Key people issues at a strategic level © 2009 Cognizant Technology Solutions. Sriram Rajagopal

The economy was doing so well….and then something happened! © 2009, Cognizant Technology Solutions. Confidential

Henry Paulson - US Treasury Secretary & ex-CEO, Goldman Sachs The most influential & powerful figure in global finance during 2008 © 2009, Cognizant Technology Solutions. Confidential “ I have great, great confidence in our capital markets and in our financial institutions. Our financial institutions, banks and investment banks are strong.” Treasury Secretary Henry Paulson March 16, 2008 CNN “ The financial security of all Americans…depends on our ability to restore our financial institutions to a sound footing.” Treasury Secretary Henry Paulson September 19, 2008 Press Release

The chain of events © 2009, Cognizant Technology Solutions. Confidential Subprime Loans Derivatives Government Bailouts Global Recession Housing crisis Financial crisis Governmental crisis Economic crisis

Pain is reflected in Fortune 500 © 2009, Cognizant Technology Solutions. Confidential Source : Fortune

Challenges posed by the ecosystem Pricing pressures Reduced consumption, reduced investments Psychological credit freeze “ Unfriendly” Democrats? Creeping protectionism Sticky dead woods Everybody is waiting and watching for somebody else to do something New government in the US and stronger UPA in India Stagnating skills Demographic advantage slowing down © 2009, Cognizant Technology Solutions. Confidential

Pricing pressures

Reduced consumption, reduced investments

Psychological credit freeze

“ Unfriendly” Democrats? Creeping protectionism

Sticky dead woods

Everybody is waiting and watching for somebody else to do something

New government in the US and stronger UPA in India

Stagnating skills

Demographic advantage slowing down

What are different industries contending with? For businesses with a high fixed cost component (like IT Services) If business volumes grow and cost of doing business remains stable, sales and profit margins generally move in tandem If business volumes are flat or declining OR margins are under pressure on account of market changes, inevitably firms have to reduce costs faster than the rate by which revenue and profitability decline When this does not happen, profitability/margins tend to drop faster than revenues Linkage to Fortune 500 and why the pain may sustain: While revenues of Fortune 500 companies in 2008 inched by 0.8 per cent compared to 2007, profits plummeted by 84.7 per cent over the same period Cost reduction process has just begun because costs have to be aligned to falling business volumes (started off with significant layoffs and other cost control measures) © 2009, Cognizant Technology Solutions. Confidential

For businesses with a high fixed cost component (like IT Services)

If business volumes grow and cost of doing business remains stable, sales and profit margins generally move in tandem

If business volumes are flat or declining OR margins are under pressure on account of market changes, inevitably firms have to reduce costs faster than the rate by which revenue and profitability decline

When this does not happen, profitability/margins tend to drop faster than revenues

Linkage to Fortune 500 and why the pain may sustain:

While revenues of Fortune 500 companies in 2008 inched by 0.8 per cent compared to 2007, profits plummeted by 84.7 per cent over the same period

Cost reduction process has just begun because costs have to be aligned to falling business volumes (started off with significant layoffs and other cost control measures)

Key trends – acutely conscious of this change Clear and sharp separation between Tier 1 and Tier 2 offshore vendors in all key metrics in the last three to five years Revenue and margins, client additions, attrition, vertical and horizontal growth, etc. Just like the separation between Tier-One and Tier –Two offshore vendors, a distinct separation is likely to emerge within Tier-One offshore vendors in the next three to five years © 2009, Cognizant Technology Solutions. Confidential

Clear and sharp separation between Tier 1 and Tier 2 offshore vendors in all key metrics in the last three to five years

Revenue and margins, client additions, attrition, vertical and horizontal growth, etc.

Just like the separation between Tier-One and Tier –Two offshore vendors, a distinct separation is likely to emerge within Tier-One offshore vendors in the next three to five years

Trends likely to dominate in the next 3 to 5 years In the next five years, the offshoring landscape may change in three key ways: Industry will find ways of breaking the linearity between employee headcount and revenue growth The Global Delivery Model will reflect a truly global hue with services being delivered using an optimal mix of the right talent from the best geography at the most competitive price point More IP/platform-based services will emerge from India © 2009, Cognizant Technology Solutions. Confidential

In the next five years, the offshoring landscape may change in three key ways:

Industry will find ways of breaking the linearity between employee headcount and revenue growth

The Global Delivery Model will reflect a truly global hue with services being delivered using an optimal mix of the right talent from the best geography at the most competitive price point

More IP/platform-based services will emerge from India

Industry pecking order changed in the past recessions 50% of the leaders held their position and emerged stronger after recession Only 20% laggards emerged stronger from recession and became leaders © 2009, Cognizant Technology Solutions. Confidential Leaders (50%) Laggards (50%) Leaders (100% ) Leaders (20%) Laggards (80%) Laggards (100% ) Pre- Recession Post- Recession

50% of the leaders held their position and emerged stronger after recession

Only 20% laggards emerged stronger from recession and became leaders

Consensus is – Recovery will be long(ish) So what does this mean to us Waiting this out is not an option Changing sales tactics and sales approaches to deal with this reality through (at least) 2009 Great pockets of opportunity © 2009, Cognizant Technology Solutions. Confidential 2008 2009 2010 Current consensus calls for late ‘09, early ‘10 recovery

So what does this mean to us

Waiting this out is not an option

Changing sales tactics and sales approaches to deal with this reality through (at least) 2009

Great pockets of opportunity

Holding up the mirror - retrospection © 2009, Cognizant Technology Solutions. Confidential Subprime Loans Derivatives Global Recession Strategy Relative validity of the existing strategies are limited, Volatile market calls for strategy revisit Difficulty in coping since IT/ITES are younger industries with low/no experience of downturn Structure Lack of structural agility to respond to changing strategies Need to build more modular structures enabling redesign Need to build scalable structures Process Need to improve rigor of processes Processes need to be seamlessly integrated Facilitate operational efficiency People Fear of uncertainty leading to paranoid behavior Openness of people to change like re-skill, up-skill and newer opportunities Experiencing lesser growth in terms of reward and opportunity Rewards Floundering with rewards and recognitions Need to create belongingness and need to support the organization Move from reward to excite to recognize to perform

Strategy

Relative validity of the existing strategies are limited,

Volatile market calls for strategy revisit

Difficulty in coping since IT/ITES are younger industries with low/no experience of downturn

Structure

Lack of structural agility to respond to changing strategies

Need to build more modular structures enabling redesign

Need to build scalable structures

Process

Need to improve rigor of processes

Processes need to be seamlessly integrated

Facilitate operational efficiency

People

Fear of uncertainty leading to paranoid behavior

Openness of people to change like re-skill, up-skill and newer opportunities

Experiencing lesser growth in terms of reward and opportunity

Rewards

Floundering with rewards and recognitions

Need to create belongingness and need to support the organization

Move from reward to excite to recognize to perform

The tilted balance Hiring freeze as experienced in the labor market May miss out on key talent in the labor market, which is highly skilled and is available at a much lower price Decreasing on-campus recruitment activities - dilute an organization’s employment brand and its relationships with universities Competitive job market - candidates indulge in elevating their resumes to falsify records A 2009 Background Screening Trends survey - 56% discrepancy rate © 2009, Cognizant Technology Solutions. Confidential

Hiring freeze as experienced in the labor market

May miss out on key talent in the labor market, which is highly skilled and is available at a much lower price

Decreasing on-campus recruitment activities - dilute an organization’s employment brand and its relationships with universities

Competitive job market - candidates indulge in elevating their resumes to falsify records

A 2009 Background Screening Trends survey - 56% discrepancy rate

Restoring the balance Need to establish stringent recruiting processes to assess candidate capability Key components of the background checking: Credit History Employment history Criminal records Personal Reference Check Education information Brand awareness – impact on the success of candidate recruitment, improve new hire performance Ways organizations can maintain brand awareness on campuses: Internship/Co-op programs Maintain an active internship/co-op program in order to build talent pipelines. On-Campus Activities/Events Continue partnerships through campus activities in order to introduce students to the company Impending labor shortage and skill deficiency in the workforce - target specific skill sets and make a smaller number of offers to top-level students at premier institutions © 2009, Cognizant Technology Solutions. Confidential

Need to establish stringent recruiting processes to assess candidate capability

Key components of the background checking:

Credit History

Employment history

Criminal records

Personal Reference Check

Education information

Brand awareness – impact on the success of candidate recruitment, improve new hire performance

Ways organizations can maintain brand awareness on campuses:

Internship/Co-op programs

Maintain an active internship/co-op program in order to build talent pipelines.

On-Campus Activities/Events

Continue partnerships through campus activities in order to introduce students to the company

Impending labor shortage and skill deficiency in the workforce - target specific skill sets and make a smaller number of offers to top-level students at premier institutions

The golden handshake Organizations face challenges in engaging employees Decreasing engagement levels have been attributed to layoffs and downsizing organizations citing layoffs as a key talent management challenge Widespread lack of employee confidence in the organization’s future – important to maintain employee engagement © 2009, Cognizant Technology Solutions. Confidential

Organizations face challenges in engaging employees

Decreasing engagement levels have been attributed to layoffs and downsizing

organizations citing layoffs as a key talent management challenge

Widespread lack of employee confidence in the organization’s future – important to maintain employee engagement

Making it firm and friendly Increase employee commitment, through increase in the rational and emotional commitment of their employees. Managers can impact emotional commitment By providing experiential development can drive rational commitment Tactics to improve commitment to the organization: Create opportunities for two-way exchanges Communications specifying how employees can contribute to business goals Rewards and recognition programs apply to a large number of employees – low or no cost Reinforce organizational values and messages Unlock solid performer contributions through challenging roles and projects aligned with strengths © 2009, Cognizant Technology Solutions. Confidential

Increase employee commitment, through increase in the rational and emotional commitment of their employees.

Managers can impact emotional commitment

By providing experiential development can drive rational commitment

Tactics to improve commitment to the organization:

Create opportunities for two-way exchanges

Communications specifying how employees can contribute to business goals

Rewards and recognition programs apply to a large number of employees – low or no cost

Reinforce organizational values and messages

Unlock solid performer contributions through challenging roles and projects aligned with strengths

Difficult dealings Culture of communication critical driver of employee engagement, intent to stay, and discretionary effort Gap between the delivery and satisfaction levels with respect to communicating the impact of economic downturn on the organization Employees are increasingly disengaged - concerns about the impact of the unstable market on their lives and jobs Employers operating under difficult conditions easily become preoccupied Layoff survivors experience a pervasive sense of personal - violation - manifest as set of negative attitudes, perceptions, and behaviors Lack of communication with survivors - decrease in quality and productivity metrics © 2009, Cognizant Technology Solutions. Confidential

Culture of communication critical driver of employee engagement, intent to stay, and discretionary effort

Gap between the delivery and satisfaction levels with respect to communicating the impact of economic downturn on the organization

Employees are increasingly disengaged - concerns about the impact of the unstable market on their lives and jobs

Employers operating under difficult conditions easily become preoccupied

Layoff survivors experience a pervasive sense of personal - violation - manifest as set of negative attitudes, perceptions, and behaviors

Lack of communication with survivors - decrease in quality and productivity metrics

Diligent dialogues Focus on internal communication Variety of media to deliver these messages face-to-face meetings - highest impact The top four strategies to improve engagement through communication Encourage line leaders to communicate frequently with staff Facilitate regular communication from chief executive/senior management Provide training for skill development Encourage flexible work arrangements © 2009, Cognizant Technology Solutions. Confidential

Focus on internal communication

Variety of media to deliver these messages

face-to-face meetings - highest impact

The top four strategies to improve engagement through communication

Encourage line leaders to communicate frequently with staff

Facilitate regular communication from chief executive/senior management

Provide training for skill development

Encourage flexible work arrangements

Curve conceded Focus shifted from attracting talent to managing employee performance Increasing need to engage and retain high performers Focused on reducing costs, restructuring their workforce to move into new product and service areas, and downsizing non-strategic operations - greater need to improve performance management by supporting first- and second line managers © 2009, Cognizant Technology Solutions. Confidential

Focus shifted from attracting talent to managing employee performance

Increasing need to engage and retain high performers

Focused on reducing costs, restructuring their workforce to move into new product and service areas, and downsizing non-strategic operations - greater need to improve performance management by supporting first- and second line managers

Shifting the mean Is everyone in your team competent? Else, remediate through training where feasible Else, request independent review and refer to HR Is everyone in your team delivering tangible value? Else, release to other areas ( Note, payroll of those not adding value is subsidized by others) Are you stretching your top 20% performers by regularly enhancing their role? Are you nurturing the middle 70% to excel in their role? Will they do well when you release them to a challenging new engagement outside your purview? Have you placed the bottom 10% under performance watch with clear timelines? Is your business results dependent on a few individual(s) in your team? If so, are you taking steps to reduce this over time? Does everyone in your team feel motivated and adequately challenged? Does your customer confirm the team is competent and geared up to deliver adequate value? © 2009, Cognizant Technology Solutions. Confidential

Is everyone in your team competent?

Else, remediate through training where feasible

Else, request independent review and refer to HR

Is everyone in your team delivering tangible value?

Else, release to other areas ( Note, payroll of those not adding value is subsidized by others)

Are you stretching your top 20% performers by regularly enhancing their role?

Are you nurturing the middle 70% to excel in their role?

Will they do well when you release them to a challenging new engagement outside your purview?

Have you placed the bottom 10% under performance watch with clear timelines?

Is your business results dependent on a few individual(s) in your team?

If so, are you taking steps to reduce this over time?

Does everyone in your team feel motivated and adequately challenged?

Does your customer confirm the team is competent and geared up to deliver adequate value?

The inverted L Maximizing Productivity of Current Leaders a Key Challenge Senior leaders are maintaining relatively high levels of intent to stay, but not putting forth the same amount of effort Employees can commitment in two principle ways Rationally - extent to which employees believe organization has their self-interest in mind Emotionally - extent to which employees value, enjoy, and believe in their job and the organization Need to build both rational and emotional commitment of leaders Confidence in Mid-Level Leadership Continues to Lag Behind confidence in Top Leadership likely due to the highly visible role Lack of ready-now candidates for leadership positions Lack of development opportunities for mid-level employees © 2009, Cognizant Technology Solutions. Confidential

Maximizing Productivity of Current Leaders a Key Challenge

Senior leaders are maintaining relatively high levels of intent to stay, but not putting forth the same amount of effort

Employees can commitment in two principle ways

Rationally - extent to which employees believe organization has their self-interest in mind

Emotionally - extent to which employees value, enjoy, and believe in their job and the organization

Need to build both rational and emotional commitment of leaders

Confidence in Mid-Level Leadership Continues to Lag Behind confidence in Top Leadership

likely due to the highly visible role

Lack of ready-now candidates for leadership positions

Lack of development opportunities for mid-level employees

Lessons learnt Build a Compelling Employment Value Proposition to Improve Effort Focus on building a compelling employment value proposition by focusing on the top five non-compensation drivers of effort for VP positions Job-Interests Alignment Collaborative Team Environment Job Impact Future Career Opportunities Coworker Quality Focus on Building the Mid-Level Talent Pipeline - use their training budget to develop mid-level talent and recruit high-potential midlevel talent These two priorities are described in detail below: Create development opportunities to speed HIPO skill acquisition Provide experiential learning and structure experiences around key challenges that enable accelerated learning © 2009, Cognizant Technology Solutions. Confidential

Build a Compelling Employment Value Proposition to Improve Effort

Focus on building a compelling employment value proposition by focusing on the top five non-compensation drivers of effort for VP positions

Job-Interests Alignment

Collaborative Team Environment

Job Impact

Future Career Opportunities

Coworker Quality

Focus on Building the Mid-Level Talent Pipeline - use their training budget to develop mid-level talent and recruit high-potential midlevel talent

These two priorities are described in detail below:

Create development opportunities to speed HIPO skill acquisition

Provide experiential learning and structure experiences around key challenges that enable accelerated learning

Cost center? Reducing organizational costs – experience budget cuts to cope with current credit crunch impacting all functional areas within HR Companies require HR to manage budgets dynamically and to effectively leverage working capital Companies also expect HR to validate the ROI of spending on specific HR activities © 2009, Cognizant Technology Solutions. Confidential

Reducing organizational costs – experience budget cuts to cope with current credit crunch impacting all functional areas within HR

Companies require HR to manage budgets dynamically and to effectively leverage working capital

Companies also expect HR to validate the ROI of spending on specific HR activities

Calculated credit HR budgeting process should use scenario planning prepare for a range of potential business outcomes to enable swift and intelligent response Key steps involved in scenario-based budget planning Step 1: Conduct Critical Issues Interviews across the Organization—To align HR budgets to a flexible Four potential economic scenarios 1. High growth 2. Low growth 3. Flat growth/low contraction 4. High contraction Step 2: Prioritize Critical HR Activities for Each Scenario—To prioritize critical HR activities during times of uncertainty Analyze potential economic scenario to identify which HR activities are most important to the strategy of the business and have the highest urgency and allocate budget appropriately © 2009, Cognizant Technology Solutions. Confidential

HR budgeting process should use scenario planning

prepare for a range of potential business outcomes to enable swift and intelligent response

Key steps involved in scenario-based budget planning

Step 1: Conduct Critical Issues Interviews across the Organization—To align HR budgets to a flexible

Four potential economic scenarios

1. High growth 2. Low growth 3. Flat growth/low contraction 4. High contraction

Step 2: Prioritize Critical HR Activities for Each Scenario—To prioritize critical HR activities during times of uncertainty

Analyze potential economic scenario to identify which HR activities are most important to the strategy of the business and have the highest urgency and allocate budget appropriately

The way forward © 2009, Cognizant Technology Solutions. Confidential Subprime Loans Derivatives Employer Brand Human resource cost Robust HR Processes Ensure timely and transparent internal and external communication Continuous communication with campus TAG - Tightening intake control Financial Planning – Salary cost in terms of increments, variable pay and promotions EAS - Revenue Forecast – Staffing forecast Immigration Planning Utilization Optimization through optimal resource allocation and onsite-offshore reconsiderations Match workforce supply & demand Place the right associate in the right job Enable associate career development - Changing the learning paradigm Fine tuned performance management Urgency in morphing into a role based organization Operating efficiencies Towards a more enabling digital ecosystem Rapid fire leadership development The Talent Managers priorities in 2009

Human resource cost

Ensure timely and

transparent internal and

external communication

Continuous

communication with

campus

TAG - Tightening intake

control

Financial Planning – Salary

cost in terms of increments,

variable pay and promotions

EAS - Revenue Forecast –

Staffing forecast

Immigration Planning

Utilization Optimization through optimal resource

allocation and onsite-offshore reconsiderations

Match workforce supply & demand

Place the right associate in the right job

Enable associate career development - Changing the

learning paradigm

Fine tuned performance management

Urgency in morphing into a role based organization

Operating efficiencies

Towards a more enabling digital ecosystem

Rapid fire leadership development

The Talent Managers priorities in 2009

© 2009, Cognizant Technology Solutions. Confidential Thank you