Cognizant Technology Solutions calls America its home, but the company keeps most of its crown jewels on the other side of the big pond.
While U.S. operations are headquartered in Teaneck, N.J., Cognizant employs thousands of software developers in India. The approach sounds like a logistical nightmare, but the results have been startling. In a typical customer engagement, Cognizants on-site team works with customers to define project requirements, review prototypes and scope changes. When the on-site team heads home for the evening, Cognizants offshore team works through the U.S. night—for pennies on the dollar—to design applications that best meet the customers need.
Customers are sold on the business model. Cognizants revenue rose a hefty 54 percent to $137 million last year. Net income for the year topped $17.7 million, up 57 percent from 1999. Despite the recent economic slowdown, Cognizants Q1 2001 income grew a hefty 61 percent to $5.6 million.
“Our ability to prosper in this market is a direct result of [our] proven on-site/offshore solutions delivery model,” says Kumar Mahadeva, CEO of Cognizant.
This isnt Mahadevas first attempt at running an international operation. Before launching Cognizant in 1994, he was chairman of Dun & Bradstreet India and China. He also was a consultant at McKinsey & Company, where he assisted technology CEOs with business development, strategy and operations.
Mahadeva continues to practice what he preached during his McKinsey days. Unlike many Internet consulting firms, Cognizant has always favored income growth over revenue growth. When e-consulting firms like iXL, Razorfish and Scient collapsed last year, Cognizants strong earnings and proven business model shielded the company from the fallout.
Strong partnerships also are key to the company. Instead of focusing on fancy graphics and commodity front-end software development, Cognizant works with BEA Systems, Oracle and Siebel Systems to manage complicated back-end development projects. For instance, Darden Restaurants—which operates dining chains like Red Lobster—recently outsourced its core mainframe applications to Cognizant.
Will Anguish, VP of corporate systems at Darden, says Cognizants experience working with other restaurant chains and retail specialists drove Dardens outsourcing decision.
Cognizants other recent outsourcing wins include Ace Hardware, The Body Shop and RadioShack.
Meanwhile, Cognizant is shoring up its management team. The company recently hired Debashish Mukherjee as chief technology officer. Mukherjee will lead a team of 150 R&D specialists to evaluate new technologies that deliver high ROI (return on investment) to customers.
Mukherjee—a veteran of Farmers Insurance, Anthem Blue Cross and Fidelity Investments—should help Cognizant to cement its position in the insurance, health-care and financial services markets. In the health-care market, for instance, Cognizant is developing solutions that comply with the Health Insurance Portability and Accountability Act (HIPAA). Health-care providers will spend about $4 billion to make their IT operations HIPAA-compliant, according to the U.S. Department of Health and Human Services.
Naturally, Cognizant wants a big piece of that pie. The company says its EDI, security and other services can help a health-care provider to achieve complete HIPAA compliance.
Still, critics wonder whether CEO Mahadeva can scale Cognizants offshore business model even higher. So far, Mahadeva doesnt appear to have a fear of heights.