IP-based tech firm shows way to beat recession

Intellectual property-based niche technology firms are among the best equipped to weather the current global recession.

Bangalore-based Ittiam Systems, which is in the digital signal processing space, is a case in point. Its business model is royalty-driven. It creates intellectual property by way of software and hardware designs, which are used by original equipment manufacturers in areas like mobile internet devices, IP-based networks, video security systems and medical screening.

Ittiam, which is closely held, does not share straight forward numbers, but Srini Rajam, its founder CEO and chairman, reveals the company is growing its top line at over 30 per cent for the last three years. Its annual licence revenue has crossed the $10 million mark. Moreover, its royalty income has crossed the 10 per cent of licence-income level.

This is important for two reasons. The 10 per cent norm is an industry benchmark; you have partially made it if you have forded it. Also, royalty income keeps coming in. So it gives stability and predictability to future revenue flows. "Ittiam's strength has been its diversity in both offerings and geography. Thus, even in a tough year (2008-09) we have recorded solid growth," says Rajam.

As a measure of its technological prowess, Ittiam has so far filed for 45 patents in the US, of which six have been granted. This indicates acquisition of technology muscle and Rajam foresees royalty income growing faster over time.

In financial terms, Ittiam is still a small venture. Also, it was founded eight years ago and cannot continue to be viewed as a start-up. But it is cash positive. It has raised altogether $11.5 million, the last round was completed in 2004 and has been able to expand (its staff strength has crossed 200 and these are rather highly paid engineers) on the basis of its own generated cash.

Moreover, for several years running, Ittiam has been judged the world's most-preferred provider of DSP-based IP by Forward Concepts -- a premier market research firm specialising in DSP and related areas.

Will Strauss, president of Forward Concepts, says Rajam "Ittiam is considered one of the better places to which you could go if you want new designs for your circuit and development platforms, whether it is telecommunications, multi media or video." With customers in the US, Europe and Japan, Strauss finds the firm "well connected globally."

Rajam was managing director of Texas Instruments India before he left to set up Ittiam and the firm continues as "one of our strategic partners for multi-media capability on the TI platform", according to Bobby Mitra, president and managing director of Texas Instruments India. Mitra recalls that "we have seen them evolve from doing just IP pieces of codecs to actually doing reference designs. They began with making just components and now they have evolved to almost like an independent design house."