These excerpts taken from the IPAS 10-K filed Mar 17, 2008.
believe that to compete favorably we must continue to invest in the research and
development of our services. Our research and development efforts are focused on
improving and enhancing our existing service offerings as well as developing new
proprietary products and services. As of December 31, 2007, our research and
development organization consisted of 172 employees. Our research and
development expenses were $21.1 million, $22.6 million and $17.7 million in
2007, 2006, and 2005, respectively.
Research and Development
Research and development expenses consist of compensation and benefits for our research and development personnel, consulting, and certain allocated overhead costs.
The decrease in research and development expenses from 2006 to 2007 was due primarily to transition of research and development work to India. This resulted in a reduction in consulting costs of approximately $879,000 and a reduction in incentive compensation of approximately $422,000 due to lower incentive compensation rates for India-based employees. The remaining portion of the decrease was due to individually insignificant items. We expect that our research and development expenses will decrease in absolute dollars in the first quarter of 2008 due to the reorganization in the fourth quarter of 2007 and then remain relatively constant for the remainder of the year, and to the extent revenues increase, will decrease slightly as a percentage of revenues.
The increase in research and development expenses from 2005 to 2006 was due primarily to an additional $3.2 million of compensation costs related to increased headcount due to the acquisition of GoRemote and $1.2 million related to the adoption of SFAS 123(R) offset by a decrease of $931,000 in consulting and contractor expenses. The remaining portion of the increase was due to individually insignificant items. The increase as a percentage of revenues as well as absolute dollars was primarily due to the acquisition of GoRemote as well as the continued acceleration of our development of new products, the integration of technology acquired into existing products and services as a result of the business acquisitions that were completed in 2004 and 2006.