Research and development has become a critical part of the operations of information technology service provider firms in India. Companies such as AT&T Bell Labs to those with less than $50 million revenues have set up their own R&D facility in the country recently.
Sudin Apte, country manager and senior analyst, India Operations, Forrester, said, "In the last two months, 250-300 captives had set up their own facility for R&D here and another 100 captives will be set up in 12-18 months."
The trend is also reflected in the R&D expenditures of IT firms. For instance, Tata Consultancy Services spends 0.26 per cent of its overall revenues on core R&D and 4.5 per cent of its overall revenues on enterprise-wide innovation programme.
Service lines such as engineering services and products and assets services account for 10 per cent of its overall business and have been developed as a result of its R&D practice.
Patni has a team of 250 people for R&D and it has increased R&D expenditure by 20 per cent in the last three years. Its product engineering services line was developed as a result of its R&D practice and now contributes to 15 per cent of its overall revenues.
Accenture has a team of 180 people globally and R&D budgets of $300 million for FY07. It recently opened its fourth R&D centre in India.
R&D is important for the company to get an edge over its competition and to move up the value chain.
At TCS, R&D is an enterprise involving its arm Tata Research Development & Design Centre, the employees, customers, academia and is headed by its Ananth Krishnan, chief technology officer.
Mathai Joseph, executive director, TRDDC, says, "This enables R&D discussions both ways as it helps the business."
Similarly, in Patni, product engineering services contributes to 15-20 per cent of its overall revenues. The company's R&D team looks at upcoming trends and services. "New trends need a window of 4-5 years before they metamorphosed into steady revenue streams," says Satish Joshi, chief technology officer, Patni.
Every six months, Patni's R&D team investigates new technologies for commercialisation and decides whether to continue with its old initiatives.
Currently, it is upbeat about service-oriented architecture, usage of devices such as mobile phones for enterprise automation and usability, which will start picking up in the next one year.
"The R&D culture has always been there in India. Motorola, HP, and IBM have had their R&D centres here for over a decade. But after the sudden acceleration of IT in the 1990s, people from all branches of engineering and science got absorbed into IT and not many pursued research, as it was a long haul," said Mathai.
"We will substantially increase the number of employees from the current 350-400 this year. The company is actively looking for PhDs and will recruit even 20 if we could lay our hands on them," added Mathai. "For the last 2-3 years, we have been consistently increasing our R&D expenses by 20 per cent and will continue it this year as well," said Joshi.
