Bullish on India's telecom sector, the United States-based $800 million telecom software provider, Telecordia Technologies recently opened a research and development lab in Chennai, the only such lab outside the US.

Started as a part of Bell Labs in the 1960s, Telcordia started operations on its own in 1984. The India operations started in 1994 as Telcordia Technologies Pvt Ltd.  Headquartered in Gurgaon, Telecordia has a programme delivery hub in Hyderabad.

Its clients in India include Tata Teleservices [Get Quote], Idea, Bharti, Reliance [Get Quote] Infocomm, Telecom Regulatory Authority of India, and the Department of Telecom.

V Swaminathan spoke to Shobha Warrier on Telecordia's plans in India, the booming telecom market and how the company plans to explore the growing opportunities in India.

Telcordia Technologies has been working through partners in India. Why did you decide now to have your headquarters in Gurgaon, a programme delivery centre in Hyderabad and a lab in Chennai?

We wanted to understand the market place first and then test the waters. That is why we initially started through our partners. Now that we have enough experience of the Indian market, we want to be a part of it fully. We understand that the market is huge and there is a lot of scope here.

We have and will continue to expand our operations to meet the needs of our customers, partners and strategic relationships. 

How has been the experience of a product development centre in functioning Chennai?

It has been quite good. We got the necessary approvals to set up the facility without any difficulty. We were also able to set up and run the centre quickly. It took us just 45 days to become operational, not in full strength, of course.

You are working from Gurgaon and Hyderabad. Is there any difference in the approach of various states?

I don't think there is any problem in getting government approvals in any state because we are a software product company.  So, we just need PCs, space, servers and so on. More than all this, availability of space is more important. Last year, we couldn't get enough space in Gurgaon in time. They say, in 2007, a lot of space will be available. But we did not face space constraints in Chennai

Is that the only reason for setting up the lab in Chennai?

The main reason, of course, is talent. Many studies tell us that there is a lot of talent in Chennai and Bangalore, specific to telecom sector. Since we are operating in a very specialised area and are leaders in the telecom industry, we knew that we would get the best talent in Chennai or Bangalore.

Is it because of the infrastructure problems in Bangalore that you finally settled for Chennai?

Yes, infrastructure and other factors came into play. When we wanted space, it was easily available here. So, we chose Chennai.

You spoke about the availability of talent in Chennai. Is the number of engineering colleges in and around Chennai another attraction?

In our case, we needed specialised telecom talent. So, we didn't go for fresh graduates. We wanted experienced hands because we are bringing in some of our cutting-edge products to this lab, specifically IMS, or IP Multimedia Subsystem. The essential aim of IMS is to allow carriers like Bharti, Tata Tele or Reliance to deliver any service over any network at any time.

The aim of IMS is to make services like downloading ring tones etc seamless and transparent. We are working on such cutting-edge products from this lab.

Are you satisfied with the number of experienced hands available here?

Speaking in relative terms, experienced hands are available. We have the IIT and Anna University here, which have specialisation in telecom. We also have companies which have been doing cutting-edge telecom work in Chennai particularly Alcatel and Ericsson. Even the government has been doing a lot of telecom related work in Chennai.

So, all these factors combine to make Chennai a place with superior talent. Even in Bangalore, we have good people but for us, Chennai was a better choice. Unlike other recruiters, we need only a modest number. Our target is 150 people by the middle of 2007. We have recruited 50 engineers till now.

How can Chennai be more attractive to investors?

The key is in investing in infrastructure so that the industry continues to expand. The city should be able to cope with the various demands of the industry like water, power, built-up office space, etc.  The growth in infrastructure should keep up with the growth of the industry.

Anyway, India is an exciting market to be now because there is a lot of room for the market to grow in terms of value-added services and there is a lot of space for innovation to happen.

We have very few companies developing products from India. Where is India in the world scenario as far as product development is concerned?

I think the trend is changing. Many companies are now doing product development from India. There are a lot of products and applications being developed in India, which are suitable for this market. Every market has its own characteristics. So, that way, there are many products being developed, which are unique to the Indian market.

It is difficult to say whether we will be number one or two, but considering the fact that there is a lot of IT and ITES work being done from India, product development also should increase.  

Compared to the services industry, the size of the product development industry is very small.

Yes, the size of the services industry is very huge compared to the products industry. Though product development is growing faster than services, services will remain huge. Services is growing at 30-40 per cent per year and the outsourced product development market is growing at around 36 per cent as of last year, according to a Nasscom study. 

The outsourced product development industry in India was around $3.6 million while the services industry was around $21 billion last year. So, the gap is very large. But you will see more and more services companies developing products these days.

What kind of products are you developing? Which markets are you looking at?

We are primarily developing two types of products -- OSS products and IMS products. We sell the OSS (operational support systems) products predominately in the US. The IMS products are mainly for the Indian market. The customers of these types of products are growing outside the US than in the US. In fact, Telcordia's sales outside the US is growing at 60 per cent every year. We have 880 patents, 550 in the US, 330 outside the US. Actually, we have filed for 1600 patents.

The Indian telecom market is growing at a fast pace. What are your views on the Indian telecommunications market?

Yes, it is growing. India is already the fourth largest wireless market in the world, and it is growing at a rapid pace.  The average revenue per user in India is Rs 441 a month, which is very less. So, carriers are trying to increase the revenue so that their profitability increases. To achieve that, carriers are going for new innovative software. So, these innovative applications will have a huge market in India.

The intention of our lab is to initially start supporting the existing customers. In future, we will understand the Indian market more and develop more products specific to India and the Asia Pacific. As the Indian market is growing at a very fast pace, we need more innovative applications to support this market.

How would you compare China and India in innovation?

In India, the telecom penetration rate is only 12 per cent. While China has 400 million subscribers, India has only 35 million. Both China and India will be developing products for the specific market because both the markets are huge.

In the software space, India has done more while in hardware, China is ahead.

Nobody can ignore the Chinese market. We already have a sales office in Taiwan, which caters to both Taiwan and mainland China.