Yesterday, Economics Times, a Business Daily from India published a very interesting perspective on R&D spending of Indian companies sector wise.
I was curious to know the R&D spending by IT companies and the results were startling and stands evidence to my earlier post on Why we dont see a Blue Ocean in Indian IT service companies.
Here are some interesting findings:
1. No.1 Indian IT services company - Tata Consultancy Services spends a miniscule 0.3% of its total revenues in R&D.
2. Infosys - Another leading Indian IT services company leads the industry - Spends close to 1.9% of total revenues in R&D. I have worked in Infosys in the past. In my experience, Infosys is one of the very few companies that is committed to Research and Education/Learning. That is indeed commendable!
3. There is no mention of other Top 10 Indian IT service companies or product companies.
Other key sector such as Pharma/Motor R&D investments are largely driven by their MNC parents in US/other countries and there is a huge royalty payback that happens between the Indian arms and the Western Parent/Partner Firms.
The article states that though the corporate spending on R&D has increased in the past years, it is not sufficient to lead in the industry. Very True!
While the Western ecomonies focus on sustainability and recovery from recession, they look up to the East / Developing Ecomonies to lead in Research & Development and Innovation. The R&D and Innovation are important in the context of Developing economies because to drive growth in emerging regions, it is required to develop region-specific, technology-enabled new products and services.
China has realized this golden opportunity way ahead of India. In the recent past, China has revamped their entire Intellectual Property related Government Policies and started giving huge incentives for companies investing in R&D. The new policy aims to encourage Indigenous innovation that woud position the country in a Leadership position to protect its local markets and lead in global markets. The Multinational companies who were thriving on IP so far are puzzled with these new policies and redesigning their strategies for fresh investments in China. This article in Harvard Business review is a must read if someone wants to understand China's Strategy in High-Tech Industries
While many may be wondering why China is not competing in the game of IT services, my observersation is - China may be rewriting the rules of the high-tech industry game itself in next few years!.
As mentioned in ET, "As customers become more demanding, and the business environment more competitive, companies will have no choice but to rely more on R&D".
While the Indian IT Service companies are busy in fighting the war for talent to sustain their existing service lines, it remains to be seen how they would respond to these emerging challenges. They largely see People as their products or channels for service delivery and invests heavily on Leadership / People Development Courses. These courses will prepare oneself to become a business-savvy consultant who not only knows business or technology but also has the capability to sell / communicate / convince the clients. And some other companies are doing reverse-acquisition. They are sitting on a huge pile of cash that they go ahead and acquire technology from a US startup / product company. While there is certainly nothing wrong with these approaches, lot needs to be done to create a sustainable and organic innovation ecosystem.