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With India becoming a hotspot for telecom companies, R&D is at the peak and several equipment vendors and mobile content creators are mulling for almost doubling their R&D budget and manpower in fiscal 2007-08 in the country, while introduction of new products and applications are in the pipeline.

There are several factors that contribute to the fresh excitement. This comes at a time when India adds a number of new mobile users each year, equal to the entire population of the UK. This represents a huge opportunity for applications that can be accessed via the mobile Internet. Beyond the mobile market, vendors believe that similar dynamics are emerging in India around digital media and IP video, high-end technology services and connecting rural communities. Companies are also looking to India to be a leader in developing technologies suited for emerging markets.

Despite the tremendous growth in cellular and enterprise segment, India probably has the lowest ARPUs in the world. This implies that Indian service providers are severely pressurized to keep the cost of providing services to an absolute minimum. This involves keeping the network costs, both capital and operational expenditure, to the lowest. Another feature of Indian networks is that the upgrades they require are almost continuous. India is one of the fastest growing markets in the world; hence operators need to ensure that the network in any region is scaled up in line with increase in demand. And, R&D is playing a major role and the focus is set to escalate.

Aspirations Beyond India
At a higher level, the overall economic growth in India and increasing income levels present opportunities for growth. On top of this, infrastructure build out, lowering costs of associated hardware such as PCs and mobile devices, improving speeds in broadband service and lower costs of services are primarily driving growth. India specific services and content is another area which will play a significant role in this growth. Finally, ensuring the quality of service, customer experience and providing great customer support will help sustain this growth.

In the current global scenario, Asia, Africa and Russia are the markets experiencing rapid growth. Indian players are primarily tapping Asian and African markets as Elitecore Technologies has done with Crestel by capturing lead share in the Kenyan data market and gaining key mobile clients in the Asian region. In fact, large global ISVs too are targeting these rapid growth regions.

Surging Spend
They have global aspirations, but are telecom companies ready to spend beyond their budget for infrastructure, marketing, etc; a key element in their tools for drawing successful stories. The freshness in their thinking coupled with demands by services providers are forcing telecom equipment makers and content providers to jack up their investments in R&D. Several companies VOICE&DATA spoke with reveal that they are in the process of increasing their R&D budget to witness a 100% growth, while large companies are bullish about R&D and growth in spend, may be around 30%.

Look at who is spending. Elitecore Technologies is planning to increase its R&D budget by 100%, which accounts for around nearly 8% of the total revenue. Supportsoft, a leading provider of real-time service management software, has allocated 20% of its expenses to R&D in 2006, and is expected to grow at a similar rate ahead. Since its inception, Tejas has invested over Rs 130 crore in its research and development initiatives. For the year 2007-08, the R&D budget is Rs 31.6 crore with a projected growth of approximately 29%. Subex Azure spends 10% of its engineering budget on R&D, while the growth in the R&D budget is 100%. The R&D budget of OnMobile is in excess of Rs 20-30 crore and the growth expected is 85%. One97 Communications' R&D budget will go up to $1 mn in 2007-08 from $250,000 it spent in 2006-07. After significant increases in R&D expense in 2006, Kirusa is on track to double its R&D spending again in 2007. Aricent, which has been earmarking 6-8% of revenue on R&D, is looking at 30% growth in R&D kitty during the current fiscal. ACL Wireless is planning a 37% growth in 2007-08 with the R&D budget touching from $758,899 in 2006-07 to $1.2 mn in 2007-08.

Resources Growth
People-centric R&D initiatives could take a beating if the country cannot provide enough talented people. Demand always outpaces supply as country's telecom players are increasing their headcount. India may be known for cheap-wages, but the growing number of manpower can enjoy surge in R&D kitty as well. OnMobile is looking at 50% growth in manpower from the present 650. One97 Communications is planning to double the manpower from the present 150 (25 is in R&D). Going by the volume of work, R&D hands at Elitecore Technologies could swell up to 80 during the current fiscal from 50, while the total manpower will increase to 350 from 264. Ciena, which has recently set up a full product lifecycle R&D center in Gurgaon, is planning to increase the number of employees to 350 in the next 18 months from the present 180.

Cisco has over 1,800 engineers working in various groups in India and its total headcount is over 2,200. Projected overall headcount is 6,000 employees in the next two to three years. Aperto Networks India is planning to double its manpower. At present, it has thirty people at the Bangalore development center, while seven people are supporting the sales and marketing functions. The Netherlands-based Irdeto, a proven expert in content security for digital TV, IPTV and mobile networks, is planning to set up its R&D center in India. The focus of the R&D center would be to develop new applications targeted at CAS and DTH players in the country. At present, Irdeto has also R&D facilities in China and Korea with around eighty and twenty-five people, respectively. "We will be focussing on CAS and DTH markets in India," says Doron Shorr, APAC director, Partner & Alliance, Irdeto.

At Supportsoft, the R&D manpower growth will be 20-30%, while the overall growth in headcount is pegged at 15-20%. Currently, Tejas employs 201 people in R&D and has a total manpower of 350 people, and intends to add another 50 people in R&D over the year 2007 increasing its total manpower to 500 people. Aricent's R&D team will grow by 25-30% in 2007-08. R&D headcount at Subex Azure will rise by 10-15%, while total manpower will grow by 20%. In 2007, Kirusa will almost triple its total manpower as well as its R&D manpower.

New Initiatives
Despite some nagging issues, growth in R&D resources and funds will continue as the resurgence in R&D focus is mainly driven by companies' focus on new products and services demanded by their customers.

Focus of Qualcomm in India is mainly on R&D, education and training. "We recently established a Qualcomm chair at the Indian Institute of Technology, Madras with a grant of $175,000. The funding will bring reputed experts in wireless technology from all over the world to the institute, and provide engineering students an opportunity to learn and contribute to wireless innovations. These initiatives show our commitment to building high-quality talent in the country which will encourage and sustain innovation in the Indian telecom industry," says Kanwalinder Singh, president, Qualcomm India and SAARC.

Cisco sees India as a big opportunity. Cisico's decision to locate Globalization Center East here definitely highlights the country's growing importance in the world. "We at Cisco are looking to utilize India as a platform to innovatively globalize and scale Cisco's worldwide functions. Through Cisco's Globalization Center East, the company will be able to best serve its customers by creating new ways to deliver information, products and services," says S Devarajan, MD, Cisco Systems.