NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Thursday, December 15, 2005

So there’s little question farmers have gained from the programme, but like any good business, ITC’s motives weren’t entirely altruistic. The company has invested a significant sum in the eChoupal project, so far installing well over 5,000 kiosks that, including extras like solar panels and batteries as well as additions to the company’s back-end architecture, cost an estimated US$5,000 apiece.

But a smoother logistics chain and the ability to source crops directly from the producers has permanently shaved ITC’s procurement costs by about 3 per cent, and the firm also levies charges on companies selling goods or services to farmers through the system. Through the project, ITC now has a direct link to 3.5 million producers in more than 35,000 villages, and has pushed its total market share up from 8 to 12 per cent.

Considering the outlay required, the absence of networks or electricity in some areas, and the heterogeneous and largely uneducated nature of the project’s user base, eChoupal could have been a spectacular failure. But according to Rajasekhar, careful initial planning and an effort to ensure management remained involved at all stages smoothed the way for success.

As there was a distinct lack of precedents for the initiative, lessons could be learnt only as the system was implemented, necessitating an approach that Rajasekhar calls “roll out, fix it, scale up”.

To test the waters, ITC first introduced a pilot project that was extremely limited in terms of geographical area and services offered. This allowed the team to test the basic concept and pinpoint teething problems.

After some fine-tuning, Rajasekhar says the project entered the “critical mass” stage, in which additional services were introduced and the number of kiosks expanded to cover more villages.

ITC’s focus now is to scale up even more rapidly, though with the number of kiosks deployed soaring from just six in 2,000 to over 5,000 today, it’s difficult to imagine how the firm can do that.
The CIO admits that the project required an initial “leap of faith” but says the staggered approach, as well as constant risk assessments and progress reviews, “went a long way to build confidence in the management and secure the alignment of employees”.

ITC also had to encourage its potential user base, most of which had never come into contact with a computer, to take advantage of the eChoupal solution. As Rajasekhar notes, this is a multi-faceted process, based on open and ongoing dialogue with the communities where the internet kiosks are placed.

“We refined [the project] continuously with the inputs from users themselves. The portal and its features are an outcome of numerous interactions, physically and virtually, with the farmers and communities,” he explains. “The choice of a facilitator of the kiosk from the local community itself inspired confidence and sensitivity to the local culture and traditions, and enabled faster acceptance.”

The CIO says training first-time users, many illiterate, was a “challenging task”, involving workshops that impart basic operating skills and supplemental refresher courses to “reinforce learning and bridge gaps”.

Changing from the inside
But some of the greatest difficulties associated with the project centred on the re-engineering ITC had to initiate internally: technological, managerial and cultural. To run with minimal hitches, the eChoupal system had to extend beyond IT to involve top executives and departments such as finance and human resources, mandating a “more collaborative effort” within the organisation.

In addition, interaction with farmers, who were unlikely to be familiar with ITC’s processes or common business models, required a high degree of sensitivity among the company’s user-facing staff. As Rajasekhar notes, only by being completely open to the ideas raised in the villages could ITC build the eChoupal network to address the users’ needs.

But this was a “paradigm shift” for staff at plants and warehouses used to dealing with truck drivers and operators, not producers and villagers. New languages and customs entered the equation, with “access to clean and hygienic food and water” at meetings and the “way staff addressed them” among the communities’ top concerns.

“A code of proper conduct was developed to deal with various situations, for example, if the farmer is not at home when the staff is visiting a village,” Rajasekhar adds.

ITC introduced several new programmes for staff involved in the eChoupal project to groom the necessary “soft skill sets”, including farmer relationship and collaborative management workshops, strategy training sessions and quality testing and entrepreneurial programmes to help employees pass learning on to the villages they work with.
CIOs and vendors alike often make grand assertions about the power of IT: that it can bring efficiency to turgid businesses, boost an enterprise’s bottom line, turn even the most difficult department into a haven of productivity.

Few, however, would be bold enough to claim their pet project has the power to lift people out of poverty and bring a traditionally disadvantaged group in touch with cutting-edge technology and knowledge resources. The IT team at Secunderbad, India-based ITC is one of the few that can say it’s deploying solutions to do just that, and contributing to the firm’s balance sheets in the process.

As one of the country’s main agricultural exporters, ITC has always had to contend with the limited infrastructure and aging business models that in India too often characterise the sector. Though the company is global in many respects, marketing commodities like soy and rice to customers around the world and competing with multinational trading firms from the US and Brazil, its revenues depend heavily on local conditions.

Most Indian farmers still auction their produce to traders and agents at small market yards, making pricing an opaque and unpredictable affair. Issues like packaging, transport and distribution could only be addressed through the use of multiple intermediaries, tacking additional costs on to the process for both farmers and processors. Unexpected weather conditions can devastate harvests that were planned months in advance. And as many isolated communities had little access to expert advice on soil testing and seed treatment, crop yields are often of inferior quality.

An electronic gathering
In 1999, ITC launched an initiative designed to transform this system from the ground up. Under the ’eChoupal’ project (choupal means gathering place in Hindi) the company began setting up internet kiosks in villages, ensuring they ran on renewable power sources and even funding network upgrades in some locations to plug infrastructure gaps.

The company also trained designated model users in each location to manage the new technology.

According to VV Rajasekhar, CIO of ITC’s international business division, the kiosks started relatively small, offering information such as crop tips, local weather and current market prices, all at no cost to the farmers.

But the second phase of the project incorporated business-to-business features that allow farmers to market their produce directly to ITC or other prospective customers, source equipment, seed, chemicals and nutrients, procure soil testing or insurance services, and process payments. Access to information from agricultural and meteorological experts as well as global markets such as the Chicago Board of Trade help ensure that decisions the farmers make are informed ones.

While villages participating in the eChoupal programme are still free to bring their crops to the traditional government-supervised auctions, by selling directly to ITC and cutting out the middlemen, farmers get an average of 2.5 per cent more for their wares, and most estimate total incremental gains, when things like improved yields and better-quality produce are factored in, to be close to 20 per cent.

On the IT architecture side, the initiative involved a “major change management exercise” that saw the department move to a more “web-centric” approach, establishing a high-performance back office data centre to support users logging in from the most remote parts of the country, as well as a backup and recovery system established in a different seismic zone that can ensure data and information services remain uninterrupted in the event of an emergency.

“Substantial energies and money went into architecting security layers for the eChoupal websites, [with] investments typically going into firewalls, intrusion detections systems and audits to ensure vulnerabilities are recognised and addressed,” Rajasekhar adds.

Relearning programmes for IT staff facilitated the introduction of new platforms and processes for quality testing, payment procedures and factory receipt systems, the CIO says.

While the revamp wasn’t easy, the results of the project have in many respects exceeded ITC’s expectations. Rajasekhar says the company has already recouped about 20 per cent of its initial investments, and expects returns to rise further as ITC moves closer to its goal of the system reaching 100,000 villages across India by 2010.

In the shorter term, he says ITC is determined to turn the eChoupals into a “fully-fledged meta market”, in which crop distributors and vendors of farming goods can link their enterprise resource planning and backend infrastructure to the system, trading and delivering goods with “no inherent inefficiencies”.

The project has become something of a model for other sustainable development initiatives, recognised by multilateral agencies such as the World Bank and United Nations Conference on Trade and Development as an example of how technology can support growth in poor regions.

ITC representatives are also regularly invited by the Indian government to serve on special agriculture, commerce and IT committees tasked with ironing out the problems that inhibit growth in rural areas.

Employed by a burgeoning number of agencies and service providers, the eChoupal system has expanded beyond agriculture to transmit information and programmes on issues such as watershed development, education, health care and gender empowerment. As Rajasekhar notes, it is seen as “an efficient resource delivery platform to underserved communities”, with its success in the farming industry easily applicable to other sectors.

But more than a resource platform, the eChoupal project is testament to the potential of a well-planned IT initiative, and a solid indication that profitability and corporate social responsibility don’t have to be mutually exclusive terms.