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MindTree R&D service business declines
By siliconindia
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Thursday, 21 August 2008, 00:04 IST
Mumbai: The recession monster is still haunting the IT companies. Now MindTree's R&D business service, which accounts to 22 percent of its revenue, is on the gunpoint as it is witnessing a slowdown for last six months. The customers defer their R&D decisions, waiting for the global environment to recover, a senior official said.
In the April-June quarter, its R&D service revenue rose nearly 31 percent on year. "When there is a slowdown and technology-spend is going down, at some level it reflects on the R&D also," S. Janakiraman, President & CEO, R&D Services.
"So there will be some slowdown in growth rate temporarily based on the global market dynamics.In the automotive electronics segment, there was increasing pressure on R&D costs," he said. MindTree, which used to spend on R&D about 8-10 percent of revenue, has now become about 4-5 percent.
Single projects are being split into phases. Clients prefer to adopt an outcome-based pricing model. Although, revenue in the first and the second quarter of the current financial year didn't suffer because of developments overseas, the order pipeline is lower, said Janakiraman.
"But the visibility level we used to have last year at the same time for future quarters, I cant say it is at the same level. It should be lesser, orders are achieving closure at the last minute," said Janakiraman, attributing it to lesser spending by large companies in U.S. and Europe. "But we are seeing a lot more interest from mid-size and small companies in terms of leveraging India to control their costs," he added. Growth in accounts have nearly halved.
"So we need to compensate by adding more customers. Growth is happening but not at the same level as in the past, because they are tightening their budgets," he added.
However, MindTree's May acquisition of Aztecsoft will keep its R&D service revenue growth buoyant in the current financial year, with its share of income nearly doubling, Janakiraman added.