SRINI RAJAM CRISSCROSSES CONTINENTS WITH HIS new toy—the Digital Media Album that allows him to watch movies endlessly. The Album has a capacity to store over fifty movies in MPEG-4 form. He also uses his gadget for downloading pictures that he took on his digital camera. He can take a look at them while listening to his favorite MP3 songs.

Rajam lugs the Digital Media Album around on his travel—a good ploy to kill time while luring customers. The device, which his team has built over the past several months, has more than eight intellectual property (IP) components for audio and video signal processing. Ittiam—which Srini Rajam co-founded and is the CEO of—has seized an early lead in taking an end-to-end product to the customer rather than just selling IPs. Potential customers can quickly relate to path-breaking IPs that Ittiam is developing and how they can leverage the Bangalore-based startup to build revolutionary devices. Rajam’s latest jaunt would indeed be a turning point for Ittiam.

“New and emerging applications like video mail, gaming and streaming video will be the order of the day in coming years and Ittiam’s Digital Media Album is in the thick of this segment. We expect this device and the associated software/firmware to spur many such appliances where Ittiam’s technology can be licensed,” says Ravishankar Ganesan, Vice President, Multimedia Business Unit at Ittiam.

Rajam hints that a consumer electronics company in the far East is designing a camcorder which will use some of the components in Ittiam’s Digital Media Album. The camcorder will hit the market before the middle of 2004. In a calculated spurt of growth, Ittiam now plans offices in the Silicon Valley, in addition to its facilities in Dallas, TX. In other countries where direct customer contacts are more difficult, the company has been very successful in working with partner associates.

The IPs that Ittiam builds is not confined to the multimedia segment alone. The company is focused on DSP systems for media processing and communications. This implies tremendous research and development investment on communications—both wireless and wireline. In fact, Ittiam owns 30 different IPs in the area of wireless LAN, VoIP and modems, licensed to over 20 customers worldwide.

Building IPs that technically out-perform those available in the market is a challenge. “In the case of wireless LAN, the challenge was the sheer magnitude, complexity, range and depth of expertise that were needed to put the entire IP together. With a twenty-plus man-year effort and multi-million dollar investment, the time available to deliver the IP was just around a year. In the case of V.92 modems, the difficulty was in the complexity of making 48 kbps data upstream mode work robustly and in making the modem interoperate with all commercially available V.92 modems,” says Shantanu Jha, Vice President, Communications Business Unit at Ittiam.

Within two years of its launch, Ittiam has design wins in Japan, Korea, Taiwan, U.K and the U.S. It has licensed 28 IPs till date. Some of its customers include Sony Semiconductor and ARC International in the U.K., Premier Image Corporation in Taiwan, and Kromos Communications, Veo, DiVx Networks, Texas Instruments, and Silicon Laboratories in the U.S.

Tempe, AZ-based market research firm Forward Concepts that estimates revenue from DSP software and hardware IP licensing in 2002 was $250 million. This space is expected to grow at a rate of 18 to 20 percent annually for the next five years. Forward Concepts’ President Will Strauss, who closely monitors the DSP space, believes that Ittiam is way ahead of most Indian companies in this category. Based on its own market analysis, Ittiam estimates the size of DSP software and system IP will grow to be a billion dollar market in the next two-to-three years.

Although IP licensing is a significant part of Ittiam’s business, the company is also engaged in custom development for DSP software and chip design. Ittiam has entered into a partnership with Austin, Texas-based Silicon Laboratories (NASD: SLAB) to develop System-on-Chip (SOC) designs for the mixed-signal integrated circuits for the wireline communications (high-speed modems) market.

Ittiam also has a partnership with San Diego-based DivXNetworks. The video compression technology that DivX offers allows users to play digital video on a basic computer. Ittiam will extend DivX video technology to portable gadgets. In fact, Ittiam’s Digital Media Album will soon be compatible with DivX technology.

Some of the other players within this space include ParthusCeva, New Logic, PCTel, AudioCodes and Hellosoft. Analysts believe that going forward there will be consolidation within this space.

Ittiam is striving to get its business arithmetic right to be a leading player in this space. “Challenges any startup in this space faces are in creating world-class IP, marketing it and building an high echo-system of partners,” says Sattam Dasgupta, Vice President, Engineering. “One has to make huge investments in marketing in terms of understanding market and promoting ideas and products.” And what Ittiam has achieved in three years is an indicator that it is on the right track.

Early Days
Rajam and his team are working towards building what could possibly be the first profitable IP business out of India. It all began when seven professionals, working for nearly two decades on building world class products at Texas Instruments, decided to create something of their own. Led by Rajam, who was then the Managing Director of Texas Instruments (India), Ittiam represents the collective aspiration of the team to lead the new wave of Indian technology products thriving in the global arena.

Founded in 2001, Ittiam raised $5 million in the seed round from Bangalore-based Global Technology Ventures. Within three years, the company has put in place competencies in different areas of DSP System—IP algorithm, embedded software, RTL design, system software and reference board. Though Rajam doesn’t disclose Ittiam’s revenue, he indicates a break-even during the current financial year. Analysts point out that Ittiam has had a reasonably good start compared to established players. It takes five to eight years for a company focused on IP business to become profitable. In Ittiam’s case the turn around has been much faster. Rajam forecasts $40 million in revenues for 2007, while being cautious about airing his ambitions of taking the company public the same year.

From the beginning the founding team has believed that the startup’s growth depended on its people or the “Ittians.” The 95 engineers who are busy at work at Ittiam’s two-floor office in Bangalore have rich experience in high-end technology and were drawn from across the industry. Ittiam has no trouble in attracting high talent. The company receives hundreds of applications for every post it offers. Rajam’s belief in “Ittians” is reflected in the logo he carefully chose for the company—a finger print. As he poses for a photograph with the company’s logo in the backdrop he says, “It represents the people power.”

“Ittiam’s business model appears to be holding up well and the company’s reputation in the U.S. and Japan is clearly growing. I believe that the company’s business plan will evolve as their revenue base grows and new opportunities present themselves,” notes Strauss.

Ittiam is pushing the frontiers in all the key areas—business, technology and people. In business, Ittiam has chosen to bypass the traditional service model and has committed itself to products, both customized and off-the-shelf. In technology, Ittiam has chosen to go beyond software and has ventured into ‘the whole hog’—algorithm, software, and the actual reference board that resides in the end equipment. On the people front, Ittiam shares the fundamental belief that the company is co-owned by all who work and share the dream, irrespective of the function. Naturally, all “Ittians” own company stocks. They also enjoy equal status; even a fresher enjoys the same benefits extended to the CEO.

An acronym derived from the French philosopher Rene Descartes’ famous words: “I think, therefore I am,” Ittiam remains true to the words. When Ittiam reaches its milestones, it will be case study that could inspire other entrepreneurs to build similar global successes out of India.