Crime Today News
The IT industry is at an inflection point with respect to technology change and R&D investment are needed to stand apart clients.
To stay ahead in the AI era, one would have thought IT services players would spend more on innovation. But the R&D spends of IT majors continue to remain flat as a per cent of their revenues and also fell in absolute terms for two out of the three top-tier IT firms.
businessline’s analysis of R&D expenditure of IT services firms shows that top-tier companies spend in the range of just 0.4-1.3 per cent of revenue as R&D and this has remained largely flat from FY19 to FY25. In absolute terms, TCS and Wipro have seen a 4 per cent and 0.6 per cent dip in R&D expenditure.
TCS’ R&D spend was ₹2,630 crore in FY25, just about 1 per cent of its revenue. Infosys spent ₹850 crore in R&D spends (0.5 per cent of revenue), and Wipro too clocked 0.5 per cent of revenue as R&D at ₹430 crore. HCL Tech data for FY25 are not yet public.
By contrast, global IT services major Accenture spent $1.2 billion on R&D (1.8 per cent of revenue) as of August 2024. Big tech product companies spend much more. Microsoft spent 12 per cent of revenue as per recent estimates, Google (Alphabet) 14 per cent and Meta 25 per cent.
Need for innovation
While IT services do not give break up of R&D spends, industry insiders note that co-innovation programmes with academia, grants to researchers, and costs of centre of excellence/labs are a few spends that go under this head. TCS, for instance, reports that its intellectual capital includes 6,000+ researchers and 4,820 patents among others as of FY25.
Analysts say the industry is at an inflection point with respect to technology change and R&D investment are needed to stand apart clients.
“Currently, the tech services industry is at a point where it needs to not just maintain its tech stack but go for transformation. Low or reducing R&D spend reflects the firms’ low confidence to build/grow products & platforms business,” Gaurav Vasu, Founder and CEO, UnearthInsight, says. In the long run, pure IT services would get further commoditised with growth of AI apps, agentic solutions, he adds.
Yugal Joshi, partner, Everest Group, says that historically the business model of IT services firms was to provide labour-centric value to clients and thus proactive investment in R&D lagged. “However, as asset-based services become more important in an AI-led world, R&D spend will increase,” he adds.
Published on June 6, 2025
📰 Crime Today News is proudly sponsored by DRYFRUIT & CO – A Brand by eFabby Global LLC
Design & Developed by Yes Mom Hosting
