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Updated: August 3, 2011 21:51 IST

Cognizant redraws strategy post-U.S. crisis

K. T. Jagannathan
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R Chandrasekaran
R Chandrasekaran

The U.S. environment post-resolution of debt crisis may push the IT (information technology) companies to look at productivity and investment with a sense of purpose, seriousness and long-term outlook.

In an interaction with this correspondent here on Wednesday, R. Chandrasekaran, President and Managing Director (Global Delivery), Cognizant, said the situation as it was evolving would force clients to look for options that give them more for less. Clients invariably worked hard to drive efficiency when chips were down. Still, they needed to support their businesses. Consequently, he felt, clients had to necessarily invest in IT. The challenge for companies like Cognizant lay in discovering “what else can we offer to them,” he said. Ipso facto, Cognizant had to stay invested in creating newer capacities and offer innovative solutions if it were to increase its business prospects. In this context, he justified the position taken by Cognizant to keep the operating margin within a 19-20 per cent band and reinvest the balance money.

With a substantial workforce located in India, the inflationary Indian economy could push the people cost for IT companies, in general. Nevertheless, the wage cost arbitrage is substantial for anybody to overlook India. Cognizant had been consciously de-risking its exposure to different geographical locations. A few summers ago, over 90 per cent of the business was coming from the U.S. The America business had now come down to 78 per cent. “We have significantly increased our presence in Europe,” he said. Europe accounted for around 18 per cent of the company's revenue. The balance came from emerging markets. Mr. Chandrasekaran said that technology, functional and product ideas always happened in the U.S. “Delivery of services can, however, be handled anywhere in the world,” he said, pointing to the strong link between the IT industry and the U.S.

The emerging environment in the wake of developments especially in the U.S. would force IT companies to work relentlessly on ways to become nimbler, flexible and adaptable. In the context, he said, Cognizant would have to expend its energies on re-working utilisation levels with newly-defined bench strength, fine-tuning the hiring process and driving resource efficiency in delivery models.

On the rising concerns across the globe over protecting local jobs, he said, “we do worry about it”. He made it clear that IT companies had to make adjustments on this score. In this context, he said Cognizant had gone in for campus recruitments in the U.S. and Europe. “We are hiring in every geographical location. We want to be a local service provider to local clients,” he said.

On Cognizant serving the Indian market, he said, “we can't offer cost advantage to the Indian business”. Nevertheless, Cognizant could piggy-ride on multinational companies to provide service solutions in the Indian market. Cognizant, he said, could get into product space. He, however, hastened to add that any foray into product segment would revolve around its service offerings.

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from:  IT Providers
Posted on: Sep 12, 2011 at 13:18 IST
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