What is the advantage of a royalty model?
The cores represent a substantial investment for Wipro-NewLogic, and offer the customer a great deal of know-how in a form they can use very quickly and with a minimum of effort. On account of the significant investment which must be recouped, the cores do not come cheaply. In order to make the cores available to customers who have a limited budget, the royalty model was developed. In this case, the up front costs are kept to a minimum and, to some extent, the risk is shared between Wipro-NewLogic and the customer. Only if the customers product is successful in the marketplace will royalty payments result, and Wipro-NewLogic investment re-paid. In order to manage this risk Wipro-NewLogic does need to be selective as to whom it offers the royalty business model.
