The US-based Cognizant Technology Services, the fastest growing IT services company, said that it will be setting up a development centre in China before the end of the current calendar year.
Cognizant also categorically said that it would continue to grow faster than its Indian competitors next year also.
In a teleconference from the United States, Kumar Mahadeva, chairman & CEO told newspersons that Cognizant would set up a development centre in China.
"We will be starting a centre in China this year, before the end of the calendar year. We don't expect it to be a large-volume location for sometime, because there are significant challenges. Certainly we would get started this year," he said.
Mahadeva declined to give out details of the China development centre or where it would be located, but indicated that the move was to support the IT requirements of an existing client of the company.
Mahadeva said that with Cognizant growing over 60 per cent compared to the year ago quarter and 12 per cent sequentially, it was growing significantly faster than competitors like Infosys and Wipro.
"Demand is very strong and it has strengthened even further in the last couple of quarters: This is a result of the fact that we are seeing many more large companies embracing the offshore model and are pushing very aggressively to move work offshore," he said.
"At this point the demand really is looking incredibly strong. We did see a good pick up and we grew extremely fast in the second and third quarters of this calendar year as clients gave us new work that we didn't anticipate," he said.
Mahadeva indicated that billing rates had stabilised over the last quarter and there was a lot more pricing discipline that competitors were adhering to.
"Pricing environment seems to improve and we see better pricing discipline from everyone. One of the reasons for this is that as the deals get bigger, they seem to go to just three or four offshore companies -- Cognizant, Infosys, Wipro and TCS. Pricing discipline has been fairly good among these four companies," he said.
Mahadeva said that stability in pricing would mean that companies would be able to post better bottomline growth, but some gains would be offset by wage increases.
"Clearly, with the industry going this fast, there will be significant compensation increases," he said.
Mahadeva indicated that across industry he expected wage increases in the region of between 10-20 per cent.
Cognizant he said was also watching closely the rallying Indian rupee, but indicated that it would not be affected much.
"The appreciation of the rupee is an issue, but not a huge one. If you look at Cognizant's cost structure, only about 22-23 per cent of our cost is denominated in rupees although the majority of the work happens in India. Because the compensation levels are so much lower in India, the cost structure is more skewed towards dollars than to the rupee. So if the rupee appreciates 5 per cent, it will still be only a 1 per cent impact in our cost structure. And we have enough room in the overall cost structure in other areas that we can reduce expenses and hence we are not too much concerned with moderate appreciation of the rupee," he said.
