We are gearing up for the new normal

"The economies of the world have begun to recover and there is a more

stable business climate as compared to a year ago. However, there remains

considerable debate on the shape of the recovery and the so-called new normal in

terms of long term growth rates for the key economies of the world. IT services

companies are looking at innovative ways of delivering offshore value to its

clients," says Francisco DSouza, president and CEO, Cognizant. In an exclusive

interview to Dataquest, he talks about the slowdown, the market dynamics, his

companys strategy and the way forward. Excerpts

If you look at the last two years, what has changed in IT outsourcing?



The past two years have not just been the time of a major change resulting

due to an economic slowdown, but also that of a significant secular shift point

for many of the industries we serve. Many of our clients are now realizing that

their businesses and supporting technology environment have to be re-planned and

changed dramatically in order to navigate through this period. These secular

changes are driven by the mega trends of digitalization; consolidation;

consumerization; globalization; demographic shifts; government mandated change;

and new disruptive technologies such as cloud, social computing and

virtualization.

The traditional areas that the offshore industry had considered as the key

differentiators are no longer so. Traditional global offshore excellence is more

necessary than ever, but it is no longer sufficient. To clients, this is just

like table stakes, an entry point into the game. What clients are really looking

for is re-architecting the clients business models and technology footprints to

reduce costs and to address the changes in their industries.

If you look at 2009, how did things work out for Cognizant and how did you

managed the bottomline pressures?



During the downturn, we stayed closer to our customers than ever before,

invested in our business, and focused on both the short and medium term value

drivers. Our program of continuous re-investment, managing our non-GAAP

operating margins within our target range of 19-20% helped us to gain an

advantage in the talent marketplace, enlarge our circle of offerings, expand our

geographic footprint, and further strengthen our domain competence in the

industries we service. In CY 2009, we saw our annual revenue rise by 16.4% to

nearly $3.3 bn, far more than the industry average of low single digits.

Post the financial meltdown, what specific strategy has Cognizant adopted

to stay competitive in the financial services space?



Even during the turbulent times, our exposure to the troubled areas within

the BFSI industry was limited. It is interesting to point out that in a few

instances in large M&A situations in the banking industry, we found ourselves in

the position of being a very substantive provider to both the acquirer and the

acquired entity. In these situations, we tended to have deep knowledge about the

applications portfolio of both the organizations. This put us in a strong

position to participate in the post merger integration work. Within the

financial services, many of our key clients are indicating that the worst is

over for IT spending reductions, and are more positive about the prospects.

You have stated that vertical industry depth and strong client

relationships are Cognizants key competitive differentiators. In what way this

approach is different from your competitors?



We provide solutions to business problems leveraging technology, rather than

mere technical capability. This makes it imperative for us to understand their

businesses and pain points. Then, we provide relevant solutions after

understanding the pulse of the market and deriving insights that drive our

ability to quickly innovate and bring new services to market.

To illustrate the power of our vertical industry depth, let us look at what

we have done with Sanofi-Pasteurwhich selected Cognizant as its global partner

for clinical trials data management, among other areasusing a core team located

in France, the US, and India. We executed over thirty large clinical studies in

partnership with Sanofi-Pasteur. Most notably, we helped the company to meet the

aggressive H1N1 deadlines on five critical studies. Our partnership has enabled

the company to increase its effectiveness as measured by time-to-value and

reduced process hiccups for bringing its vaccines to market.

Moreover, our two-in-a-box client engagement model is also a key

differentiator. In this model, the center of gravity is not geographic, but

vested in a group of people. Each one individually and jointly feels

accountable, empowered and responsible for the success of the engagement. They

together define the success of the client.

What are some of the emerging market opportunities you looked at last year

and do you foresee a scenario in which your dependence on the North American

geography will come down?



Cognizant will continue to focus on the North American market while also

expanding its geographic footprint in Europe, Asia Pacific, the Middle East and

Latin America. North America is the largest IT market because organizations in

North America are traditionally aggressive adopters of technology and generally

have mature global sourcing programs. While 79% of our revenues still come from

North America, Europe has grown to over 18% and Asia Pacific has started seeing

good traction with 3% of revenues.

Do you have an India plan from a services perspective?



We started making our seed investments in India in the last two years and

the results have been phenomenal. India is a high growth market for us and is as

attractive today as any other market. Our value proposition to the Indian market

is slightly different in terms of the services we offer. While we have invested

in a dedicated leadership and sales team, our approach to this market is a lot

more consulting and domain led.

What would be Cognizants key priorities in 2010?



Our approach has three main partsto drive continuous improvement in the

services we are currently delivering to clients in order to take clients to

world class levels of efficiency and effectiveness; to extend our customer

relationships by identifying the core business process areas that we can

redefine and offer as standalone solutions across an industry; and to continue

investing in our talent base to ensure that we have deep expertise in the

technologies, business process areas, consulting skills, and methods that will

be required to fulfill our aim of optimizing and extending our client

relationships.

Shrikanth G



shrikanthg@cybermedia.co.in