October 2005

Inside job

Tata Elxsi has made the most of its brush with hard times to find a place in the Silicon Valley sun

Given that the US is the centre of the semiconductor world, it makes eminent sense for Tata Elxsi — the design-focused gem in the Tata group's information technology crown — to make that country the hub of its expansion activities.

Tata Elxsi's expertise lies not just in assisting in the design of specialized semiconductors but also in making them critical parts of the greater whole. About 40 per cent of the company's revenues come from North America, a gargantuan market where a big player such as Intel designs specially for computers, Microsoft for industrial controls, Texas Instruments for digital signals, and Broadcom for wireless infrastructure.

Based in San Jose in the fabled Silicon Valley, Tata Elxsi has some 40 people working in its US operations. This is largely a sales setup; most of the services work the company undertakes is carried out offshore.

Tata Elxsi does not see itself as an IT company. "We are a design services company," says Madhukar Dev, Tata Elxsi's managing director. "We are not so much in software as we are into implementing software. We design semiconductors, hardware, embedded software, enclosures and mechanical systems, enabling complete product design and development."

The company clubs all of its design activities under the umbrella moniker 'inside the box'. Its services package includes the writing of software to test semiconductors before they are manufactured, verifying the objectives of design processes, and embedding software to functionalize products such as portable video devices, mobiles, camcorders, and even anti-lock brake systems in cars.

Tata Elxsi's extensive know-how has delivered it access to a range of high-end industries in the US. The largest share of its American business comes from the portable consumer products industry. The business vertical that follows is wireless infrastructure: switches, routers, way stations, etc.

One of the company's peripheral activities in the US is in industrial design services. These could include creating a basic design based on a marketing / design brief, or what is known as 'Class A surfacing' — converting a model into a true digital mode that can actually be manufactured.

Agility and innovation is intrinsic to the company's way of operations and derives from its experiences with different and sometimes disruptive technologies and products.

Tata Elxsi's first foot forward was, for it, a learning milestone. Because it was nearly impossible to import computers into India, the company started manufacturing them. "Before we could manufacture a significant volume, the laws changed and it became easier to import," says Mr Dev. "But we did not respond quickly enough to the transformation happening at that time and stuck to manufacturing for a while. That experience enhanced every Tata Elexian's alertness quotient and ability to adapt our proposition to a continuously changing environment in the technology world."

The company's relatively small size, compared to typically large IT companies, has made it extremely nimble. Having maneuverability in its corner means that the company can move quickly into emerging business vistas in the US. "There is a fairly large opportunity in animation and special effects for films," says Mr Dev, "and we have a lot of creative talent in our company. We would like to set up a small studio in Hollywood that becomes the interfacing point for our customers while we implement the bulk of our projects from our Mumbai centre."

Animation and special effects as a relatively new business accounts for only about 10 per cent of Tata Elxsi's current revenues, but this is a business lined with gold. That explains the company's sustained efforts to increase its take-home from it.

While it charts out new waters, Tata Elxsi has not forgotten to be watchful of the weather. The company has to tread carefully since some of its most exciting work comes from start-up ventures rather than large and stable enterprises. "We have to figure out who is likely to succeed and who is not," says a sanguine Mr Dev.

There are challenges on other fronts too, notably arising from cultural differences that exist in the various geographies that Tata Elxsi services. Mr Dev adds that while American customers are very direct in their approach Indian engineers sometimes see this as harsh. "The most frequent complaint we get from our American customers is that Indian engineers do not demand what is required to help them complete the task."

As it seeks out and pursues growth and a higher profile, Tata Elxsi has to manage the tricky task of navigating choppy seas while riding the big waves. Constantly upgrading the skills of its people is, in this context, an imperative.

"We spend a lot of money on technical training," says Mr Dev. "Because of our outsourced R and D business, we have to ensure that our engineering capability is absolutely contemporary." It is no small help, then that Tata Elxsi is well on its way to mastering the art of moving with the times.