Company Analysis: Cognizant Technology Solutions

"COGNIZANT" - PASSION FOR MAKING A DIFFERENCE

Francisco D'Souza - CEO of Cognizant Technology Solutions

Cognizant Technology Solutions Corp. is an American multinational provider of information technology, consulting and business process outsourcing (BPO) services. It is headquartered in Teaneck, New Jersey, with significant presence in other countries, especially India. 

Cognizant is included in the NASDAQ-100 and the S&P 500 indices.

KEY POSITIONS


CEO - Francisco D‘Souza
CFO - Karen McLoughlin
CHAIRMAN - John E. Klein
VICE-CHAIRMAN - Lakshmi Narayanan

HISTORY

• Cognizant has its roots in Dun & Bradstreet Satyam Systems (DBSS), an India-based joint venture between D&B (76%) and Satyam Computers (24%).
• DBSS focused on implementing large-scale IT projects for the D&B businesses
• 1996 - DBSS spun off several of its subsidiaries(IMS International, Erisco, Nielsen Media research, etc.) to form Cognizant Corporation.
• Jan ‘97 – DBSS was renamed to Cognizant Technology Solutions (CTS).
• July ’97 – D&B bought Satyam's 24% stake in DBSS for $3.4 million
• Mar ‘98 – Kumar Mahadeva was named the CEO.
• CTS operated as a division of Cognizant Corporation and focused mainly on Y2K-related projects.
• 1998 – Parent company Cognizant Corporation splits into two companies: IMS Health and Nielsen Media Research. CTS became a public subsidiary of IMS Health.
• June ‘98 – IPO raised by IMS Health, company raised $34 million. Money was earmarked for debt payments and upgradation of the company’s Indian offices.
• 2003 – IMS Health sold its entire 56% stake in CTS

KEY MILESTONES

• 1994: Started as the technology arm of The Dun & Bradstreet Corporation
• 1996: Began adding third-party clients (usually pursued the Y2K related projects) and servicing the best across industry segments. Won two large accounts outside of D&B: Northwest Airlines and Aetna
• 2002: Became the first company to be assessed enterprise-wide against mature industry-process certifications, such as P-CMM level 5, BS 7799, SEI-CMMi Level 5
• 2004: Acknowledged as a leading provider of IT services by industry analysts such as Gartner, Forrester, AMR and IDC; added to the prestigious NASDAQ 100 Index
• 2006: Became the fastest global IT services company to reach a $1 billion run-rate (under 12 years)2007: Acquired MarketRx, Inc., a leading provider of analytics and related software services to global life sciences companies; crossed $2 billion revenue threshold
• 2008: Entered Fortune 1000; exceeded $2.8 billion revenue mark
• 2009: Joined Fortune's "Most Admired Companies" list; named to BusinessWeek 50 list of the top-performing U.S. companies for third consecutive year; named to Forbes "25 Fastest Growing Technology Companies In America" list for sixth straight year
• 2010: Selected for Fortune’s “Most Admired Companies” list for the second year in a row; placed in Top 5 for IT services
• 2011: Cognizant joins Fortune 500, ranking #484

VISION & MISSION STATEMENT

VISION:

To lead sustainable growth with environment friendly practices and responsible use of natural resources

MISSION:

Cognizant's single-minded mission is to dedicate our business process and technology innovation know-how, our deep industry expertise and worldwide resources to working together with clients to make their businesses stronger.

BUSINESS SEGMENTS

SERVICES

• Cognizant provides a broad and expanding range of information technology consulting and business processing outsourcing services, including:
• Project-based application services
• Business process services
• Business and technology consulting
• Complex systems integration
• Application outsourcing
• IT infrastructure and cloud services
• Analytics, Business Intelligence, CRM, Data
• Data Warehousing, Supply Chain Management
• Engineering Management Solutions, ERP
• Testing Solutions

GLOBAL FOOTPRINTS

• Cognizant has offices all over the world, located strategically to help them serve their clients and deliver the best expertise effectively and efficiently.
• In addition to its headquarters and delivery center in Teaneck, New Jersey, Cognizant has five additional delivery centers in the United States of America: Bentonville, Arkansas; Bridgewater, New Jersey; Chicago, Illinois; Holliston, Massachusetts; and Phoenix, Arizona. The company has more than 140,000 employees globally, of which over 100,000 are in India across 10 locations with a major chunk in Chennai. The other centres of the company are in Bangalore, Coimbatore, Gurgaon, Hyderabad, Kochi, Kolkata, Mangalore (CoreLogic), Mumbai and Pune. The company also has local, regional and global delivery centers in the UK, Europe, China, Middle East, Philippines, Canada, Argentina, and Mexico. The leadership is mainly based in the United States.

COGNIZANT's UNIQUE OPERATING MODEL

Independent Cognizant customer satisfaction surveys consistently reveal that our clients receive superior quality IT services at significantly lower cost, which enables them to maintain operational agility and focus on core competencies that drive bottom-line and top-line growth.

SWOT ANALYSIS

EMPLOYEE STRENGTH

Cognizant has approximately 140,500 employees as of March 31, 2012.

Here is a graph showing the total employee base of Cognizant over the past 5 years:

Cognizant Technology – Financial Performance – 2006-2011

• Except in 2009 (16% YoY) due to recession caused by Global Financial Crisis Cognizant had seen significant YoY revenue growth 2010 (40%) and 2011 (33%). But compared to other Indian Top players Cognizant has done really well during and after the recession and crisis.
• Significantly reduced the operating expenses during FY 2009 and later increased operating expenses in line with the revenue growth.
• Cognizant has overtaken Wipro and became the Number 3 player and is closely following on the heels of number 2 player Infosys. Cognizant had seen tremendous growth in the past few years.

Cognizant Technology – Geography Mix – 2006-2011

• Dependency on the North America is very high compared to other Indian players and it gets almost 80% of revenues from the region.
• Europe has been constant at 18-19%.
• Rest of the World ( APAC, Latin America, MEA) revenues are small but growing slowly.

Cognizant Technology  – Vertical Revenue Mix – 2006-2011

• Cognizant is the dominant player in the BFSI segment and it gets significant amount of revenues from Insurance segment along with financial services segment.
• Healthcare is the second largest revenue contributor and has significant dominance in this vertical and Healthcare spending in US is on the rise. 
• Manufacturing/Retail/logistics is growing over past three years. 
• Cognizant focuses on these few verticals for growth.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Philanthropic efforts are conducted through the voluntary efforts of Cognizant employees and support from “Cognizant Foundation”, which is its CSR arm.

The Cognizant Foundation aims to helps "unprivileged members of society gain access to quality education and healthcare by providing financial and technical support; designing and implementing educational and healthcare improvement programs; and partnering with Non-Government Organizations (NGOs), educational institutions, healthcare institutions, government agencies and corporations".

Some of the projects carried out by Cognizant Foundation are as follows:

Education

• IT Training for the differently abled persons
• Computer education for underprivileged boys
• Empowering women with job skills
• Education and rehabilitation of differently abled children
• Literacy through primary education for rural girls

HealthCare

• Sophisticated Cardiac care to the needy
• Artificial Limbs for the differently abled
• Mobile Eye care unit to treat low vision problems
• Subsidized dialysis treatment for the poor

GRASSDOOR REVIEW

OBSERVATIONS

• Cognizant is a growing IT consulting company which is making its presence felt across the world and especially in India, where it is closing its gap with its competitors. 
• Is dependent a lot on US economy since it generates a major chunk of its revenue from there.
• Is dependent a lot on “BFSI” business segment and earns around 40% of its revenue from it.
• Cognizant’s entire revenue is generated from only 400 or so clients. Of their 400 clients, 87 are 'strategic' (i.e., they generate $5-40 million/year in fees).