Cognizant Technology Solutions: Driving Growth

HIGHLIGHTS Chairman and CEO Kumar Mahadeva retires and COO Lakshmi Narayanan named CEO In addition to some inorganic growth, hired the highest number of employees ever Ranked 8th on Business Week's list of Hot Growth Companies Maintained high levels of profitability despite and during the downturn, indicating a stable business model Growing aggressiveness in the market as it pitches itself against the top five Revenue dependence on the US remains extraordinarily high at 89%. Inability to increase presence in Europe and APAC Growing aggressiveness in the market as it pitches itself against the top five Ability to manage inorganic growth of any scale yet to be proven

It was a year when the company tried to shed its conservative image with aggressive hiring and some acquisitions. DQ estimates Cognizant Technology Solutions India-the wholly owned subsidiary of US based Cognizant Technology Solutions Corporation-grew revenues by a very healthy 59% to return to the DQ Top 20 list. Globally, the company grew 52%. Almost three fourths of its workforce is in India. The big highlight of the year was a 62% increase in its global headcount-the highest ever. Across the software exports sector last fiscal, net profits have grown at a much slower pace than headcount. Even though PAT might be affected by other factors, it is significant that globally the company saw net profits actually increase 69%-perhaps the highest PAT growth among its peers. Lakshmi Narayanan President & CEO

Francisco D' Souza COO Gordon Coburn CFO

Some of this has come from the improved quality of business done. It added 17 new strategic customers during the year taking the total to 43. The company defines strategic customers as those that have the potential to generate annualized revenues of $5 million to $40 million. Further, while billing rates stabilized in the rest of the sector, Cognizant-which has traditionally worked at higher rates-saw them stabilize at about $68 per hour onsite and $24 per hour offshore.

Other strategic initiatives included acquisition of three companies-ACES International, California, a CRM company; Infopulse Netherlands, a company specializing in BFSI; and Pune-based Ygyan, a SAP services provider. However, all three acquisitions together cost only around $10 million and brought in 195 employees. This is significant in view of its sole earlier acquisition in Ireland in 2002. The company decided to close down that development facility sometime this year as the euro appreciated 25% against the dollar and the center was no longer profitable.

Meanwhile, the company has continued to gain ground in the healthcare segment. It was among the first to move in this vertical after the passage of HIPAA (Healthcare Insurance Portability and Accountability Act) in the US and by the end of fiscal 2003-04 the vertical accounted for an impressive 21% of the topline. Manufacturing and retail accounted for about 16% each while BFSI remained the key vertical at 48%.