Consultants warn underinvestment in innovation might weaken long-term competitiveness and development
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At the same time as Indian IT companies companies improve spending on analysis and growth, their investments stay a fraction of these made by world know-how friends, elevating questions on whether or not the business’s innovation budgets are protecting tempo with the calls for of the AI period.
Amongst Indian IT companies firms, on a standalone foundation, Infosys elevated its analysis and growth (R&D) expenditure to ₹1,093 crore in FY26, up from ₹850 crore in FY25. R&D spending accounted for 0.73 per cent of complete income in FY26, in contrast with 0.62 per cent a 12 months earlier, as per the corporate’s annual report.
Tata Consultancy Companies (TCS) reported standalone R&D and innovation expenditure of ₹2,814 crore in FY26, representing 1.3 per cent of complete turnover, in contrast with ₹2,546 crore, which was 1.2% of turnover in FY25. On a consolidated foundation, the corporate spent ₹2,900 crore on R&D in FY26, equal to 1.1 per cent of turnover, up from ₹2,630 crore – 1.0 per cent of turnover in FY25.
TCS’s India analysis centres perform in Pune, Chennai, Bengaluru, Delhi-NCR, Hyderabad, Kolkata, and Mumbai. The corporate’s Tempo Port and Tempo Studio innovation hubs function in Amsterdam, Toronto, Pittsburgh, Tokyo, New York, London, Paris, Singapore, Sao Paulo, Riyadh, Letterkenny, Sydney, Stockholm, and Manila.
“Margins noticed assist from larger productiveness and realisation, pyramid restructuring, and beneficial foreign money tendencies, which enabled investments in expertise, studying and growth, analysis and innovation, infrastructure, functionality constructing, and enterprise development. Regardless of these investments, working margins expanded by 70 foundation factors,” the corporate mentioned in its annual report.
LTM incurred R&D expenditure of ₹122.1 crore in FY26, in contrast with ₹90.7 crore in FY25, as per the corporate’s annual report.
World Benchmark
In the meantime, amongst world know-how and consulting firms, Microsoft spent $32.5 billion on R&D in 2025, representing 12 per cent of complete income. IBM invested $8.3 billion in R&D in 2025, whereas Accenture reported R&D expenditure of roughly $0.8 billion in FY 2025.
“For many years, the mannequin rewarded execution velocity and value effectivity, not lab-funded curiosity. Purchasers got here with outlined issues; the job was to unravel them quick. That mindset formed funding selections for years. However AI, automation, cloud, and cybersecurity are altering what purchasers anticipate from know-how companions altogether. The dialog has moved from “are you able to ship this?” to “are you able to assume forward of this?” This calls for a essentially completely different funding posture,” Praveen Joshi, MD & a founding member of RSK Enterprise Options, defined.
Treating R&D purely as an overhead misses its strategic worth. When it results in reusable automation frameworks, stronger AI capabilities, or proprietary supply accelerators, it turns into a aggressive benefit quite than a value. Whereas margins might face short-term strain, the long-term beneficial properties—quicker supply, fewer errors, stronger shopper retention, and premium positioning—can outweigh the funding. The bottom line is not how a lot is spent, however whether or not it makes supply smarter, quicker, and extra differentiated.
Joshi added that enormous IT companies ought to focus R&D on areas the place demand is clearly headed, together with AI-led transformation, cloud modernisation, cybersecurity, and clever automation. Overspending with out execution creates noise; underspending dangers irrelevance. The problem is to speculate forward of shopper demand whereas sustaining operational self-discipline.
Printed on June 1, 2026
