The Hindu Business Line : R&D helps TCS save Rs 33 cr

Mumbai June 7 Tata Consultancy Services (TCS) has saved about $8.05 million (Rs 33 crore) in 2006-07, courtesy in-house research and development (R&D).

There is a noticeable upward trend here as the company's savings were up by 139.6 per cent year-on-year from $3.3 million (Rs 13.53 crore) recorded in fiscal 2005-06.

Development Hubs

Majority savings have come as the company has been developing a set of R&D tools — that assist in various aspects of application development — from its development hubs globally, according to Mr K Ananth Krishnan, Vice President and Chief Technology Officer, TCS.

"We save on the licensing costs associated with procuring these tools from outside vendors," he said. It may be argued that for a $4 billion firm like TCS, savings to the order of Rs 33 crore are not significant.

However, the company is saving an amount equal to what it annually spends on R&D. For the year ended March 2007, annual spend on R&D was 0.22 per cent of its total income — that is Rs 33.64 crore.

Delivery Model

Though analysts feel that the R&D spend is small for a company like TCS, Mr Krishnan is not perturbed, as he believes that the level of spend is fairly satisfactory given what it wants to achieve.

The R&D efforts have ensured that the company issued 3,489 software licences in 2006-2007, of which it used 3,479 internally. The company added 379 licences year-on-year. However, the number of licenses sold to clients came down to 10 from 473 in 2005-2006. Mr Krishnan said this is because the company is focussing on using more of its own software licences through its service delivery model.

"We are trying to ensure that majority of software licences reach the external market place through our full service offerings rather than as stand alone intellectual property," he said.

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