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Deccan Herald, Monday, January 03, 2005

Economy & Business

Ittiam’s heart beat in digital goodies

Bangalore-based Ittiam Systems has ventured into the sphere of IT product development, shunned by most Indian companies. In a short span of time, it has successfully developed products, which are being used by global brands like Sony, Premier Image and so on, writes RAJESH PARISHWAD.

WHILE you are e-shopping for a digital video camera on Indian portals such as Rediff or Bazee, you will come across a range of products from Sony and other global electronics companies. The products have impressive features like 45 minutes of video recording without recharging the batteries; extremely easy to handle and lightweight; using the handycam as a still camera and transferring the digital content to your personal computer.

You will be amazed to find that the heart of this new-generation video camera — the core technology such as the reference software and hardware design — has been developed by Bangalore-based Ittiam Systems focused on creating Intellectual Property (IP) in the digital signal processing (DSP) space.

DSP chips usually convert signals such as sound, video, and other analog signals into a digital form. The chips are used in devices like mobile phones, digital cameras, modems, network systems and a host of other consumer electronic goods.

The four-year-old Ittiam, which has been christened on the acronym of `I Think Therefore I Am,` is shattering the myth that the Indian companies are merely doing the “plain vanilla” software development work.

The company, the brainchild of Srini Rajam, former managing director of the Bangalore-based Texas Instruments India and six others, has thus successfully broken into the global DSP product domain.

In a short span of time, it has notched up an impressive list of clientele that includes global companies Sony, Premier, ST Microelectronics and Silicon Labs for its products in streaming video, portable media player, digital still camera, wireless LAN and IP video phone.

The premier US-based Forward Concepts survey for 2004 ranks Ittiam as the world’s most preferred supplier of DSP based IP in both software and hardware categories of the DSP.

“In the first four years of existence, we have been recognised as technology supplier globally. And in the next four years, we want to consolidate on our gains and build our brand even stronger,” says Rajam, who believes that they have to go a long way in attaining leadership in terms of the market share and moving up the value-chain of the DSP business.

Initial days

Things were not so rosy in the global technology market when Ittiam started in 2001. The technology bubble had burst in the US and Indian IT companies were learning to live with the hard reality of a cut in IT spending globally. That, however, did not deter or dampen the spirit of seven former IT techies to float a company focused on rolling out DSP products from India for the global market.

“We were not really bothered about technology downturn. In fact, it was a blessing in disguise for us. As we were a product company, we didn`t need a good economy at the start of our operations. Because, it usually takes 12-18 months for the product company to build a basic team, finding talent, decide on the products to do and getting it to the demonstrative phase,” Rajam said.

Moreover, he pointed out that he and his friends had begun the process to launch a new company almost a year ago before it took a final shape in 2001. “We were passionate about building a world class technology company. We had successful careers in technology product companies in TI. We felt that we should dedicate our second phase of the career to achieve our dreams.”

Though the team had a cumulative experience of over 130 years in VLSI/DSP industry, marketing, and building a world-class organisations, it had to take tough calls on deciding on the nature and areas for the products. “Choosing the right products was one of the key challenges. We decided to bet on mobile electronics and entertainment. That has significantly paid for us. In retrospective, it seems that we made a right decision,” Rajam observed.

Ittiam has a team of over 130 DSP experts which is expected to grow to 200 in 2005. In the last 24 months, the company has 24 patents to its credit in areas of video encoding, audio coding and wireless transmission. “From now on, it is possible for us to file 10 patents every year,” he added.

MNCs lap up products

In the last two years, Ittiam’s products ranging from portable media player, IP Video phone, wireless LAN, digital video to receiver for satellite broadcast, have impressed many Original Equipment Manufacturers (OEMs) across the world including the likes of Sony, Texas Instruments. Some of these interested OEMs have even begun production.

Premier Image Corporation of Taiwan has already started manufacturing and marketing portable mediaplayer based on Ittiam technology under different brand names across the world. In fact, the portable media player is proving to be the favourite gift for the Thanksgiving celebrations in the US. “We are expecting about one lakh units of portable mediaplayers to be sold in a short span of time,” Rajam said.

Digital video cameras based on Ittiam technology have crossed half million units around the world and the numbers are going to be huge in the coming years. The company is also betting big on its IP video phone. Individual users can have high quality video interaction with the other person at the end of an internet connection anywhere in the world. “It is not video conferencing but just one-on-one video interaction between two people,” he pointed out.

Digital Corporation, the US-based outfit, which is one of Ittiam`s customers, is manufacturer of multimedia appliances such as the digEplayer, a portable in-flight entertainment system used by 11 carriers, including Ryanair, Alaska Air Group and Hawaiian Airlines. Indian airline firms have also expressed keen interest in deploying Ittiam-based in-flight entertainment systems.

The differentiator

Ittiam’s business model is quite innovative. The company develops its own solution but it doesn’t sell directly to the end consumers. Instead, it sells solutions to manufacturing or other firms to create products for the end consumer.

For example, as Ittiam develops a product, the company makes an assessment its market value. The market value of a product is estimated to be $5 lakh. In case a manufacturer is ready to purchase the product for the entire amount, they sell it to them. The manufacturer can also share the risks with Ittiam by getting into a royalty agreement. Ittiam charges a certain amount of licence fee on the manufacturer and takes royalty for every unit of the products sold.

“Our business model is pro-manufacturing. We enable the manufacturers to enter the market at low-entry costs. Licencing and royalty based business model is very attractive for the manufacturers as we also share risks with them,” said Rajam.

In 2003-04, its third year of existence, Ittiam reported revenues of $4.8 million with a net profit of $1 million. “Ittiam has successfully completed its first mission of proving its business model. We have shown that the revenue streams which include both license and royalty could be well applied to our IPs in the field of DSP,” he said.

Rajam expects royalty income to grow to 30 per cent in 2006-07 from about 5 per cent of revenue in 2003-04. By 2008, Ittiam hopes to be IPO- ready and about $25 million in revenues.

Ittiam had raised $5 million from Global Technology Ventures, which was co-founded by Banc of America Equity Partners (BAEP), Asia, in 2001. Last month, it has received the second round of funding of $6.5 million from BAEP, Asia for development of new products in communications and media processing segments. “We will have budgeted about 1 to 2 million dollars for development of next generation products,” Rajam said.

BAEP Asia Managing Director Kayu F Mehta said, “Ittiam is a company with a difference that we had identified four years back and has tremendous potential to emerge as a global leader in technology innovation and licensing.”

Rajam foresees that the convergence of digital media and communications will be the next opportunity for Ittiam. “We will see more and more products coming out this space. We are also bracing up to the new areas and challenges,” he concluded.