TCS may make cognitive automation software ignio as a standalone firm

Tata Consultancy Services (TCS) is looking at building its cognitive automation software ignio as a standalone company.

Developed within TCS Research & Innovation Labs in 2015, ignio has evolved as one of the top-performing software globally, clocking a revenue of $31 million just in its third year. Around 50 companies across the world, many of them are Fortune 500 firms, use the software with an average revenue per customer of $550,000 per annum. 

However, while most of its current users are from TCS' existing client base, the Mumbai-based company has started looking at offering this as a standalone product and even to rival service providers.

"Ignio is a standalone brand and it has been built potentially to be a standalone-product company, both in terms of business model and architecture," said Rajesh Gopinathan, chief executive officer and managing director at TCS.

He said ignio as a product had been able to meet the expectations of the clients by delivering value within weeks after the deployment, which has made Digitate, the unit under TCS that owns ignio, "among the best-performing software product companies within the first three years." 

The product has more than 75 patents filed in the artificial intelligence (AI), machine-learning and intelligent-automation space.

Ignio competes with the likes of Wipro Holmes and Infosys NIA, though the company said Ignio offers a cross-platform solution, including cognitive reasoning as well as contextual automation solutions. IBM Watson also offers automation solutions but combines with a larger spread of technologies for enterprises.

According to analysts, for an AI-based product like ignio to be successful, enhancing the user base is extremely critical, which TCS is focusing on. It's because the product requires a lot of user data to continuously learn and improve the expertise.  

"In the past, Infosys also carved a separate identity for their banking solution (Finacle) to the extent that even competitors use it. So, if TCS is seeking to compete with product companies, a separate identity is likely to boost adoption among competitors," said Pareekh Jain, senior vice president and managing director for India at HfS Research. 

"While similar products are available in the market from software providers, there would still be many players who do not have this solution and could benefit from an AI product."

Ashutosh Sharma, vice president at Forrester Research, said: "Usually, service providers have a natural tendency to combine these offerings (products like Ignio) with their application maintenance and infrastructure support services. It is more sticky engagement-wise and has a revenue upside. Besides, there is always a service component to be addressed during implementation and ongoing support."

Around 83 per cent of ignio's revenue is generated from licenced contracts and the rest is contributed by services. Ignio clients are largely from retail (25 per cent), banking financial services and insurance (22 per cent) verticals followed by energy and utilities (14 per cent). North America accounts for 61 per cent of ignio's revenues followed by the UK (17 per cent), Europe (12 per cent) and APAC (10 per cent).

"Ignio continues to gain traction in the market place, with 7 wins in Q1 (June quarter), and aspires to be one of the fastest software products to achieve $100 million in revenue," said Harrick Vin, vice president at TCS and Global Head of Digitate. 

The company said the sales team was heavily incentivised to offer ignio-specific as well as automation-based services to customers at a strategic level.

"TCS has been expanding its (ignio's) applications across multiple service offerings and over time its applications have evolved into a full spectrum cognitive automation and orchestration platform," said equity analyst firm Morgan Stanley in a report. 

"We believe products and platforms are becoming a key differentiator for TCS and helping it build a long-term sustainable competitive advantage," it added.