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Business News/ Companies / News/  Indian IT firms look to build intellectual property assets
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Indian IT firms look to build intellectual property assets

IT services companies are increasingly looking at intellectual property as a major growth driver

The IT-BPM sector in India employs nearly 3 million people, of which more than 25% are with the top five Indian IT firms. Photo: MintPremium
The IT-BPM sector in India employs nearly 3 million people, of which more than 25% are with the top five Indian IT firms. Photo: Mint

On 18 April, when Tech Mahindra Ltd said it will buy a 75% stake in data analytics start-up FixStream Network Inc. for about 60 crore, the move was in line with its i5 Startnet programme launched about a year back to tap innovation outside the company and scout for firms in cloud, mobility and networking to create a basket of intellectual property (IP) assets.

Following a similar strategy, Wipro Ltd invested $19 million in two undisclosed technology start-ups in February 2013. It had invested $5 million in US-based Axeda Corp., a provider of cloud-based services and software for managing connected products and delivering machine-to-machine applications, in June 2012.

In May 2012, Wipro announced a $30 million investment in New Jersey-based Opera Solutions Llc, a privately held big data analytics firm, for a minority stake.

Most IT services companies have a linear service model, hence have to hire more people to grow their revenue. However, because of increasing costs, their margins have come under pressure which is why IT services companies are increasingly looking at IP as a major growth driver, according to Akhilesh Tuteja, head of IT advisory at audit and consulting firm KPMG.

Software lobby group Nasscom’s vice-president, Sangeeta Gupta, corroborated that post the Lehman crisis in September 2008, the focus of IT companies “has shifted towards a non-linear approach, where they want to do more work with fewer people".

The IT-BPM sector in India employs nearly 3 million people, of which more than 25% are with the top five Indian IT firms. Still, large Indian IT firms currently generate less than 10% of revenue from IP assets. But the potential is huge since the global addressable market for products alone is forecast to grow to $439 billion by 2020, according to a January report by KPMG-Nasscom.

“Over the next five years, the revenue from IP could be in range of 20-25% from combined IT services and BPO (business process outsourcing) companies, which are now moving towards IP-based BPO service model," said Tuteja.

India’s largest IT services firm, Tata Consultancy Services Ltd (TCS), expects revenue of around $3-5 billion in four-five years from its digital business, which comprises social, mobility, cloud and analytics technologies, chief executive and managing director N. Chandrasekaran said in an interview on 22 April.

Infosys Ltd announced its plans for a $100 million innovation fund in April 2013 to focus on new ideas, products and platforms that allows for sharing of a technology solution. US-based Cognizant Technology Solutions Corp. has an emerging business accelerator and incubated 20 ideas over the past 18 months, according to a September report by Everest Group, a global management consulting firm.

New Delhi-based BPM firm, WNS Global Services has WiNCUBATE, an entrepreneurial contest for generating IP-led products and services.

Moves such as these have resulted in an increase in the number of patents filed.

In 2012-13, Infosys Labs’s IP cell filed 97 unique patent applications in the US Patent and Trademark Office, the Indian Patent Office and other jurisdictions. While it had filed 532 patents till the end of 31 March 2013, it was granted 87.

Wipro applied for 53 new patents in 2012-13, and was granted patents for 15 applications in the same period. “Patents received covered areas including workflow management, software testing systems, authentication and interception of data, circuit characterization, etc.," the company said in its 2012-13 annual report.

As on 31 March, TCS said it has applied for 1,746 patents including 211 applied during the March quarter. The company has been granted 114 patents so far, it said when declaring its March quarter results on 21 April.

However, the number of patents filed by, and granted to, Indian IT companies pale in comparison to what multinational technology firms are granted.

International Business Machines Corp. (IBM) alone was granted about 6,800 patents in 2013, according to IFI Claims Patent Services—a division of Fairview Research Llc, continuing its dominance that has lasted 21 straight years. In comparison, companies (not just IT firms) were granted a total 4,126 patents in India in 2012-13, according to the Indian Patents Office.

Over the years, IBM has monetized its IP by licensing and even selling some patents to companies such as Twitter Inc., Facebook Inc. and even Google Inc. that have collectively purchased more than 2,650 patents from IBM till date to grow their businesses while preventing potential lawsuits over IP.

According to Jennifer Hamel, a Technology Business Research Inc. (TBR) analyst, IBM integrates consulting with IP-based analytics solutions to maximize profits and stave-off competition in the digital transformation space. She believes companies such as “Accenture and fast-following India-centric players such as TCS and Cognizant will challenge IBM for digital transformation engagements in 2014. IBM differentiates itself from competitors by providing both advanced, proprietary analytics capabilities and practical, outcome-focused road maps for transforming clients’ business processes".

Indian IT companies will have to do likewise to sustain their growth momentum, analysts say.

According to Bozhidar Hristov, a TBR analyst, “partner-developed and proprietary IP will help TCS carve a niche in the digital software market" such as setting up a separate Digital Software and Solutions Group and partnering with Microsoft Business Solutions for the development of Microsoft Dynamics CRM (customer relationship management) platforms, which can be deployed both on premise and in the cloud.

IT services firms have to reinvent the wheel every time they deliver services to customers, whereas IP-led companies have the capability to reduce the time it takes to deliver and thus can acquire customers faster, said Tuteja of KPMG. “While IP cannot be the only driver for the company, it is going to complement the mainstream business," he said.

leslie.d@livemint.com

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Published: 23 Apr 2014, 07:24 PM IST
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