At the time an outsourcer’s service offering is marketed publicly, they are not necessarily an outsourcing greenhorn. That is the case with Cognizant Technology Solutions, a provider of application development and maintenance services. Established in 1994 and completing its IPO (initial public offering) four years later, Cognizant finished 1998 ranked as the 12th best performing IPO in the US. The company predominantly serves North American and European markets in three areas: health care, financial services, and information industries.
A Nook to Grow In
With a tremendous dependency on technology, the Dun & Bradstreet conglomerate in 1994 came to the conclusion that its divisions and software development teams needed to establish a facility to serve internal needs. Cognizant was born in 1994 and was essentially a captive shop for its first two years, explains Francisco D’Souza, vice president of North American operations and business development at Cognizant Technology Solutions.
“That allowed us to understand what worked and what didn’t work,” D’Souza says. “It helped us to hone our value proposition so that when we took our services outside the Dun & Bradstreet companies in 1996, we had a two-year record of success with a very savvy, large customer. We were able to take our offering to the market and say that we had proven ourselves.”
Leveraging for Growth
Headquartered in New Jersey, the company has offices in Chicago, San Francisco, Toronto, London, and Frankfurt, and currently services clients in 15-20 different countries around the world. The unique wrinkle to Cognizant’s model is its use of teams located at customers’ locations, together with teams located offshore at its seven development facilities in India. By performing work in India, the company is able to leverage its services, accomplishing the goal of better, faster, and cheaper delivery to clients.
Services are delivered faster because the company’s teams in India are going to work when the US teams go to bed at night. The time difference between the US and India allows the company to keep a 24-hr development cycle going. It is cheaper because the cost of a developer in India is substantially lower than one in the US, thereby substantially lowering overall cost. Cognizant’s work is better, D’Souza explains, because it has access to the tremendous pool of talent in India. Although there is a worldwide shortage for skilled workers, India graduates annually upwards of 60,000 scientists and engineers.
How to Avoid Stunting the Growth
D’Souza speaks passionately about the most important aspects of building a company. First is a recognition that a large part of success is based on the people. “The key skills we build,” he says, “are in project delivery, customer relationship management, and intellectual capital development. You have to be able to develop a set of solutions so that you have–and continue to have–services that your clients want and need.”
D’Souza explains their method of attracting and retaining “knowledge workers.” Cognizant offered people opportunities to grow, take on ever-increasing responsibilities, and to move between different types of client engagements to increase their knowledge and experience. “That is why we went public,” he explains. “We knew that eventually we would saturate the Dun & Bradstreet market and would have to reach outside that group in order to provide opportunities for growth to our people. Unless they could grow in their careers, we would lose valuable people.” Cognizant’s IPO gave employees stock options, thereby sharing the equity of the company with them.
Second in areas of importance for building a company is the need to ensure that service quality remains extremely high as the business grows. D’Souza comments that this is a trap that many service organizations fall into. That is why, explains D’Souza, Cognizant is fanatical about its processes. Last year, the company was certified by the software engineering institute of Carnegie Mellon University. CMI uses a capability maturity model, assessing whether an organization’s processes are rigid, repeatable and manageable. With five being the highest assessment on the scale, Cognizant was assessed at level 4. There are only 18-20 companies in the world registered at level 4.
Challenges in Growing
D’Souza says that the company’s key challenge in its entry into the public market was how to make it stand out among a very crowded field of competitors. “We had to compete with everyone–from IBM on down, ” he remembers. The company accomplished its objective by staying extremely focused on crafting solutions in the three industries where it is strong. “We made ourselves stand out by creating a reputation for ourselves in our three areas of expertise,” he says
Finally, he cautions against another common inhibitor of growth for a new company. “Unless you are an IBM,” he says, “you can’t be all things to all people.” Small companies often are tempted and become opportunistic toward all opportunities that present themselves, without stopping to consider whether an opportunity will truly help to build the service model and the organization. In an outsourcing services organization, he says, “your inventory is your time and your people’s time. You need to be very careful how you manage that. It is easy to spread that inventory very thin across a variety of different engagements. That may pay the bills, but will it also build your credibility?” A new company needs to build a story that it can go out and sell repeatedly.