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.

SWOT

  • Strength: Focused business strategy (Only targets Fortune 500 and blue chip customers. Only looks at e-apps)
  • Weakness: Conservative, unable to adapt quickly–can lead to lost opportunities
  • Opportunity: Growing importance of domain knowledge
  • Threat: Prolonged slowdown will hit IT/telecom vertical where the company is strong

PERFORMANCE 
HIGHLIGHTS

  • Opened offices in Atlanta, Cincinnati, Dallas, Los Angeles and Minneapolis
  • Nearly 70% of the development work was done offshore, contributing to 40% of export earnings
  • 35% of revenues from fixed-bid projects
  • Among Forbes ‘Best Small Companies’ and Businessweek ‘200 Hottest Growth Companies’

FACT SHEET

President & COO: Lakshmi Narayanan 

Start-up year:
1994 
Products and Services:
Application Management and e-Business 

Employees:
3,370 
Branch Offices

Address:
226 Cathedral Road, Chennai 600086 

Tel:
2540555 Fax: 2540556 Website: www.cognizant.com

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.

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