Elxsi was then acquired by a firm called Trilogy, which folded in 1989. The Tata Group had distributed a number of the mainframes in the Indian market, so they acquired the technology from the shuttered company. The same year a new company, Tata Elxsi was incorporated to support the mainframes that Tata had distributed.
Some of the early work that the new company did was in the disk drive space. For example, the team put together a 5 channel SCSI adapter in 1989, so that users could augment capacity on mainframes just based on off-the-shelf SCSI drives. This was a preview of what was to come for the new company.
Today Tata Elxsi is the technical computing arm of the Tata Group’s IT strategy. The company has customers like Hitachi, Cannon, Intel, Microchip, Alcatel, Macromedia and Texas Instruments to boast of, and 1000 employees.
Tata Elxsi’s model is unusual for an Indian Services firm, in that the company focuses exclusively on specialized product design services, offering help to customers at all levels of the product lifecycle, and in a variety of technology verticals — broadly speaking silicon design, systems design, and software. But you won’t see Tata Elxsi integrating SAP-based enterprise software applications, or any of the other standard cash cow services that are the mainstays of the large Indian consulting firms.
Instead the company addresses highly technical projects in areas such as digital signal processing (DSP), embedded software, or Graphics. Ramki Sankaranarayanan, who is the company’s regional manager for Silicon Valley, admits that the company’s very product design focused approach means that there are no traditional IT consulting and software development revenues serving as a buffer to fall back on. It’s a focused approach, with revenue coming in smaller increments than would be the case for firms doing systems integration for large corporations.
Up the Value Chain
“The 90s saw non-linear growth from a technology standpoint,” says Sankaranarayanan. He suggests that from now on the rate of change in technology may no longer instantly bring significant product differentiation, as it did in the last decade.
As a result, products will become less differentiated, in the way that PCs are no longer differentiated today. Product margins will suffer, and as a result R&D spending will be hit. There will be a shorter time to market window, and it will no longer make sense for companies to constantly attempt to reinvent the wheel, from a technology standpoint.
This is the basic trend that the Tata Elxsi consulting model is built on. The firm is strategically developing pieces of technology in a variety of verticals, and also acquiring domain knowledge, so that it can both license ready-made technology to customers and provide specialized design expertise for those looking to deploy products in an accelerated timeframe, and at less cost.
It is a services concept that is not new in the technology world. Cadence (and specifically its subsidiary Tality) have long taken advantage of the huge market for outsourced chip and systems design. Tata Elxsi, with several key design centers in India, is one of the pioneers in terms of taking the market and adapting it to India’s successful and lower cost global delivery model.
Sankaranarayanan admits that Wipro competes with 60 to 70 percent of what Tata Elxsi offers, so this kind of consulting work may become more prevalent for Indian companies, as they struggle to move up the value chain away from commodity services.
Tata Elxsi has designed what it thinks is a unique and better approach to the product design market. “We are the first SEI CMM Level 5 company in the world with processes and methodologies which are exclusively articulated with product design workflows in mind,” says Sankaranarayanan. “We don’t have one process that will go build an SAP based enterprise application and the same for chip design.”
As it is business for Tata Elxsi is tougher than it was during the tech boom, but the market for outsourced R&D could well prove to be more resilient to down economic times than the more standard IT consulting market.
