MindTree R&D eyes growth through ODCs

Bangalore-based MindTree Consulting, which provides Information Technology (IT) and Research and Development (R&D) services, is eyeing offshore development centre (ODC) model to drive business in the R&D services division.

The company's R&D services division, which generated revenues of Rs 41 crore during the second quarter of the current fiscal, operates 16 ODCs for various customers. In the last two quarters, the company set up three new ODCs. While ODCs contribute about 60 per cent of the R&D services division's revenue, the rest comes from individual projects.

"Our target is to take the revenue share from the ODCs to 75 per cent from the existing 60 per cent. The ODCs will give us predictability of business apart from adding stability to the revenue growth. We prefer ODCs over individual projects though the latter gives an opportunity to work on cutting edge technology. We intend to set up at least 3-4 ODCs every year," MindTree Consulting President and CEO (R&D Services) S Janakiraman told Business Standard.

The company's largest ODC has 180 people working on various projects for a particular customer. "Talks are on with various customers to set up ODCs. They are in the pipeline," he added.

MindTree's R&D services, which employs 1500 people in Bangalore and Chennai, has expertise in communication infrastructure, storage, consumer appliances, automotive, industrial systems and medical systems. It provides services in the complete product realisation as well as at the sub-system level development for both semiconductor and system companies.

Recently, it signed an agreement to acquire Purple Vision, for $6.55 million, in an all-cash deal. Purple Vision provides differentiated services in the integrated circuit design area. With this, the number of clients in MindTree's R&D services division has reached 60.

The R&D services division derives 70 per cent of its revenue from the US, 20 per cent from Europe and the rest from the Asia Pacific region, including India. According to Janakiraman, though US will remain the largest market for the company, Asia Pacific region is witnessing growth momentum.

"Many companies from Taiwan, Japan and South Korea have now begun to outsource software work to India. We expect the orders from these countries to increase," he added.

Janakiraman said the company was looking at India from a long term growth perspective.

"At present, the Indian automotive and electronics industry has in-house R&D services. However, as technology improves, they have to turn to niche players like us. We expect the Indian electronics industry landscape to change in the next 5-10 years," he observed.