Top IT companies in India are increasingly turning to start-ups to arm themselves with cutting-edge technologies be it Artificial Intelligence, Machine Learning, Internet of Things or Robotics.

This, experts say, is critical as IT companies are forced to adopt and adapt to digital and disruptive technologies to stay relevant with the labour cost arbitrage coming to an end.

Tata Consultancy Services, Cognizant Technology Solutions, Infosys and Wipro have created a war chest of $300 million for investing in start-ups, both in India and abroad and thereby building an innovation ecosystem. With over 5,000 players, India has world’s third largest start-up ecosystem.

Wipro Ventures, the strategic investment arm of Wipro, has set up a $100-million fund that invests in early- to mid-stage ‘cutting edge’ start-ups. As on March 31, it has invested and partnered with 11 start-ups in areas such as AI (Avaamo Inc and Vicarious FPC Inc.), Industrial IoT (Altizon Systems) and testing automation (HeadSpin, Inc., Tricentis GmbH). It also invested in two enterprise-focussed venture funds — TLV Partners and Work-Bench Ventures.

Wipro’s annual report 2017-18 says that the company ‘leverages the innovation ecosystem by working closely with partners/start-up ecosystem, academia and expert networks to jointly provide latest innovations to its customers.’

Infosys Foundation Fund partners with start-ups by providing early-stage capital and helping them bring their innovations to market. It also helps start-ups attain scale, gain product validation and facilitate customer introductions. Till March 31, 2018, the fund had invested $53 million in the form of minority holdings, says the company’s annual report.

TCS leverages innovations in start-up ecosystem through TCS Co-Innovation Network. This programme has now expanded its start-up connects to over 3,000 in key innovation hubs in the US, the UK, Europe, Asia and Australia. Similarly,

Cognizant Ventures makes minority investments in external early-stage start-ups that it believes will help develop new skills and technologies and offer new capabilities to its clients. Working with Cognizant also gives start-ups access to some of the world’s largest and most successful companies, across multiple industries and specific insight in to how enterprise systems work, said Sean Middleton, President, Cognizant Accelerator.

Peter Bendor-Samuel, CEO, Everest Group, a research firm, said new digital start-ups tend to focus on building and selling technology, they need implementation partners. For every dollar, a company spends on new technology, it will spend between $10 and $20. The service providers are seeking to participate in the $10-20 part of the spend. Hence, they make good ecosystem partners.

This desire to partner does not mean that they are not trying to develop their own technology, and companies such as TCS have substantial budgets devoted to this. However, such is the extent of innovation they cannot possibly cover all the bases, he said.

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