Nasdaq-listed information technology company Cognizant Technology Solutions is one of the fastest growing firms in India. The company, which registered 61 per cent revenue growth in 2003, expects revenues of around $530 million in 2004, up from $368.2 million last year.
The company now has 11,700 employees. Approximately 70 per cent of these are working at its development centres in Chennai, Kolkata, Pune, Bangalore and Hyderabad. The rest work at its centres in Phoenix (Arizona), Amsterdam (The Netherlands) and other client locations.
Cognizant has been on a hiring spree this year, recruiting as many as 100 young engineering graduates every week -- a record of sorts.
Lakshmi Narayanan, President and CEO, Cognizant, in an exclusive interview with Shobha Warrier, talks about the company's decision to hire from the top B-Schools in the United States, the quality of the management and engineering students in India. Excerpts:
Cognizant is being looked upon as the largest recruiter in India and you seem to be recruiting over 100 professionals every week. Is it because you are expanding aggressively that you are recruiting so many young engineers?
In the last two years we have been growing faster than the rest of the industry. That's why our appetite for more people to serve our customers is very high now. That's the trend we are likely to see in the next two quarters too as we plan to add at least 4,000 professionals this calendar year.
The reason why we are growing faster is because we re-invest anything in excess of 20 per cent of our operating margins back into our business, keeping our operating margins at our historic 18-20 per cent levels. Above that, we invest in client relationships, sales and marketing, and in strengthening our domain and strategic IT consulting capabilities.
All those investments have helped us grow our business more rapidly than the average.
Was this growth on expected lines or beyond expectations?
Growth was expected. Growth beyond the industry-average was expected because we had been investing for it but not to the extent that we experienced last year. Last year, for a period of time, growth was significantly higher than we had expected.
Is there any strategy that helped you, such as targeting any particular service sector?
That was because of specifically focusing on areas where we have significant strength. For example, the financial services including banking, capital markets and insurance, and healthcare.
In the last 6-7 quarters, our revenue share of financial services has gone up from 35 per cent to 51 per cent of our overall revenue pie.
Would you be concentrating only on these areas, or, would you expand your base?
We will definitely broaden it. We will expand our business in a gradual manner. For example, we are expanding into manufacturing and retail verticals. We are also expanding to provide highly customised, vertical-driven business process outsourcing and highly customised business-technology strategy consulting.
We are making significant investments in these areas now, so that in the months and years to come, they will become our additional growth engines.
From your perspective, which service area do you see growing fast? And why?
In terms of the market opportunity, the IT services arena is the one that is well understood and has enough case studies to show that it is sustainable. It is a very large market segment with very limited risks. There are lesser risks of security breach, less risks of turnover of people, and less risks of getting commoditised very rapidly. So that's specifically the area we are focusing on.
We have seen the Indian industry complaining about the raw talent that is being churned from the engineering institutions. They say that industry has to spend a lot on training them. What's your experience as one of the largest recruiters in India?
I would concur with that view. We often say, "Even if software is taught in the educational institutions, software professionals are made in the industry."
We do invest a lot of time and effort in orienting, training and developing these individuals into the corporate culture. Clearly there are things that the educational institutions can do to help that. Some of the institutions have taken initiatives to get there and some are waiting to see how these experiments shape up.
There is also a lot of talk about the need for the industry and academia to come together so that it will eventually help the industry better. But not much seems to be happening in this area.
Correct. The orientation (of the academic institutions) will have to be a little different. For example, we in the industry always talk about customers. Similarly, academia will have to view the industry as their customers and do what's good for the industry and get rated by the industry.
But that concept is just not there or is only beginning to happen in pockets. Unless the academia has that kind of alignment with customer interests, it's difficult for them to devise the most appropriate curricula and syllabi.
So it's not so much in collaboration alone that we see the results. It's only when the academic institutions realise that they are serving a certain customer base and they need to fulfil the needs of that customer base and take proactive action internally, that the situation would improve.
Does it not make sense for the industry to collaborate with the institutions so that they get better products?
Yes, it does. But, at this point of time, it appears as though the entire onus is on the industry to do it. Today, the academia seems to say if you want these people you come and do whatever it is to make these people suitable for you.
So when the onus is on the industry entirely, the industry says: "Let them come into my organisation and I shall make suitable investments on training them internally and developing them." I believe there must be some halfway meeting that must happen at least for these programmes.
The huge pool of human resources in India is much talked about. How good are the human resources from the engineering colleges?
They are really good, smart people. The mistake we commonly make is to underestimate the human potential that is available and not providing them with the right type of opportunities. We must remember that the IT industry recruits the top one per cent of the brainpower that is available in this country.
This number is small compared to the ones that go to school and the ones that graduate. So it means it's the cream of the cream that gets into this industry. And so in terms of brainpower, it's quite unmatched.
Indian labour was looked at as low cost, high value. Do you feel it would no longer stay competitive, with salaries going up?
Unlikely. For the next several years, it's not going to be uncompetitive. The wage increase is only marginal and the productivity improvement that happens year after year compensates for the bulk of the increase that happens. To that extent, it's not a factor to worry about, at least for the next 4 to 5 years.
A Nasscom report says in a few years from now, there will be less supply of qualified human resource here in India compared to the demand. Do you feel this would happen?
That type of a situation is unlikely unless the educational system deteriorates. For example, Forrester says that by 2010, 3.3 million jobs will be created in IT and IT-related areas here in India. That's a lot of people.
This means companies may not go after the top 1 per cent, and they would expand it to the top 5 per cent. For which, the educational institutions have to change and intensify the courses and should be meritocracy-based. People who score good marks or are more intelligent do get into higher schools.
Photo: Sreeram Selvaraj
