BackIndian tech companies seek to fund disruptive business ideas
Firms such as TCS, Infosys and Wipro plan to set aside money for investing in start-ups outside the company
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Bangalore: India’s biggest technology firms are scrambling to create start-up funds for investing in fledgling ventures, as they seek disruptive business ideas being demanded by top outsourcing customers such as Target Corp. and Nike Inc. that have begun to look beyond commoditized software code writing and maintenance projects.
Tata Consultancy Services Ltd, the country’s largest software services firm, said it plans to set aside money for investing in start-ups outside the company as well as incubating ideas pitched by employees. Chief executive N. Chandrasekaran said in an interview on Tuesday that the company has already started evaluating different models to invest and partner with startups.
“We are in a period when the dynamism with which the technology is impacting businesses is at a significant pace. It is very important for a company like TCS to understand what the possibilities are because we have size, we are successful with a very large customer base. We definitely recognize that there is a start-up ecosystem out there and we want to be there to understand what’s going on," Chandrasekaran said. “Secondly, we can also bring these firms to work with our customers."
TCS isn’t the only large IT company doing this.
On Tuesday, Wipro, India’s third largest software firm, announced a $30 million (around ₹ 165 crore) investment for a significant minority stake in Opera Solutions LLC, a New Jersey-based big data company. Last month, Infosys unveiled a $100 million fund to incubate internal ideas and pick up stakes in start-ups around the world. Big data refers to the massive volumes of data generated by businesses that are analysed by specialised software to reveal patterns and trends.
For almost two decades now, large technology corporations have invested in external innovation. For the Indian IT firms, the decisions have been largely driven by the needs of major clients such as Wal-Mart and Target that are demanding useful products in their specific sectors.
“It’s coming out of a realization that innovation has become very difficult to do within a corporate set-up. Innovation is being done by start-ups," said Rajesh Sawhney, head of GSF Accelerator in Bangalore, which invests in start-ups.
“This is run like a start-up inside the company. We all operate with very nimble, small teams," explained Sanjay Purohit, senior vice-president of the Products, Platforms and Solutions, Infosys.
“We don’t get billed for the number of hours we put," he added. “This is a different game."
TCS’ internally incubated businesses function similarly. iON, the company’s business unit offering software applications for small and medium enterprises, “does not even run on our corporate IT systems, but uses the same software it sells to smaller firms", said Chandrasekaran.
“The challenge with many of the Indian companies is they only focus on each other," said Vinnie Mirchandani, a technology historian and analyst.
“In newer tech markets, disruptive players have evolved (that) are far ahead of them" he said, mentioning Amazon’s work in the cloud services business and Mu-Sigma, the analytics company.
Placing bets on developing new companies is a risky venture, particularly for large IT firms that are themselves not in the best possible shape, said Dev Khare, a partner with Lightspeed Ventures in New Delhi. “When venture investing gets done by large corporates, it’s usually at the top of a cycle," he noted. “This is a downturn—I’m not sure what’s going on here."
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