\"Investments in media, telecom next on the radar\"

Televisionpoint.com's Karan Sharma Interview with R. Chandra Sekaran
R. Chandra Sekaran is executive vice-president and MD of Cognizant Technology Solutions, an offshore outsourcing company. Chandra has more than 16 years of experience working with leading Indian software companies in both the operational and business development functions. At Cognizant's development centre in Chennai, Chandra is responsible for ISV relationships. As a member of the senior management team, Chandra is actively involved in key alliances, capacity growth, process initiatives, business development and delivery.

Prior to joining Cognizant, Chandra worked with TCS, and was responsible for setting up its offices across the US and Europe. He also built a distribution and support network for Oracle products, and managed large IT projects. A mechanical engineer, Chandra obtained his MBA from the Indian Institute of Management.

Cognizant has been expanding significantly in India. What are the key drivers behind such expansion?
In the last two years, Cognizant posted industry-leading revenue growth of over 50 percent. In that period, we added over 14,000 professionals globally, of which over 85 per cent was added in India. Currently, we have over 23,000 professionals globally. We attribute this buoyant growth to three drivers. First, we deepened our relationship with our customers through the cross-selling of new service offerings, such as business-technology consulting, testing, IT infrastructure services and KPO, to meet growing demand for a broader range of services.

Second, we expanded our knowledge expertise in service offerings in additional industry sectors, as companies beyond financial services increasingly recognised the value of strategically adopting offshore enabled IT and business outsourcing.

Third, we broadened our geographic presence and expanded our international executive management team to cater to the increasing demand from nonUS, especially European, customers that are increasingly interested in adopting largescale offshore outsourcing. Cognizant has a big exposure to the financial services industry.

How do you see opportunities from other industry segments such as manufacturing, retail, media and telecommunications emerging?
Financial services contributes to about 50 per cent of our revenue, followed by healthcare and life-sciences which contributes to about 20 per cent of our revenue. Manufacturing and retail are industries where we made good investments in the last few years, contributes to about 18 per cent of our revenue. We will make focussed investments in telecommunications and media in 2006. In April 2005, we acquired Fathom Solutions, a niche telecommunications consulting company in Chicago which has gives us high-end consulting capabilities in the telecommunications services segment.

Is there any notable change in the way offshoring is being done at present? Do you see the pattern changing in the coming years?
One notable change that happened in the last year is that customers' reliance on a single vendor to provide end-to-end services is diminishing. Conse quently, they are unbundling their requirements and partnering with multiple players in specific areas of their strengths. This trend is also reflected in a report by the Meta Group, which highlights that 76 per cent of customers today are using multiple service providers to source their requirements. This clearly indicates that although size is an important criterion beyond a certain threshold, strong capabilities are gaining prominence. This trend is clearly providing greater opportunities to offshore providers across segments of specialisation.

What are your plans for 2006? Which are the areas you are looking at expanding?
In 2006, Cognizant would reach the landmark revenue of $1 billion. When we do it, we would be the fastest offshore IT Services company to hit the billion dollar mark. Our focus areas for expansion would be in adding more strategic customers, taking a broader range of solutions to our customers and expanding our markets, primarily in Europe and AsiaPacific regions. From a delivery stand point, we are making investments to the tune of $76 million in India (in 2005 and 2006) for constructing state-of-the-art technocomplexes across locations. This investment would give us an additional fully-owned capacity of approximately 900,000 sq. ft. to accommodate an additional 8000 professionals. Most of the State governments are now looking to promote Tier II and Tier III cities for IT companies.

Cognizant has already set up a development centre in Coimbatore. What were the reasons for you to choose Coimbatore, and how has the experience been?
We do not differentiate cities as Tier I or Tier II on the basis of a given set of parameters. Cognizant started its operations in Coimbatore in August 2005, and Coimbatore for us is pretty much another strategic development centre, similar to that in Chennai, Kolkata, Pune, Bangalore, Hyderabad and Mumbai. What attracted Cognizant to Coimbatore is the rich talent pool of technical professionals, good infrastructural facilities such as power and international airport connectivity, flourishing entrepreneurial and SME culture, and high work ethics and performance ethics of professionals.

As a university town, Coimbatore, is estimated to produce 20,000 graduates each year (passing out of 19 engineering colleges, 70 arts and science institutions and 14 polytechnics; engineering colleges alone produce about 6,000 engineering graduates each year) and Cognizant has been a power recruiter from premier colleges in Coimbatore. Our experience with our Coimbatore operations has been terrific, and that centre has grown faster than we had originally anticipated.

When we started operations, we expected to ramp up our operations to about 400 professionals in the first year of operations (by August 2006), but we have already ramped up to about 250 professionals. What's Cognizant's strategy on acquisitions?
Our strategy for acquisitions is to go for small, 'tuck-under' acquisitions, as integration is easier. We have made six small acquisitions in the last four years.

Attrition has been a source of concern in IT space. What is Cognizant's attrition rate?
Our attrition has consistently been in the "low teens", for the quarter on an annualised basis. This attrition, which includes both voluntary and involuntary attrition, has consistently been much below industry average, and is heavily weighted towards the junior members of our staff in India.