New Jersey-based Cognizant, which started operations in 1994 as an in-house division of Dun & Bradstreet and Satyam Computer Services, has been the darling of Wall Street, much like Infosys in India. Ramakrishnan Chandrasekaran, president and managing director of the $2 billion company, spoke to Venkatesh Ganesh on the company's recent acquisition, its growth plans and strategy to compete against top Indian IT exporters.
Industry watchers feel Cognizant has entered the BPO/KPO segment late with the recent acquisition. Your comments.
Cognizant has taken a different approach to grow its BPO/KPO practice and we are very happy with its growth in the last 18 to 24 months. Cognizant will provide BPO (business process outsourcing) and KPO (knowledge process outsourcing) services that are at the intersection of domain, process, technology and consulting. Our voice-based support is also domain-based and is integrated within our core process. We currently work with 25 clients for BPO and KPO services across financial services, manufacturing, retail, life sciences, healthcare, enterprise and accounting. We are also looking at making a significant impact in new industries like pharmaceutical, healthcare, media and entertainment.
In the healthcare and pharmaceutical space, we provide a range of services, including clinical data management, biometrics, pharmacovigilance, provider credentialing, subrogation, claims adjudication and anti-fraud. In the media and entertainment space, we are working with large media houses, television channels and Internet portals in areas such as loyalty management and online data analytics.
Why the marketRx acquisition?
marketRx has a proven global delivery model for analytics, domain knowledge and proprietary analytics software platform that have helped the company build an impressive client list in the life sciences market. This was one of the main reasons that attracted us. This combines analytics, market research and software services to provide scalable, web-based solutions in three functional areas for life sciences companies: sales management and operations, brand marketing and product management, and market research.
The acquisition opens up for us a client base of 75 life sciences customers, including the largest 20 pharmaceutical companies and four out of the top five biotechnology companies. It expands our capabilities in the analytics segment and broadens our service offerings for the life sciences industry, while providing strong synergies with our existing business intelligence, data warehousing and customer relationship management services. The acquisition would also help us strengthen our offerings across all areas of the life sciences value chain.
What are your investment plans for India?
Cognizant plans to invest over $300 million through 2009 to construct approximately a 4.5-million sq-ft of office space across five Indian cities — Chennai, Kolkata, Pune, Hyderabad and Coimbatore. This is all proposed to be carried out in special economic zones (SEZs) to allow us to participate in tax holidays well into the future. In addition, we are leasing facilities with SEZ status. We have leased over 800,000 square feet of SEZ office space so far this year — all of which will become available for use by year-end.
How does your deal pipeline look for the rest of the financial year? How many employees are you planning to add?
We expect robust, across-the-board growth. The three drivers are: expanding beyond financial services into industries such as healthcare, pharmaceutical, telecom, media and entertainment; broadening our circle of offerings to include BPO/KPO, IT infrastructure services, testing and ERP/CRM, and expanding our geographical footprint, primarliy in continental Europe. We plan to close calendar 2007 with approximately 55,000 employees, a net addition of approximately 16,000 professionals during the year.
The appreciating rupee has had a huge impact on IT firms. How has Cognizant overcome this and how can Indian companies overcome this?
Every 1 per cent appreciation of the rupee negatively impacts Cognizant's operating margin by approximately 20 basis points. As part of our strategy to offset its impact, we are increasing our employee utilisation levels, which is lower than our comparable peers. Due to economies of scale and heavy over-investment in strategic buffer resources, we were able to take our global utilisation up from 61 per cent in the first quarter to 63 per cent in the second quarter. Cognizant does not hedge. While Indian companies are exposed on their revenues and their dollar expenses, we (as an US-based company) have no exposure on our revenue side and our rupee expenditure is about 30 per cent of our total expenses.