station at Samalkot
near Visakhapatnam (Andhra Pradesh), and a 165 MW naphtha-fired power station at Kochi (Kerala).
While the power from Dahanu was consumed entirely in BSES's distribution grid in Mumbai, the
Samalkot and Kochi plants supplied power to SEBs in Andhra Pradesh and Kerala. With annual
revenues of INR 28 billion and a total asset base of nearly INR 34 billion in 2003, BSES was ranked
DPRQJ ,QGLD¶V WRS  OLVWHG SULYDWH VHFWRU FRPSDQLHV IRU DOO PDMRU ILQDQFLDO SDUDPHWHUV. Post its
10
acquisition, BSES was renamed Reliance Energy under the banner of the Reliance group (see
Exhibit 4).

Business Issues in the Electricity Industry

Prior to the passage of the Electricity Act 2003, the performance of firms in the power sector had
left much to be desired. Extensive transmission and distribution losses, thefts and inefficient power
management leading to regular power failures throughout the country were persistent problems. Line
losses in excess of 50 percent in India were very high relative to international averages of 8-12
11
percent. Apart from supply constraints, problems of labour excesses, ageing transmission and
distribution systems and a lack of commercial orientation plagued the power sector. Pilferage and
operational inefficiency resulted in further losses. Typically, only about half of all the power generated
was actually paid for ² the rest was swallowed by technical and/ or commercial losses or lost to theft
12
(experts estimated that out of every 100 units, only 55 were billed and 41 collected ).

Electricity companies continually made efforts to combat these issues and contain losses; they
conducted a series of actions on various fronts, such as energy audits, theft investigations,
replacement of defective/ non-functional meters and strengthening of the distribution network, to
improve system performance. Despite these measures, in 2001-02, the aggregate losses accruing to
13
the SEBs were an astronomical INR 240 billion.

The deregulation of the power sector following the Electricity Act renewed the pressure on
incumbent players in the sector to address the above inefficiencies. The potential for increased
competition arising from opportunities for existing players to enter new markets in new geographical
areas, a growing number of new entrants, including MNCs, and consolidation among the top players
did not spell good news for incumbents who enjoyed a near monopoly of their markets. The new
competitive dynamics were exerting pressure on utility companies across the country to streamline
operations, improve financial efficiency, enhance customer care and improve overall service delivery.
Electricity, like any other service, seemed set to be traded on the benchmarks of customer
satisfaction, quality, price and service, and therefore, would have to meet international standards of
operations and delivery. Like other states across the country, the power sector in Maharashtra also
faced these important challenges. The Maharashtra SEB (MSEB) was one of the largest SEBs in
India with nearly 13,000 MW of capacity on its grid. However, it too was plagued by the inefficiencies
affecting the sector and was recording losses. In 2002 MSEB posted a revenue deficit of INR 14.62
billion.

Apart from the MSEB, which was the major public utility in Maharashtra, there were two large
private players  BSES and Tata Power Company (TPC). TPC, with 80 percent of its power
generation concentrated in Mumbai and its vicinity, was the largest private player in the power sector.
In 2003, TPC had total revenues of INR 50 billion with a profit-after-tax of INR 5.2 billion. For the

10 BSES Annual Report 2002-03

11
Indian Power Sector: http://www.icf.at/en/5832/indian_power_sector.html, last accessed on May 30, 2013
12
Company sources.
13
5DVWRJL$QXSDP³The Infrastructure Sector in India, 2005´ India Infrastructure Report 2006  Urban Infrastructure,
Oxford University Press, New Delhi. http://www.iitk.ac.in/3inetwork/html/reports/IIR2006/The%20Infra.pdf, last
accessed on May 30, 2013
4| IT-Led Business Transformation at Reliance Energy

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 ISB023
14
same year, BSES achieved a total income of INR 28 billion with a profit-after-tax of INR 1.62 billion.
,QFRPSDULVRQWR%6(6¶VSRZHUJHQHUDWLRQFDSDFLW\RIDSSUR[LPDWHO\0:73&KDGDJHQHUDWLRQ
capacity of 2,278 MW, which was 52 per cent of the total power generation capacity of the private
15
sector in the country in 2002-03. $GGLWLRQDOO\ 73&¶V WUDQVPLVVLRQ DQG GLVWULEXWLRQ ORVVHV RI 
percent were known to be among the lowest in the country. Between them, BSES and TPC supplied
about 2,300 MW power to greater Mumbai and its suburbs. Going forward, TPC planned to add 1500
MW to its generation capacity by 2009, increasing its dominance in the market. From being a bulk
supplier, selling more than 1000kW and above, it now planned to target consumers in the retail
segment, such as office complexes and housing societies, which had hitherto been BSES¶V territory.

Faced with increasing competition from both existing and new players, Reliance Energy realized
that for it to become the leading player in the utility business, it needed to excel in the efficiency of its
operations and offer superior value to its customers. The expanse of BSES¶V operations across
Mumbai and Delhi, coupled with a very large customer base, was a major challenge to the
implementation of reforms. With a customer base of five million, BSES had to read more than 100,000
meters every day in Mumbai and Delhi. This process also entailed running the billing system and
preparing, printing and distributing bills. To add to this, defaulters bounced cheques, and pilferage
was a common problem in the collection of bill payments. To remain competitive, Reliance Energy
needed to ensure the quality and reliability of supply, accuracy of billing and ease of payments, and
have a better complaint management system in place. At the same time, it needed to focus on its
operational efficiencies, especially in light of rampant pilferage, defective meters and other operational
issues that were prevalent in the power sector.

Reliance Energy Goes Digital

The CEO of Reliance Energy was clear from the start that technology would play a key role in the
transformational agenda of the company. A powerful partnership existed between the CEO, a
business leader attuned to the strategic use of technology, and the CIO who had a sound
understanding of the business. They were supported by an executive board that believed strongly in
the strategic value of technology. In fact, technology was a fundamental part of 5HOLDQFH¶V mission
statement: ³To be a technology driven, efficient and financially sound organization.´

The board of Reliance Energy reaffirmed the view that technology-enabled transformation was the
first step toward safeguarding revenues from impending competition and improving growth and
profitability. The CIO was of the opinion that data integration across the organization and end-to-end
visibility across the value chain were necessary to realize efficiency gains and customer value. The
lack of visibility between operational units had resulted in a disconnect between various customer
touch points and important business functions, such as grid management, customer service and
billing. For instance, a bill may be generated on a faulty meter reading. Operations and maintenance
would respond to the customer¶V complaint and fix the faulty meter, yet the billing department would
not be updated in real time about the action taken, with the result that there would be no
communication with the customer apart from a faulty bill. This lack of coordination between
departments resulted in many dissatisfied customers. This lack of visibility in the value network
contributed to operational inefficiencies, which in turn led to poor customer service. Therefore, a well-
designed and integrated IT system was considered essential for Reliance Energy to improve its
performance. The use of technology to integrate information across the organization would eliminate
unnecessary manual involvement in transaction processing or grievance redressal; more importantly,
integration of information would provide relevant and accurate information to the appropriate person in
the shortest possible time, leading to improved efficiency and the quick resolution of business issues.
The CIO described his vision for IT at BSES at the time:

IT is all pervasive. It exists all throughout the organization. It is really beneficial only
when it affects the entire organization. Therefore, I wanted to come up with a system that
integrated the entire company. The vision was to have a system resulting in the company

14
Company Annual Reports.
15
³Indian Power Sector´ICF Newsletter, February 2007. http://www.icf.at/en/5832/indian_power_sector.html, last
accessed on May 30, 2013
IT-Led Business Transformation at Reliance Energy |5

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working as one entity. The objective was to create a system that catered to all categories
of people and work, which was my focus.

The application of IT to develop an integrated organization involved significant risks. However,

instead of shying away from the mammoth task of implementing world-class information technology
systems at BSES, The CIO decided to take the challenge head on. The first step in this direction was
to assess the existing state of IT in BSES, and subsequently develop a roadmap that would be in line
with the vision of the company to establish international standards of operational excellence and
customer service in the Indian power sector.

State of IT at BSES

BSES had introduced computers into its operations very early (in the late 1960s) and had even
acquired what were then state-of-the-art mainframe computers from IBM. However, these computers
had been distributed based on seniority, and because most of the senior employees of the
organization were not IT savvy, these computers were rarely put to use.

BSES also had an EDP department that comprised of approximately 25 people. This group
16
handled consumer billing, an interactive voice response system (IVR), a consumer care and
complaints resolution system and payroll. The company had high-tech printers, which were used to
print electricity bills for more than 2.5 million consumers every month. In addition, the Corporate
17
Finance department was using Enterprise Resource Planning (ERP) software for compiling and
consolidating accounts. However, the ERP system was decentralized and did not offer the benefits of
data integration across the firm. Except for the ERP, every system had been developed internally.
BSES also had its own telecom company and an Internet Service Provider (ISP), Powersurfer.com.
Even though the company had Internet facilities in place, employees rarely utilized the web. An open
source email system with a limited number of users was also in existence.

When Reliance Energy took over, there were standalone legacy billing systems and customer
interaction portals. In addition, a slew of small, locally-developed applications existed within different
departments that did not interact with each other. The IT applications were at best sporadic,
incoherent and largely tactical in nature. These disparate implementations meant that there was a lot
of variation in processes throughout different parts of the organization. Thus, a quick assessment of
%6(6¶VFRPSXWHUL]ation revealed an inchoate IT system that was neither standardized nor integrated.
,WZDVLQWKLVVRUWRIHQYLURQPHQWWKDW5HOLDQFH(QHUJ\¶V,7MRXUQH\EHJDQLQ

The IT Roadmap

Considering the criticality of IT as an enabler, it was important to identify the key technology
investments that would yield the maximum benefits. A task force, comprising IT, the operations team
RI %6(6 DQG 5HOLDQFH (QHUJ\¶V LQ-house ERP implementation and e-enablement teams, were
assigned the job of creating a roadmap for IT implementation within BSES. The company also hired
McKinsey Consulting to offer a complementary perspective based on their extensive experience in
technology-enabled business solutions for diverse industries. The roadmap detailed business
objectives and proposed investments to realize these objectives. Overall, the objective was to
integrate data and systems across functions and managerial levels to achieve greater transparency
for the benefit of customers as well as employees (see Exhibit 5).

x Business Objectives: McKinsey and the IT task force team identified two broad focus areas for
which initiatives were to be conceptualized: 1) operational efficiency, and 2) customer service.

16
Interactive voice response (IVR) is a technology that allows a customer to interact with a computer through a pre-
recorded set of menu options via a telephone keypad or by speech recognition. It is useful for handling large call
volumes and reduces the need for human intervention.
17
ERP refers to enterprise software that provides end-to-end visibility in a value chain through data integration and
process standardization. A central database ensures that all business units in a firm have access to the same data at
the same time while process standardization ensures that business processes (e.g. billing, procurement, etc.) are
executed in the same fashion, and hence, subject to the same controls across business units or product segments.
6| IT-Led Business Transformation at Reliance Energy

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Integral to achieving these objectives was the integration of data across business units. The
integration of IT across the entire value chain of the utility company was deemed necessary to
reap the maximum strategic benefits for the business.

x Proposed Investments: As a first step toward achieving the outlined business objectives, the
task force recommended the creation of an infrastructure that integrated data across select
business functions: finance, costing, operations, billing, plant maintenance, customer
management and HR. The task force believed that integration across these functions would yield
the highest returns in asset management, workforce planning and customer service levels.
Consequently, they analyzed various ERP software packages and decided to implement SAP.
Prior experience with the software and their prior relationship with the vendor were important
determinants of their choice. The CIO explained³Reliance is not an IT company. We were very
clear about the fact that we could not develop these systems. So, the decision was to use
packaged software (SAP for ERP) since the rest of Reliance was already using the software and
in-house competence was readily available.

Operational Efficiencies

Extensive pilferage and defective meters were rampant in the power sector and BSES was not
immune to these inefficiencies. During 2003, BSES conducted 16,930 raids that resulted in the
detection of 4,225 cases of theft and the recovery of 45.27 million units, compared to 25 million units
18
during the previous year. With these efforts, system losses were contained at 13.6 percent. Based
on these facts, the task force recommended the implementation of a Supervisory Control and Data
Acquisition (SCADA) system, which monitored the network components closely and provided data for
effective load management and fault analysis. Two key initiatives that were part of this system were:

1. Geographical Information Systems (GIS): GIS was a system designed to remotely capture,
store, analyze and manage data by geographic location. With GIS in place, network
monitoring and field operations were completely automated. Since the network was
geographically dispersed and underground, diagnosing network issues, such as service
stoppages, main breaks, power outages, etc., was the most time consuming aspect. The GIS
helped identify the precise location of an equipment or fault and provided the maintenance
crew a ready guide, including an area map, to reach the fault quickly. This, in turn, helped in
resolving outages more quickly.

2. Automatic Meter Reading (AMR): AMR allowed for the reading of a utility meter without
physical access to or visual inspection of the meter. The immediate benefit of introducing
AMR was to reduce the cost of reading meters and to ensure 100 percent error-free readings.
AMRs also allowed for the remote collection of consumption, diagnostic and other status data
from the energy meter and their transfer to a central database. In this way, AMR provided
data for fault location, pilferage and accurate billing of energy consumption.

Customer Service

McKinsey and the task force realized that a lot of the initial work would center around meeting and
sustaining the basic needs of customers in the newly privatized market. At the time of the acquisition,
BSES had skeletal systems in place to aid customer queries and complaints. The team had a set of
solutions to address gaps in meeting basic customer needs:

1. Outage Management Systems/ Trouble Call Management Systems: In the event of a

complaint from a customer or an indication of an outage through the SCADA system, these
systems provided triggers for the creation of work orders, assigning crews and monitoring
progress. These applications were responsible for improving response time with respect to
complaints and creating service responses with customized billing messages.

18
BSES Annual Report 2002-03.
IT-Led Business Transformation at Reliance Energy |7

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2. Billing: The AMR system, which recorded energy consumption, provided input to the billing
module, which in turn generated bills using information on the subscribed tariff plan.
Incorporating these systems led to a discernible change in the communication of billing
information to customers. At BSES, the mode of communication to customers had been via
letters (snail mail), but this would now change to SMS and email. Further, many services,
VXFK DV UHPLQGHUV IRU SD\PHQW DV ZHOO DV DFNQRZOHGJHPHQWV RI SD\PHQWV ZKLFK KDGQ¶W
H[LVWHGSUHYLRXVO\FRXOGQRZEHSDUWRIWKHFRPSDQ\¶VFXVWRPHUVHUYLFHRIIHULQJV

3. Customer Relationship Management (CRM): The CRM module comprised two components.

a. Interactive Voice Response (IVR): This was a crucial function as this was often the
first interface a consumer had with the company. Implementing this service would
allow the company to accommodate an increased number of callers, as well as
account for each call made to the plant. Additionally, customers could ask for details
on the last bill paid as well as request duplicate bills, among other features.

b. Field Force Automation (FFA): This solution involved providing the field force with
mobile terminals that were linked to the central database. Mobility solutions for the
workforce were expected to not only reduce service errors, but also to improve the
overall productivity and effectiveness of the workforce.

In addition to the above investments in operational efficiency and customer service, the task force
also decided to invest in the following systems:

Learning and Knowledge Management: The task force strongly believed that continuous improvement
in firm performance was dependent on a seamless flow of knowledge, which emanated from day-to-
day transactions, decision processes and from specialists who were usually scattered across the
organization. Therefore, Reliance Energy decided to facilitate collaboration and coordination among
dispersed parties through a messaging solution called Lotus Notes (a collaborative tool to help people
work with each other). This was the formal knowledge sharing system deployed at Reliance Energy
that allowed for collaborative learning. This application increased transparency in communication
across the company and also facilitated knowledge sharing among employees.

Analytics and Reporting Systems: The CIO believed that the company should leverage its vast
integrated data to build analytics capabilities; thus, Reliance Energy invested in analytics and
reporting capabilities. The system consisted of business intelligence and reporting software that
processed transactions data, which accumulated over time, and converted it into product insights and
other information that helped management with decision making.

MANAGING THE BUSINESS EQUATION

Culture

Both the CIO and the CEO were well aware that implementing changes in the staid environment of
BSES would be fraught with numerous challenges, beginning with hesitation and skepticism from
BSES employees. Their goal was to facilitate the adoption of the recommended systems through
collaboration with BSES employees. However, BSES was unused to large-scale enterprise system
implementations or to the allied need to reengineer processes. This effectively added a sizeable
change management component to the IT implementation effort. However, there was no doubt about
the need to convince BSES employees of the benefits of the IT development plans. The CIO
H[SODLQHG ³Culturally, Reliance is a tech-friendly company, and given the fact that BSES was now
part of the Reliance group, an IT transformation was inevitable, notwithstanding concomitant costs.´

The management¶VILUVWPRYH after the acquisition was to give all BSES employees a computer.
Although computers existed in BSES, they were older models and a technology upgrade was well
overdue. Reliance replaced the old computers with 3,000 new models, thus motivating existing

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employees to use them. Apart from providing new computers to employees, the company started an
after-hours certificate program with Aptech, a computer education school. This was done to bring all
employees up to speed on the functioning and use of computers. Prizes were awarded to the top
three performers of each batch. Although this program was optional, the CIO reported that by the end
of the second year, 1,200 people had registered and been trained.

Additionally, there was the challenge of familiarizing older employees with the new software that
had been installed. The CIO recalled an incident that emphasized the initial reluctance among line
engineers to use the GIS. As a practice, cable joints were recorded in sketches, which were more
than 56 years old. These sketches were critical since most problems with the system usually had to
do with the cable joints. Thus, engineers and other personnel would consult these sketches first to
identify the source of the problem. However, the newly implemented GIS did not incorporate these
sketches. When informed of WKLV³problem´ the CIO immediately ordered the blueprints of the cable
joints to be scanned and incorporated into the GIS. From the next day forward, the team began to use
the system.

Another move by Reliance was to retain the younger BSES employees rather than replace them
with Reliance Energy IT personnel. These young and impressionable BSES employees were very
interested in the new IT developments. Although they had not yet had the opportunity to work on
sophisticated IT platforms, they had an abundance of enthusiasm and motivation, which was critical
for the company at the time. The CIO recollected that they were made to feel as if they were emerging
from a ³moribund environment´ and were part of the "new future wave.´

Management also introduced a performance benchmarking initiative called ³Simply the Best´
(STB) to foster healthy competition and reward excellence at the divisional level. The electricity
landscape of Mumbai was divided into five zones, and the five zonal teams competed against each
other on both business and maintenance performance parameters, which were significantly impacted
by the IT systems. For instance, the business scorecard measured the parameters of speed and
efficiency in new connections, meter reading, recovery and customer care. On the other hand, the
Operations and Maintenance (O&M) scorecard measured network reliability and safety parameters.
Both team and individual level awards were given to the best performers and led to motivated
members working in inspired teams.

Training

It was important that all the members of the organizational hierarchy use IT in their day-to-day
operations for the proposed benefits to be realized. This was a challenging task given the manual
orientation of the existing organization. The CIO budgeted substantial time and effort for training and
demonstrations and set up help desks following the successful IT implementation. Training exercises
were aimed at enhancing WKHWUDLQHHV¶knowledge and equipping them with the ability to increase the
usage of computers in their departments. Further, a needs assessment revealed that the training
required at various levels of management would vary. Thus, a multi-pronged plan, involving training
programs, discussion sessions, actual demonstration, exercises and quantifiable targets for users
was executed at each level of management as an essential step toward managing the change.

The middle management training focused on operational issues in an attempt to raise their levels
of comfort with all the software packages being implemented at Reliance Energy. They were shown
how to utilize computers and the associated software in their day-to-day operations. The CIO
reflected on the attitude of BSES employees at the time:

The middle level engineers of BSES were eager to learn and use IT in day-to-day
operations. We specifically targeted them, making them a part of our implementation
team and power users at the various offices. This action eliminated the hiatus that often
exists between IT and the end users team and facilitated the smooth introduction of IT
into the company.

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Since WKHFRPSDQ\¶Vexpectations of its junior staff were higher, it held separate focused sessions
for them to render them excellent end users. These users needed to understand the business
processes, identify weaknesses, articulate the changes required and interact with the application
teams regarding any modifications.

The top management of the company participated in a one-day workshop aimed at acquainting
them with the growing role of computers and networking in day-to-day business operations. External
speakers presented case studies on the successful use of IT by other business entities and the
benefits they had reaped. This was followed by a detailed description and discussion of the IT
roadmap as a means to build an appreciation for it on all fronts. The workshop also attempted to
convey to each executive a clear understanding of their role in the entire change process.

End User Involvement

To ensure a smooth transition, management decided to involve all business stakeholders in the IT
implementation right from the blueprint stage. For instance, before the implementation of the ERP
systems, the initiative was discussed at length by both the business and IT teams, so as to generate a
collective outlook on its impact. Such participation at all stages not only ensured timely
implementation but also a more effective one than the IT team could have achieved single-handedly.

The company also made a deliberate attempt to integrate IT with the core operations. Members of
the IT implementation team worked in proximity with other employees; in other words, they were not
³tech´ specialists or part of a separate IT department. Rather, they were essentially end users who
understood the bottlenecks and issues of the business well, and thus, could implement IT more
effectively. The company trained these end users and gave them incentives to work in the IT
department.

Retaining talent within the company and motivating them with a career development plan proved to
be a successful strategy for Reliance Energy, leading to the formation of a world-class IT team with
expertise in IT, business and operations management. The CIO elaborated on the FRPSDQ\¶Vchange
management strategy:

9HU\RIWHQ\RXKDYHYHU\EULJKW\RXQJ,7HQJLQHHUVZKRDUHQ¶WDEOHWRVSHDNZLWKDQG
XQGHUVWDQGWKHQHHGVRIWKHHQGXVHUVLPSO\GXHWRWKHIDFWWKDWWKHUH¶VDFXOWXUDOJDS
an experience gap and a language gap. Using the strategy to train end users in these IT
systems, and motivating them to do so, totally eliminated these problems.

Top Management Support

The Reliance group had a reputation for its extensive use of IT. With a strong advocate in Anil
Ambani, thHJURXS¶V&KDLUPDQLWSHUPHDWHGWKURXJKWKHYDULRXVKLHUDUFKLHVRIWKHFRPSDQ\0RVWRI
5HOLDQFH (QHUJ\¶V VHQLRU PDQDJHPHQW FDPH IURP FRPSDQLHV WKDW KDG OHYHUDJHG WHFKQRORJ\ WR
create value. Therefore, there was significant support from top management to push for IT reforms to
transform the energy utility company.

IMPACT
7KHUH ZDV ERWK D GLUHFW DQG DQ LQGLUHFW LPSDFW RI WKLV WUDQVIRUPDWLRQ RQ WKH FRPSDQ\¶V JURZWK
market share and customer value. In terms of the impact of technology on operational efficiency, job
monitoring was automated and demand forecasting became more scientific. Network automation
19
through SCADA reduced the power interruption time by 60 percent. System demand, which had
been recorded monthly before the IT implementation, was collected every 15 minutes post-
implementation.

19
Company presentation
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The electromechanical meters that were used pre-implementation were low on accuracy due to the
frictional fatigue of moving parts. The introduction of tamper-proof electronic and AMR meters not only
improved accuracy but also considerably reduced pilferage. As a result, the aggregate technical and
20
commercial losses during 2007-08 declined to about 28 percent. The immediate benefit of
introducing the AMR module for its premium consumers was a reduction in meter reading costs and
100 percent error-free readings. Automatic meter reading also provided data for fault location, and
more importantly, facilitated accurate billing for energy consumption.

There was also a marked improvement in customer service levels with the introduction of many
value added services for customers. These included better access to billing information, ease of
payments and speedy redress of grievances. From very basic bills, the company was able to
generate customized bills that were more informative and available in multilingual options. Customers
had the option of receiving e-bills via email or an SMS alert on their phone, or viewing their bills on the
company website. They also had the choice of multiple modes of payment. Further, many services
such as reminders for payment and acknowledgements of payments, which had not existed earlier,
EHFDPHSDUWRI5HOLDQFH(QHUJ\¶VFXVWRPHUVHUYLFHRIIHULQJV

The implementation of the Outage Management System/ Trouble Call Management System led to
a significant reduction in response time. The automation of complaint reply letters resulted in a
decrease in response time from 10 days to four days. Queue management systems at Customer Care
Centers reduced the average wait time from more than 30 minutes to approximately 15 minutes. A
new connection could be provided in three to four days as against 20 days in the past. Also, billing for
industrial customers had reduced from 45 days to seven days. Amendments to existing service plans,
which took a month earlier, were implemented immediately.

The technology initiatives had an impact on overall business performance as well. Sophisticated
analytics on accurate, integrated data allowed the company to experiment with new pricing plans (e.g.
based on usage or availability). The benefits of automation were also felt in HR and cash
management. The employee performance appraisal process, which earlier spanned three months,
could be completed in just one month. With improved internal controls, bank reconciliations could be
completed in three days compared to seven days in the past VHH ([KLELW  5HOLDQFH (QHUJ\¶V
success with a range of technological advancements helped it achieve the distinction of operating the
network with 99.96 percent reliability and providing impeccable customer care support. The
compDQ\¶VQHWSURILWVsurged to INR 10.8 billion in 2008 from INR 1.62 billion in 2003.

THE WAY FORWARD

7KH&,2UHIOHFWHG RQ5HOLDQFH(QHUJ\¶V SRVLWLRQDVRQHRIWKHIDVWHVWJURZLQJFRPSDQLHVLQWKH
country. In 2008, Reliance Energy had annual revenues of INR 75 billion and total assets worth INR
169 billion. The company generated more than 940 MW of electricity through its power stations and
distributed around 25 billion units of electricity to more than 25 million consumers across Mumbai and
Delhi. The company was also certified for ISO 27001, an Information Security Management System
21 22
(ISMS). It had won various prestigious awards for its IT initiatives, including the ³SAP-ACE´ award
for best service sector implementation in the telecom/ utility sector in India in 2006 and the ³Special
23
Achievement in GIS´ (SAG-GIS) award in 2008 from ESRI. Reliance Energy had also been
24
empanelled by the Government of India to reform distribution companies. The CIO and his team
were serving as IT consultants for projects in the Indian states of Chattisgarh, Haryana, Maharashtra
and Karnataka.

20
Reliance Energy Annual Report 2007-08
21
Reliance Energy Annual Report 2007-08.
22
http://www.sap.com/india/about/company/awards/ACE2006/winners/index.epx, last accessed on May 30, 2013
23
http://events.esri.com/uc/2008/sag/list/, last accessed on May 30, 2013
24
http://www.rinfra.com/pdf/pressreleases/Media_Release_RInfra_Empanelled_SCADA_Consultant-
1009_3rdOct09.pdf, last accessed on May 30, 2013
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Having established its leadership in the power sector over the years, the company was now poised
to extend this position of strength to other vital areas of national concern, including the infrastructure
development of India. Reliance Energy was confident of leveraging its core competence in building
and managing world-class assets. The CIO was also considering various options related to the IT
department at Reliance Energy. He was battling questions of outsourcing, implementing his success
story in other departments of Reliance and providing extensive third-party consulting and advisory
solutions through a possible spin-off of the IT department. Far from being the end, it seemed to be the
beginning of another remarkable journey.

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EXHIBIT 1

SEGMENTS IN THE ELECTRICITY BUSINESS

NTPC, NHPC,
Generation
NPCIL, IPPs, and
SEBs

Gridco, PGCIL
Transmission
and SEBs

Licensees like
BSES, and
Distribution SEBs

Source: Ramana, D.V., Mishra, Banikanta and Nayak Birendra K., Orissa Development Report ± &KDSWHU;,,,³Power
Sector Reform in Orissa: A Case Study in Restructuring´
http://www.planningcommission.gov.in/plans/stateplan/sdr_orissa/sdr_orich13.pdf, last accessed on May 30, 2013

EXHIBIT 2

INCREASE IN PRESENCE OF PRIVATE PLAYERS

AFTER THE ELECTRICITY ACT OF 2003

45
40
35
30
25
20
15 No. of Companies
10
5
0
1999 2001 2003 2005 2007

Source: Capitaline Database, www.capitaline.com, last accessed on May 30, 2013

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EXHIBIT 3

(A) RELIANCE INDUSTRIES LIMITED  SEGMENT REVENUE BREAKUP 2002-03

2%

Petrochemicals
45%
Refining
53%
Others

(B) RELIANCE INDUSTRIES LIMITED  DIVERSIFIED PORTFOLIO OF

MANUFACTURING AND SERVICES BUSINESSES (2003)

Oil & Gas

Energy Chain
Refining & Marketing

Indian Petrochemicals Petrochemicals Power/BSES

Corporation Limited
(IPCL)

Textiles

Infocomm/Telecom

Reliance Reliance
Infocomm Telecom

Source: Company Presentation, http://www.ril.com/rportal1/DownloadLibUploads/D480RILPresentation-23Apr03.pdf,

last accessed on May 30, 2013.

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EXHIBIT 4

BSES STATISTICS, DISTRIBUTION NETWORK IN MUMBAI (2003)

As on March 31, 2003

Licensed area of supply 384 sq. kms
Number of consumers 2.223 million
Population covered 9 million
Maximum demand 1,226 MVA
Receiving stations 49
Sub-stations 3,653
H. T. Consumers 348
High tension mains 2,829 kms
Low tension mains 2,965 kms
Computerized complaint centers 28

Source: Company Annual Report 2002-03

EXHIBIT 5

PROPOSED INTEGRATED IT SYSTEMS

Source: Reliance Energy  Company Presentation

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EXHIBIT 6

TECHNOLOGY IMPACT ON FOCUS AREAS

KEY INTIATVES FOCUS AREA PERFOMANCE PERFORMANCE LEVEL

MEASURE
PRE- POST-AUTOMATION
AUTOMATION
Customized billing Customer Communication Letters Advanced,
messages Service medium personalized &
systemized
Automation of complaint Customer Number of Response time of System-driven with
reply letters Service complaints 10 days response time of 4
received days
Turnaround time against Customer Response time Response time of Response time of 4
each activity in ISU Service to complaints 10 days days
Queue management Customer Wait and serve Average wait Average wait time
systems at Customer Service time at center time>30 minutes around 15 minutes
Care Centers
Billing/ invoicing alerts on Customer Number of Not available Reduced bill delivery
SMS and email Service complaints earlier complaints
received
Payment acknowledgment Customer Volumes on Not available Enhanced customer
alerts on SMS and email Service alternative pay earlier convenience and
modes transparency
Payment due date Customer Average time Not available Enhanced customer
reminder alerts on email Service for payment earlier convenience
and sms response
E-bill: Monthly auto- Customer Reduction in bill Not available Reduced bill delivery
generation of electronic Service delivery earlier complaints
bill on email complaints
Job monitoring O&M Sturdiness Manual Automated
Performance

Demand forecasting O&M Accuracy Manual Scientific

Performance
System parameters O&M Frequency Monthly Every 15-minute block
recording Performance
New connection Business Days to connect 20+ days 3-5 days
Performance meter
Metering Business Accuracy of <25% electronic >70% electronic
Performance meter/ meters meters
metering
technology
Billing/ meter reading Business Frequency B1-monthly Monthly
Performance
Billing Business Meter to bill >6 days < 4 days
Performance cycle time
Bill design Business Feature Basic Multi-lingual,
Performance customized messages,
educative
Billing Business Options Basic Best-in-class options
Performance including e-bill, web-

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bill, online
Bank reconciliation Cash & Cost Number of days 7 days 3 days
Management
Final billing for energy Cash & Cost Number of days 45 days 7 days
(industrial, TIL, TTP Management
consumers)
Amendments for industrial Cash & Cost Number of days 30 days Immediate
consumers Management
Performance HR Days to 3 months 1 month
management system Performance complete the
full cycle

Source: Reliance Energy  Company Presentation

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