R&D spends of Indian IT majors on a decline

livemint.com:

₹10,700 crore R&D expenses were more than four times the cumulative innovation spending of the five companies in the last five years, totalling ₹2,361 crore, according to a Mint analysis. “Organisations worldwide continued to face a slowdown through multiple macroeconomic headwinds and challenges such as inflation, recessionary fears, global conflict, and supply chain disruptions assaulting their strategic goals," Tom Reuner, managing director at IT outsourcing advisory, HFS Research, said. “They are also in a big hurry to drive innovation to respond to challenges and stay relevant.

With that, discretionary spending came under continuous scrutiny." Lower R&D spending by the five companies underscores the challenges faced by Indian technology leaders to promote newer business services, including generative artificial intelligence (AI) tools, to Fortune 1000 companies. The $245 billion IT services industry in India is witnessing diminishing profitability as traditional tasks such as application development and infrastructure maintenance are being commoditized. Predictably, profitability of the firms has decreased over five years, while Accenture marginally improved its operating margin.

Accenture has reported a 62% jump in revenue since 1 September 2018 to $64.11 billion in the year ended August 2023. Its R&D spending rose 63% during this time. From 1 April 2018, to March 31 2023, TCS, Wipro, and Tech Mahindra’s revenues grew 46%, 41.3%, and 38.5%, respectively.

During this period, TCS and Wipro witnessed a rise in R&D expenses by 28% and 21%, respectively, while Tech Mahindra’s R&D spending fell 59%. Infosys and HCL Technologies, saw their revenue rise 66% and 60.6%, respectively. HCL Technology’s R&D spending was at ₹141