Despite a changing economic environment, New Jersey-based Cognizant has been able to
maintain a double-digit revenue growth rate and projects revenue for the year to increase
by at least 11.5 percent over 2008.
Francisco (Frank) D’Souza, Cognizant’s president and CEO, attributes increased
demand for the company’s IT, consulting and business process outsourcing services to
two developments: companies’ efforts to streamline and rationalize costs in response to
the prevailing economic conditions and the longer-term need to restructure amid the
fundamental changes occurring in many industries.
Cognizant was founded in 1994 as an IT services arm of The Dun & Bradstreet
Corporation and was spun off as an independent organization two years later. Its
strategy has been to provide blended onsite and offshore services, a combination
intended to leverage the lower-cost labor available in offshore locations while
maintaining close ties to clients through onsite technical and client management teams.
Cognizant is organized around specific industries and its growth strategy is focused on
expanding into new geographic markets — especially building its client base in Europe,
where companies are beginning to embrace global sourcing — and expanding its service
offerings. D’Souza talked with Spencer Stuart about Cognizant’s business priorities and
their talent implications.
COGNIZANT AT A GLANCE
- Founded in 1994 as an IT development and maintenance services arm of The Dun &
Bradstreet Corporation, Cognizant was spun off as an independent organization two years
later and has been listed on Nasdaq since 1998.
Headquarters: Teaneck, N.J.
Employees: 64,000 associates
Geographic reach: 50 global delivery centers in 15 cities and in five countries
around the world
Revenue: $2.8 billion in 2008, an increase of 32 percent over the prior year
Customers: 569 active clients, including 46 of the Fortune 100 companies
- “As our business scales and the complexity of the business problems that we’re solving
for clients increases, the different groups at Cognizant need to cooperate with each other
to deliver end-to-end solutions. So, collaboration is going to become the ‘killer’
competency for the next generation of growth.”—Frank D’Souza
Has Cognizant seen its mix of business change in
the current economic environment?
D’Souza: This is a very interesting economic
slowdown because, while there is clearly the
cyclical trend that began with the credit crisis,
there is another factor at play that is getting very
little attention and may be even more important
for the long term. Businesses and whole
industries are going through very fundamental
structural changes. For example, in media and
entertainment, you see a tremendous amount of
turmoil because of digitization; whether it’s the
newspaper industry, television or traditional music
publishers, each segment is being threatened by
digitization in various forms. You see a similar
story in the life sciences industry, where drug
pipelines are shrinking, research and development
productivity is falling, the number of blockbuster
drugs in the pipelines are far fewer than they were
in the past. Industry by industry, you can point to
fundamental structural changes that are driving
these companies in a very different direction.
So, while we have seen an uptick in demand for
services that help reduce costs, such as
application maintenance, offshore testing,
business process outsourcing, we are also seeing
growth in our management consulting business
and our analytics business, which provides highend
quantitative solutions to business problems.
My view is that the strength in those service
offerings is being driven by companies trying to
respond to structural changes in their industries
— and looking for new thinking around new
business models, new operating models, market
entry strategy and so on, which is a lot of what
we’re doing in our consulting business.
It sounds as if Cognizant is involved in activities that
are much closer to the core business than in the
past, when outsourcing was for back office-type
things only.
D’Souza: Clients are looking to us not just as
outsourcers, but as enablers of the virtualization
of their business. They increasingly see us as being very good at running globally
distributed
virtual operations. I would argue that we have
figured out better than anybody else how to take
complex processes and distribute those processes
at various levels around the world, in places in
the world where it makes the most sense to do
this work and then reassemble that work and
deliver it to an end client. It’s analogous, if you
will, to Adam Smith’s “invisible hand” that directs
capital to the most efficient use. We provide the
equivalent of the invisible hand that’s directing
work to the places in the world where it is most
optimally performed, based on skill and cost and
so on.
We recently announced a relationship with
Invensys through which about 400 Invensys
employees in India joined Cognizant. Now, if
you view this through the lens of the traditional
core competency model of outsourcing, you
might conclude that that a technology firm like
Invensys should not consider outsourcing a core
com-petence. But in fact, they look at us as an
integral part of a broader ecosystem and have
concluded that our globally distributed development
model is the way to accelerate innovation
and get access to the best talent in the world.
Looking ahead, what would you say is the strategic
direction or imperative of the firm?
D’Souza: In the future, work is going to be highly
distributed; personal physical geographic
presence is going to be less important. You’re
going to be able to work from wherever it is
convenient for you and participate in the global
economy. That’s clearly an area that we’re
pushing on with Cognizant 2.0, which is our Web
2.0 platform to support global project
management and global knowledge management
of highly distributed teams. All this is
made possible by the advances in collaboration
technologies and reductions in the cost of
bandwidth, which continues to impact the kinds
of services we can deliver from India and other
parts of the world, as well as the complexity of
services we can deliver.
We’re also pushing the more traditional areas
of growth and expansion, such as moving into
new geographies like Asia, Latin America and
the Middle East. We’re expanding our service
offerings. And broadly speaking, there is room
to grow our traditional outsourcing business, as
the penetration of global sourcing is still extraordinarily
light in all of our sectors, whether it be
industries or verticals or horizontals, so we think
there’s plenty of upside even in the services
we’re delivering today.
Based on its strategic direction, does the company
need to develop or acquire different capabilities?
D’Souza: If you think about the three primary
vectors along which we think about the business,
which are the services we offer, the industries we
serve and the geographic markets we operate in,
we are pushing forward on each of them. Every
time we push forward, there is a requirement for
us to build new capabilities. For example, we
recently sent a team to Latin America to explore
and develop a strategy for the market and for
building the capabilities we need there, including
local market knowledge. The Invensys relationship
also required us to develop new capabilities.
So we are rapidly building out our knowledge in
the shop floor manufacturing space to ensure
that we understand what really happens on the
plant floor and can help manufacturers stitch
plant floors together with enterprise applications.
What are the leadership qualities that will become
more important for the company to acquire or
develop over the years?
D’Souza: We’ve seen dramatic growth in a short
period of time, and virtually all of the growth over
the past 15 years has been organic. We’ve had
three to four distinct phases of growth, and in
each of those phases there was a particular set of
qualities and competencies that allowed us to be
successful during that phase. As I think about the
phase of growth that I expect we will be in for the
next three to five years, the competencies that the
firm is going to have to learn pivot around
collaboration internally — so-called boundary-less
thinking. We’ve been very successful up until now
building the company based on very empowered
business units, where we’ve got folks who think
of themselves as “CEOs” of business units. As
our business scales and the complexity of the
business problems that we’re solving for clients
increases, the different groups at Cognizant need
to cooperate with each other to deliver end-to-end
solutions. So, collaboration is going to become
the “killer” competency for the next generation of
growth.
How much time are you devoting to the people
management side of things, in terms of coaching,
hiring, appraising and counseling of your team?
D’Souza: I try to have a rule that it’s not less
than half of my time. One of the core levers that
CEOs have is their people — the people they
have on the train and seats they occupy. We have
a very structured process in which we review the
top 100 to 150 people in the company in terms
of performance and potential, and then we talk
about their development. I would say that my
scarce resource today is not capital and it’s not
market opportunity. I could grow the business
faster if I had greater access to leadership talent.
Do you see that globally?
D’Souza: Yes, the issues are a little different in
different parts of the world, but it’s a universal
phenomenon. In India, the economy overall is
growing very well and this is creating huge
demand for talent. So, finding strong leadership
talent is a challenge. It’s highly competitive. It’s a
traditional war for talent. In other parts of the
world, we have terrific services leadership talent,
but less leadership experience in the global
delivery model.
Tell us about your own route to the top and some of
the experiences that have been most valuable to you
as CEO.
D’Souza: The thing that was most valuable to me,
beyond the fact that I had a good, broad range of
experiences, is that I worked closely with four
different CEOs: the CEO of Dun & Bradstreet,
who set up the business and now serves on our
board, and then three CEOs of Cognizant. Each
one had a very different style, and all were
extremely successful in their own right. That was
a life-long learning experience in a very short
period of time.
Still, when you actually moved into the CEO job,
were there one or two things that surprised you?
D’Souza: I have to separate my answer into
the activities of the job and then the softer side
of the job, if you will. In terms of the activities
of the CEO’s job, I give our board and my
predecessor a lot of credit for managing the
succession process well. They identified areas
of development in the year leading up to the
announcement of my taking the job. For
example, investor relations wasn’t something
that I had an opportunity to do in my career. My
predecessor, the board and our CFO made it a
very conscious priority to get me in front of the
investors and to coach me on how we work with
investors and create that level of visibility.
All that said, no matter how much preparation
you do, there are some things that you just don’t
have the frame of reference to understand until
you’re in the seat. The conceptual understanding
that the buck stops with you is very different
from the actual realization that the buck stops
with you, and that only comes when you’re in the
position and confronted with that first very
difficult decision. The second piece is that, if you
allow it to be, the CEO job can be very lonely for
many reasons. I’ve found that I had to create an
environment that didn’t make it that so isolated
by making sure that I had peer groups outside of
Cognizant and also the support structures inside
the company to address that.
How has the global experience that you’ve had
working in places like Hong Kong, India, Panama,
Germany and the U.S. helped shape and influence
how you go about your job and make decisions?
D’Souza: It’s a great question and I sometimes
take that experience for granted. A lot of the
culture and fabric of this company comes from
the fact that many members of the executive
team of the company are very global executives.
That has allowed us to build a company that has
a couple of different flavors to it. The first is that
we as a company are very comfortable being
“local” in any part of the world in which we
operate, but being a global company at the
same time. We have balanced that extremely
well. Clients tell us all the time that we are the
“most local” of the global services firms.
The other thing about Cognizant is that, because
we have people from multiple nationalities
around the world, it’s an environment that
respects, welcomes and embraces diversity and
understands that diversity actually makes us a
much stronger company.