Cognizant Technology Solutions will continue to expand its offshore services delivery hub in India, even as the industry is finding it tougher to hire good staff in the country, the company’s top executive said Wednesday.
Cognizant, an IT services company based in Teaneck, N.J., will have about 35,000 employees at the end of this year, of which about 26,000 will be in India, said Lakshmi Narayanan, Cognizant’s president and chief executive officer, in an interview. About 21,000 of the company’s 28,000 staff are in India today.
Getting engineering staff in India is not difficult, though companies have to invest in training, Narayanan said. Cognizant spends about 2 percent to 3 percent of its revenue on training campus recruits. As processes get streamlined and new tools are available, some of the jobs in offshore delivery centers can be handled by generalist graduates if there is a staff shortage, according to Narayanan. “A lot of the staff in IT services in India are overqualified,” he added.
The company has set up a 100-staff operation in China, which it will increase to 250 by the end of this year. China cannot be an alternative to India in the near term because the company can hire better, English-speaking technical staff in India at a comparable, if not lesser cost, Narayanan said. “A creative, innovative mindset that is required for IT services is available more in India than in China,” he added.
A number of Indian outsourcing companies have indicated they may expand in China, as they consider using engineers in that country to deliver services to customers globally. Cognizant has set up operations in China only to service the local operations of its multinational customers, Narayanan said.
Cognizant competes with Indian outsourcers and a number of multinational services companies like IBM and Accenture that have set up operations in India to take advantage of the country’s low-cost staff. In its guidance earlier this year, Cognizant forecast revenue of at least US$1.3 billion for the year that ended Dec. 31, up from $885.8 million last year.
By setting up services delivery from India, multinational companies like IBM and Accenture have given credibility to the offshore delivery model, according to Narayanan.
The larger companies like IBM do not typically pursue small orders in the $50 million to $100 million range, leaving this market open to smaller players like Cognizant. Multinational services companies have also not been able to achieve the same cost structure as Cognizant, as they have not yet moved a significant proportion of their staff to India, according to Narayanan.
Customers are also unbundling larger deals, preferring to outsource to specialist, niche players. While Cognizant might get the application development and maintenance part of a deal, for example, the infrastructure management contracts would typically go to larger service providers like IBM and Electronic Data Systems who are willing to take over assets from the customer, Narayanan said.
Cognizant’s strategy is to focus on large vertical markets such as financial services, insurance, health care, life sciences, pharmaceuticals, manufacturing and logistics, retail, telecom, media and entertainment, and offer these market segments services ranging from business consulting to application development and maintenance to business process outsourcing.
-John Ribeiro, IDG News Service (Bangalore Bureau)
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