How a Tata Motors IT arm aided Jaguar Land Rover’s turnaround

A little known aspect of the strategies that helped Tata Motors turn Jaguar Land Rover (JLR) around is that it spent £200 million just to set up an independent IT ecosystem for the company.

That’s nearly 12% of the £1.7 billion it paid Ford to buy the two British marquees in 2008.

The money, spent over two years, helped JLR to have separate IT operations from Ford.

The system separation was undertaken by Tata Technologies, a subsidiary of Tata Motors.

The work involved painstakingly copying and cloning more than 1,500-1,600 business applications, said Warren Harris, president and chief operating officer of Tata Technologies.

The project saw, among other things, JLR extracting 18 terabytes (one terabyte is 1,000 gigabyte; one gigabyte is 1,000 megabyte) of email from Ford’s Microsoft Exchange system (FMES) under which all of the 14,000-odd staff at JLR migrated from FMES to Google Mail.

“Tata Technologies was successful in winning a project from JLR to manage this separation. The project was completed last July on time and on budget,” said Harris.

“It’s not an easy task and today I am very happy that we did this. It helped save millions of pounds (that would have been needed) to set up our own Microsoft Exchange server,” said Jeremy Vincent, chief information officer, Jaguar Land Rover.   

Post the JLR acquisition, Tata Motors found itself saddled with a debt of Rs21,900 crore in 2008, an uncomfortable position for a company that had been virtually debt-free.

The company had to pump more than £1 billion into the brands to cover losses during the credit crunch and the financial crisis that followed.

But the IT ecosystem work and other cost-saving measures sure helped JLR, which reported a net profit of £275 million for the quarter ended December, riding on robust sales of Jaguar and Land Rover.

Today, JLR generates about 60% of Tata Motors’ revenues and 80% of its profits.

“We suffered very badly but the new owners (the Tatas) spent £200 million in setting up a separate IT ecosystem that helped us greatly,” said Vincent.

“We could have brought out a new vehicle with that amount of money (£200 million). But they (Tata Group) had faith and the results are to be seen,” said Vincent, adding that now is a “golden opportunity to transform the company”.

Interestingly, Tata Technologies hired nearly 100 engineers from the big three Detroit carmakers —- General Motors, Ford and Chrysler —- who were made redundant during the financial slowdown starting in the summer of 2008. It was to prove a fortuitous move.

“Ford is our client and we worked with JLR before Tata acquired it. Now, clients trust us and we hiring these people from our clients helps keep that trust intact,” said Harris.

Tata Technologies does a “significant amount” of IT work for JLR and “close to 65%” of technology work for the world’s smallest car, the Tata Nano, according to Ronald Bienkowski, executive vice-president at the company.

JLR’s turnaround story could as well be the story other automakers. Going by experts, the dependence on technology can only increase as companies across sectors become more technology-driven.

“Companies are realising unprecedented returns for technology,” said Thaddeus Arroyo, CIO at AT&T, the US mobile network.

Kishor Patil, CEO & managing director of KPIT Cummins, the country’s largest automotive technology company, sees Indian car manufacturers’ spending on IT going from ‘meagre’ now to “competitive levels” of automakers globally.

“The IT spending follows a direct co-relation with the complexity you have in the car. As the domestic car manufacturers go in for more efficient and complex models, the spending will only increase.”