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Seema Singh
I write about sci-tech and all things that lie at the intersection.

What Does CRL’s Acquisition by TCS Mean?

The short answer is: India is not yet ready for serious HPC (high performance computing)  business. TCS has scooped up a great start-up which will allow it to offer more differentiated services to its global clients.

As most media outlets have reported today, TCS is acquiring Pune-based Computational Research Laboratories (CRL) for Rs 188 crore.

Here’s a company that was set up in 2007, never mind with a storied beginning, to be the first corporate-funded HPC facility in a world that is dominated by government-funded supercomputing machines. The synergy between some of the Tata group companies was obvious: they would aid and use CRL expertise. But CRL, as officials told me then, was supposed to prove that supercomputing can be a viable business by itself. That, as this acquisition shows, didn’t quite pan out as the group had planned:  Tata Sons, whose wholly owned subsidiary CRL was, had invested $30 million then, and now TCS is paying $34 million to acquire it!

I got a whiff of the changes at CRL a few weeks ago when I learnt that its chief executive Vipin Choudhary is going back to academics in the US, where he came from to lead CRL. With both academic and entrepreneurial experience, Chaudhary was expected to drive the business.

When I asked Chaudhary in late July if he was going back to theUS, he said he had always traveled between India and US on business and his family continues to be there. Today he says he’ll continue to work for TCS, and “this is a big win for CRL and HPC”.

With most of its customers overseas, CRL was finding it tough to break into the Indian market which is not only small but also ridden with turf war among institutions that have an unhealthy habit of putting together big machines without thinking through its effective use.

When CRL started, it hoped to bundle its brute force capacity with novel applications to serve various Indian government programs – space, climate research, weather forecasting, life sciences, media and entertainment industry, etc. But, leader as CRL is in HPC cloud and solutions space, according to Chaudhary, there are very few government projects of this nature.

“Perhaps most projects you have seen are hardware acquisition which comes from MNCs and the companies who supply them do not have any value add. That is not our model,” says Chaudhary.

Back in 2008, S Ramadorai, chairman of CRL and CEO of TCS had told me that the challenge for CRL was ground-up. “Unless we involve the research community, unless the industry has a real world problem, or we redefine the problems, for instance, improvement in manufacturing at the nanoscale level, penetration of HPC will take time,” said Ramadorai, who was then talking to Bharat Heavy Electricals Ltd for deploying Eka’s (name of CRL’s supercomputer) services, among other things, for better power transmission and distribution. How much of such business deals were clinched in India, is anybody’s guess.

Eka is still one of the largest systems in India after five years. It is the largest commercial system by a big margin and perhaps close to top five in the world in that category, argues Chaudhary.

Incidentally, in June this year the government announced Rs 5000 crore for ramping up supercomputing infrastructure in the country.

Ashwani Kumar, Union Minister of State for Planning, Science and Technology and Earth Sciences, said, “The Indian government is seriously looking at accelerating R&D in HPC infrastructure development and technology proliferation. For this, an allocation of Rs 5,000 crore has been made in the 12th Plan.” Several supercomputing facilities in a “three-tier architecture” which would include many small-scale HPC systems at various institutes, some medium-scale HPC systems at regional level, and a few large-scale HPC systems at the national level would be set up.

Ideally, the govt should make public what it plans to achieve, in measurable and effective outcomes, with Rs 5000 Cr investment. Supercomputing after all is pretty commoditized today. What it actually boils down to are smart applications, and how much juice one is able to extract out of the fast number crunching ability. A fresh impetus to supercomputing in India shouldn’t just become a typical “big science” project which is undertaken for stature and, in many cases, for survival of research groups.

 

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How much juice one is able to extract out of the fast number crunching ability. that is it Badri
As Rohan said below, i wonder if TCS just bought this to save Tata Sons $30 million..Why don't Forbes or some one ask tough questions on the valuation and pricing? I guess this is a shame on Corporate Governance of TCS and Tata Sons/CRL..
Whatever I understand of HPC, I think it's a pretty specialised, high skill area and TCS is certainly going to get a leg up in its offerings because of this capability. So I don't think it's a question of buying a distressed asset only to save Tata Sons. As for valuation, while I will ask TCS, but given the nature of this business, it looks conservative.
R & D culture has taken a far seat in India, research is seldom encouraged or instilled in our students, with libraries slowly losing out in schools / colleges / universities, it is just rote learning all the way....
Excellent article. Why is the author switching between INR and US$ ? First she writes that TCS is acquiring CRL for Rs. 188 Cr. and then she writes that Tata Sons invested $34 million in CRL and TCS is buying the company fpr $35 million. Why this inconsistency ? Does $34 million equal Rs. 188 Cr. ? Looks like Tata Sons, a privately held company (Tata & Mistry Families) is scalping TCS, a public company for Rs. 180 Cr. This should be a concern for all non-Tata shareholders of TCS.
Prakash: Yes, according to the TCS release and the going exchange rate, Rs 188 cr is equal to $34 million.
Why do you have to provide figures in USD ? Did TCS pay Tata Sons the price in USD ?
I'm afraid I don't know if TCS paid in dollars, but I'll hazard a guess here and say no because it doesn't make sense. Both the buyer and the seller are Indian entities. Why use USD? I think it's standard practice for global companies. I used it to compare the investment and sale figures.
It has become a fad for the media to give figures in Dollars and in Millions. It sounds great when one says Million Dollars and against Crores of Rupees. Tata Sons is hardly a global company. I believe both the companies publish their accounts in INR and in crores which you could have used to compare the figures.
Prakash: I don't know if it's a fad or not and I can't speak for media in general but I can certainly explain why I used USD in this case. If you've noticed, I am quoting the investment amount of $30 million (given by CRL in USD) from an old article that I wrote in 2008. Given the volatility in exchange rate, I think it's better to compare the figures in USD.
Correct me if I'm wrong but looks like Tata Sons, the major shareholder of CRL & TCS, is being paid $30m as an exit price for an underperforming investment by TCS, a publicly traded company. Why shouldn't it be merged with TCS instead and how "arms length" were the acquisition discussions and how was the acquisition price determined. I'm a minority shareholder of TCS and don't have a clue except for media reports. If magazines like Forbes don't ask the relevant questions who will? Thank you,
Very good article - you have hit the nail on the head when you write of the "an unhealthy habit of putting together big machines without thinking through its effective use" amongst the Government institutions. Doing great HPC is not just about buying hardware, but a whole lot of other things, not the least of which are have appropriate scientific questions, having the technical skills to turn those questions into number crunching code, and then, ensuring that the number crunching is not held up by service and maintenance issues. The 5000 crore the Government intends to spend will benefit only the sellers of HPC hardware, who install, forget, and then laugh all the way to the bank!
It's a shame to see that supercomputing, which should be so useful today, hasn't really taken off in India. Re 5000 cr investment: Lack of transparency has been the feature our government and the governments before. But surely if you speak to academics or institutes, who would benefit from such an investment, you would come to know more. Have you done that?
Akshat: I don't want to ask academics who will benefit from this, instead I'd like to ask, if anyone is listening, if there ever has been any scientific audit of expensive machines in this country. I know of places where big machines have been bought, (eg one machine for Rs 3.5 cr) and in a few yrs dumped for lack of use. Not a single paper came out of that. Next came in another machine, double the price. The company (from US) was getting acquired so they did all they could to get their order and then dumped the machine. Not more then 10 papers have come out of it. That makes it, what, Rs 60-65 lakh per published paper? That's an awful lot I'd say. Are the sellers honouring their contract for upgrades and support? Perhaps not. I don't want to rant but we certainly need someone like Vinod Rai of CAG in the ministry of S&T.
Are you alluding to the Cray super-computers purchased by the government during Rajiv Gandhi's regime for weather forecasting ? The govt. paid through its nose to buy these computers. Nobody knows what they did with them.
Prakash: I wasn't alluding to Cray in this instance; unfortunately there are other machines. But yes, Cray could be one of them. I have no idea to what extent was Cray used.
Cray is one of the better vendors that work in India. Unlike many others who are sort of jack of all trades, Cray's only business is to make supercomputers. So, they have arguably the best staff and the best after sales service in the country. What one does with the machines, though, is not a service/maintenance question, but one of scientific capacity to extract useful science from HPC hardware. That is where we have a major failing.
In the 1990s, CDAC had built PARAM supercomputer using off the shelf components and parallel processing concept. It was hailed by the govt. as India's competition to Cray. Does anybody know what happened to PARAM ?
 
 
Seema Singh
Until Dec 31,2013, I was a Senior Editor at Forbes India and I usually wrote about science and technology on this blog. I believe while we may have settled into consuming the nicely packaged final products of science - technology being a hand maiden of science - we are distancing ourselves from all the effort that goes into it. This blog was an attempt to bring occasional peek into those efforts and ideas.
I've been a journalist for 17 years and have written for The Asian Age, The Times of India, Mint, Red Herring, IEEE-Spectrum, Cell, New Scientist and others.
I'm now available at seema@seemasingh.in

You will find my future articles on www.seemasingh.in
 
 
 
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August 23, 2012 14:16 pm by C.R.BADRI
How much juice one is able to extract out of the fast number crunching ability. that is it Badri
Seema Singh
Seema Singh
August 22, 2012 21:58 pm by Seema Singh
Whatever I understand of HPC, I think it's a pretty specialised, high skill area and TCS is certainly going to get a leg up in its offerings because of this capability. So I don't think it's a question of buying a distressed asset only to save Tata Sons. As for valuation, while I will ask TCS, but ...
August 22, 2012 21:32 pm by Rajesh
As Rohan said below, i wonder if TCS just bought this to save Tata Sons $30 million..Why don't Forbes or some one ask tough questions on the valuation and pricing? I guess this is a shame on Corporate Governance of TCS and Tata Sons/CRL..
August 21, 2012 13:16 pm by Seema Singh
Prakash: I don't know if it's a fad or not and I can't speak for media in general but I can certainly explain why I used USD in this case. If you've noticed, I am quoting the investment amount of $30 million (given by CRL in USD) from an old article that I wrote in 2008. Given the volatility in exch...
August 21, 2012 13:03 pm by Prakash Warty
It has become a fad for the media to give figures in Dollars and in Millions. It sounds great when one says Million Dollars and against Crores of Rupees. Tata Sons is hardly a global company. I believe both the companies publish their accounts in INR and in crores which you could have used to compa...