The Hindu : Cognizant mulls sourcing centre in China

Online edition of India's National Newspaper
Tuesday, Nov 12, 2002

Business

Business

Cognizant mulls sourcing centre in China

By Shanthi Kannan

CHENNAI NOV. 11. With the offshore outsourcing becoming the order of the day, Cognizant Technology Solutions (CTS) is taking a hard look at China with a different mind-set.

Cognizant feels that China could not be approached from a `market perspective'. However, the country could be explored from a `sourcing point of view'. According to N. Lakshmi Narayanan, President and Chief Operating Officer, China undoubtedly has a strong manufacturing base. CTS, he said, earlier had thought of accessing China as a market for hawking IT services. "We have, however, given up that idea now as we find the market proposition not attractive,'' he added. "We are now looking at it from a resourcing perspective. We have to investigate a little more into that,'' he said.

In an interview with The Hindu, Mr.Narayanan indicated that Cognizant's entry into China could take six months or so. It had already teamed up with a local company to study the possibility of setting up a centre in China from resourcing perspective.

There appears to be a clear method in the shift in its China strategy. Cognizant is obviously keen to ensure that locational risk does not affect its business by spreading its presence strategically. "It is essentially to hedge the risk that we would like to go there,'' the President asserted.

The COO said Cognizant would look at Japan, Philippines and East Europe from a marketing perspective. In this context, he hinted that Cognizant would necessarily set up bases in these places without identifying the timeframe.

Mr. Narayanan said there had a downturn in the market in the last 12 months, forcing companies to look at offshore outsourcing. He presaged the downturn to continue till mid-2003. This scenario had caused a change in management perspective. The main objective of many a company had been to ensure better quality at lower cost with lower head counts. The process had enabled companies to save costs up to 50 per cent. Given this backdrop, offshore outsourcing had increased to nearly 80 per cent.

Asked about the billing rates, he said it depended on competitive demand. Rates might remain the same but the blended rates could come down, he felt. Even during recession, he said, the main markets for Cognizant were the U. S. and Europe. The growth in these markets was high and investments in technology were equally high. Nearly 85 per cent of the jobs came from the U.S. and 14 per cent from Europe.

Outsourcing had seen many waves. So did offshore outsourcing, according to Mr. Narayanan. Each wave had had its merits and limitations and served a definite purpose. Today, Cognizant was in the fourth wave in offshore outsourcing, which was branded the `Fourth Generation of offshore outsourcing'. The fourth generation of players used the onsite/offshore model, and extended that model to provide end-to-end, transformational solutions to customers.

On its growth strategy, he said normally Cognizant preferred to acquire businesses with assets and personnel. Nonetheless, customer acquisitions like the American Express it had bought from Silverline surely went a long way in improving its topline. Mr. Narayanan, however, made it categorical that Cognizant would lay much store by bottomline and margins.

Printer friendly page
Send this article to Friends by E-Mail

Business