18. Cognizant Technology: Solutions Growth Time, Ahoy

IT was good going at Chennai-based Cognizant Technology in fiscal 2000-01, which saw revenues jump at 70% to Rs 705

crore, from Rs 414 crore in 1999-00. In the previous year, growth had stayed at 43%. More importantly, gross and net profits too grew at over 70%–the company ended Q4 cash rich, this at a time when most companies were burning their reserves. Operating margins also grew marginally, from 18.5% to 19.2%, while productivity increased from Rs 17.5 lakh to Rs 20.9 lakh per employee.

The SEI-CMM Level 5 company continued to focus on applications management and e-business solutions in the global market, and these segments continued to account for most of its revenues. Web-enabled and e-commerce applications made up 33% of its software export revenues, even as its presence in the domestic market remained negligible, with only 0.2% of the revenues being generated locally.

If one talks focus areas, Cognizant Technologies remained committed to IT and telecom, which together contributed Rs 275

crore, 39%, to overall revenues. The banking and finance and services verticals accounted for another 27% and 22%, respectively.

Cognizant found itself a place in the Forbes ‘Best Small Companies of 2000’, Businessweek’s ‘200 Hottest Growth Companies’ and Deloitte & Touche’s ‘Fastest-Growing Technology Companies’ lists. Increased exposure meant that the company added at least 50% more customers during the fiscal. Yet, 82% of revenues came from repeat orders. Cognizant stuck to its strategy of starting off with legacy applications management with a customer, moving on to e-biz apps and their integration with legacy systems and finally to management of the new apps.

Over the past few years, the company has increased its fixed-price proportion of revenues. Last year, a healthy 35% of revenues came from fixed-bid projects, against time-and-cost projects, disparagingly referred to in the industry as ‘body-shopping’. Nearly 70% of the development work was done offshore, contributing to 40% of export earnings.

Last fiscal was essentially a year of expansion and growth for Cognizant. It opened offices in Atlanta, Cincinnati, Dallas, Los Angeles and Minneapolis. It also opened a development center in

Bangalore, its ninth in India, and expanded facilities in Kolkata, Chennai and

Pune. It also beefed up its R&D and sales and marketing.