Cognizant proposes establishing a pan-India presence through opening offices in emerging cities to tap into lower cost talent outside major tech hubs. This would decentralize operations while helping acquire land and develop real estate assets. The plan aims to make Cognizant the "Microsoft of India" through widespread operations and a mix of social responsibility and profitability to gain loyalty over competitors. Real estate is positioned as a key resource to accommodate growth while generating returns through strategic property investments.

1.
Cognizant Business Plan
An Executive Summary
Hardik Doshi
Investment banking
Hardik.doshi@spjain.org
Sriraman Rajamani
Information Technology Management
Sriraman.rajamani@spjain.org
Yogesh Rao
Information Technology Management
Yogesh.rao@spjain.org
S P Jain Center of Management, Singapore

2.
Table of Contents
Market Opportunity ..................................................................................................... 3
.
Saturated and Concentrated market ................................................................... 3
Rising CTC decreasing profit margins .................................................................. 3
Problem finding new customers, competition and new business ....................... 4
Employee retention, relocation and rising demands ........................................... 4
Non‐diversification and Market Risk ................................................................... 5
Competition against big Multinationals .............................................................. 5
Business Concept and Competitive Advantage ........................................................... 5
Break the concentrated IT industry into fragments: ........................................... 6
Acquire untapped Talented Human resource at lower cost, Target regional
colleges ....................................................................................................................... 6
Rebranding—Make Cognizant Microsoft of India ............................................... 6
Mix of corporate social responsibility and profitability‐‐‐A win‐win situation .... 7
Real estate is the key ........................................................................................... 7
Resources & Finances ................................................................................................... 7
Annexure ....................................................................................................................... 8
Bibliography .................................................................................................................. 9

3. Market Opportunity
Saturated and Concentrated market
Gone are the days when Indian IT workforce was considered to be a cheap source of labour for
work that was outsourced from major developed nations like US and Europe. Indian IT industry
was born a decade ago with an intention of attracting low skilled work. Soon world realised the
immense talent and growth potential of IT in India and within a span of ten years it transformed
itself into a mature market with IT hubs such as Bangalore, Delhi, Mumbai, Calcutta, Chennai,
Hyderabad. Indian IT giants like WIPRO, INFOSYS, TCS, PATNI and SATYAM made their global
presence and expanded their operations from mid-sized companies to billion dollars companies.
Thanks to historical and future aggressive recruitment plans of these companies that today TCS
has already crossed employee base of 1 lakh, Wipro is on the verge of crossing it with the huge
employee requirements quoted in terms of few thousands at any given point of time. More and
more graduates may be from top ranking engineering colleges or some low level college dream of
getting into IT industry and joining this trend of IT boom. The fact is that IT industry has place for
everybody be it highly qualified IIT graduate or low skilled graduate from underdeveloped villages.
The high quality office infrastructure, better work environment, long weekends and abroad
opportunities to make big bucks have lured graduates into this industry. Talking about the
cognizant, it’s a well known fact that cognizant being a foreign player entered into Indian market in
order to tap this trend in the minds of fresh graduates, tap them and thereby to attract low cost
talented professionals. But the question here that needs to be answered whether the trend is
sustainable? How does Cognizant differentiate in comparison to this Indian IT giants?
Indian IT industry has developed significantly but in my opinion it has developed in an
abnormal and abrupt manner rather than planned manner and it is this amorphous nature of IT
industry that cognizant can take advantage of. When we call it an Indian IT industry we forget that
with only six cities in India being IT hubs we making a big mistake. Indian IT industry is
concentrated and confined only to this six cities and it is only this six cities which countries outside
India know as IT hubs. Moreover with every year more than one Lakh fresh graduates aspiring to
join trend of IT it’s important to know that IT market in India is highly saturated. Moreover with such
huge inflow of new aspirants maintaining quality standards becomes a question. Hence the only
way a company can make difference is continue to excel at their core competency or give an
alternate future worth.
Rising CTC decreasing profit margins
A consistent year on year growth of 50% sounds unachievable for consecutively 4-5 years but yes
this was true for Indian IT companies few years back. Sustaining this growth rate was possible
because of top line growing at a faster rate compared to bottom line. But 50% sounds quite

4. impossible according to current market scenario with top line and bottom line shrinking at a faster
rate because of rising employee cost, infrastructure cost and rising competition. In their
aggressiveness to recruit skilled people companies didn’t bother to give high salaries. Flexible
timings, higher allowances and secured benefits are other means used over high salaries. This
raised the overall IT industry salary standard resulting into higher expenditure and better standard
of living for IT professionals. IT professionals started moving out of their home town and flocking
this six major IT hubs resulting into real estate prices and prices of consumer goods sky rocketing.
The current infrastructure of these six cities is not equipped with supporting such a huge inflow of
job aspirants from all over the country. All this factors resulted into costly real estate for IT
companies, rising employee demands in terms of benefits and CTC, decreasing company profit
margins and unsustainable high growth.
Problem finding new customers, competition and new business
The first step in analysing what new needs to be done is to find what the difficulties in existing
situation are. Does Indian IT companies face problem in acquiring new customers or new
business. Global image of India as pool of IT talent has definitely improved but increasing CTC
makes it less favourable destination for outsourcing now with Russia, Philippines and China taking
over. The Indian companies have reacted to this situation by entering into foreign market and
opening up their shop there. But the question here is does it mean that India is not favourable
destination for making IT investments anymore? Does this global establishment was required? In
my opinion the answer to this is both yes and no. If they have gone global to expand clientele it
makes senses but if in search of economic resources then no because India still has to offer lot of
untapped IT potential which is not explored by these companies.
Employee retention, relocation and rising demands
Major challenge faced by current IT companies is employee retention and rising employee
demands. With over supply of jobs in the Indian IT industry employees tend to frequently switch
jobs for small bucks or for some superior benefits and comfort. This creates a major problem for
company which spends huge sum of money on employee trainings in terms of predicting growth
paths, employee loyalty and poses a threat to intellectual property preservation. Appraisal hikes
are no more attractions to retain people as there are better hikes available in the market because
of job shit. The only way it can retain people is provide better flexibility in terms of working from
home or better freedom. Companies need to understand that policing people will not work and
working from home is one concept that can bring workforce to different level.

5. Non­diversification and Market Risk
The law of competition and mean reversion says that high growth for any company is
unsustainable and eventually stabilises at industry average. This law assumes that company has
maintained its current business lines. The only way to maintain high growth is to innovate and
diversify. Another problem faced by Indian IT companies is too much leverage on to business from
foreign developed countries. This adversely impacts the revenues of these companies when there
is turmoil or imbalance in developed economies. The US recent economic slowdown has resulted
into shrinking IT budget approvals which has impacted earnings of IT companies leading to cost
cutting and downsizing at times. The point here is IT companies need to diversify from the
traditional method of functioning. If we consider companies like Weyerhaeuser and McDonald’s
rather than being manufacturing and restaurant giants they are more of real estate giants with the
kind of real estate assets they possess. Wipro has been making significant acquisitions overseas
in order to foray into different businesses. The major asset of an IT company is its human resource
and in order to grow this human resource company needs to promise better infrastructure. Hence
real estate acquisition will play important role as far as IT companies’ growth is concerned.
Competition against big Multinationals
Non-IT MNC companies like Supervalu, Target, Tesco, Ginger, Albertsons and IT-MNC companies
like Adobe, Hewitt, ORACLE etc were conservative in making investments in India initially but after
realising IT favourable environment of India they have started making investments in self-owned
buildings and setup their own IT team to manage their IT systems. This is a direct hit on the
business of outsourcing. Moreover IT-MNC companies can afford to pay higher salaries and other
benefits as compared to Indian IT companies thereby attracting best talents. But these companies
will keep themselves confined to metros. In recent times the less developed Indian cities are fast
catching up with metros and that is where cognizant can take advantage and do something which
this MNC’s can’t do. The point is talking to people in Bangalore and Chennai is easy but talking to
people in Baroda is difficult. If work can move from US to Bangalore and then it can very well move
from Bangalore to Baroda. Underlying highlight is understanding India and acquire bigger social
face.
Business Concept and Competitive Advantage
Concept: Using IT build great real estate base along with pan-India presence
to increase profit margins

6. Break the concentrated IT industry into fragments:
Cognizant can open up offices near emerging and fast developing Indian cities other than metros
in order to tap the regional untapped talent. The point here is bringing the offices close to the
people rather people leaving hometowns and travelling to metros. Cognizant can achieve this thing
in two ways 1) either it purchases real estate (offices) in these emerging cities or 2) it takes on
lease. The first approach gives multiple advantages. Since these cities are still developing
cognizant can acquire land from government at much cheaper rates as compared to cities like
Bangalore where there is tremendous shortage of land. Secondly, since this are fast developing
cities the land prices in this cities will increase at faster rate and hence Cognizant will have high
return on its property increasing value of companies’ net assets. Also, Cognizant can take first
mover advantage and acquire huge amount of land which than can be sold to other IT companies
which are bound to follow thereby making huge returns on real estate. As a part of conservative
approach Cognizant can also adopt the second strategy of leasing the offices. All these small town
offices should be at par with offices in developed cities in terms of quality of work and
infrastructure. These remote offices shouldn’t be cost centres but revenue generators in it. Idea
here is to decentralise operations from one place.
Acquire untapped Talented Human resource at lower cost, Target regional
colleges
Establishing pan-India presence and smaller offices near Indian developing cities will allows
cognizant to tap the same talent which migrates to metros at cheaper cost. Moreover a person can
stay near to his/her hometown and earn fairly decent salary. This definitely gives flexibility to
people. One may argue that people dream of global exposure but the point is people dream in
steps. The other argument could be ability and skills of graduates from moderate ranking colleges
as compared to top ranking colleges. The solution to this is train them at Cognizant development
centres in metros and deploy them back. This may require higher investment in training and
employee development. Moreover when these resources are deployed back can help tap
technological needs of Indian SME business which is also quite unexplored and untouched. The
idea here is to get each new graduate on board.
Rebranding—Make Cognizant Microsoft of India
Establishing India wide presence will definitely help Cognizant to establish stronger foothold.
Cognizant being fairly new in Indian markets compared to TCS, WIPRO, Infosys it’s important to
do brand building. Having operations across India can help break the image in the minds of
graduates as TCS, WIRPO being the first company of choice. In order to do this it is very important
that cognizant reaches to the roots and brings every eligible graduate on board. Cognizant will
have to do to Indian software industry what China did to manufacturing industry. The best example

7. of this could be the recent efforts by HP, the I-community group in India-Kuppam. In order to
establish itself in the league of these companies it’s important that cognizant reaches out to
graduates at early stage of their career start.
Mix of corporate social responsibility and profitability­­­A win­win situation
In the long run only the company which follows equal give and take policy wins loyalty of society
and employees. Cognizant by establishing itself across India will contribute significantly to the
development of Indian youth in terms of developing, training them and reduces the unemployment
rate. In return Cognizant gets their loyalty at cheaper CTC which allow cognizant to sustain profit
margins against stiff competition from Indian IT giants. Cognizant can collaborate with colleges if
need be and bring offices near to them. Providing additional flexibility of working from home to
eligible executives establishes a bond of loyalty and trust.
Real estate is the key
In order to accommodate the growing employee base and growing business of Cognizant it is very
much necessary that cognizant has adequate real estate infrastructure bought at low cost. The real
estate market in India is seeing the downturn and the prices in metros which sky rocketed are
decreasing after reaching the peak. Cognizant can make careful investments in real estate which is
properly priced and strategically located in emerging cities (not metros). The trend within IT
companies is one opens an office, others follow it and it results into full fledged IT parks with
nearby areas developing after that. It’s the early leader who gets advantage. The point is cognizant
should buy the land, build it and lease it when others follow. Make real estate as secondary
business.
Resources & Finances
Cognizant will need below resources and financial investments apart from routine resources
required in IT companies in order to execute above plan. However detailed resource requirement
and finance can be worked stage by stage based on scale of operations.
Increased investments in training and development.
Untapped engineering graduates at cheaper CTC as human resource
Leased or purchased office infrastructure in emerging cities at low cost.
Pan India presence would want that Cognizant has forecast of improvement in quality and
quantity of work based on projects in pipeline.

8. Annexu
A ure
Rate of increase of salary rates in India
s
Some of the fastest g
f growing Indian cities which made to the top 100 list of world’s fastest
’
growing cities.
• Durg – Bhilai
• Ghazi
iabad
• Auran
ngabad
• Bhopal
• Chand
digarh
• Guwa
ahati
• Surat
• Asans
sol
• Dhanb
bad
• Visha
akhapatnam
• Farida
abad
Property rates in maj cities of I
y jor India

9. Bibliography
Salaries in India are expected to increase by 16% in 2009, one of the highest in the Asia-pacific region, driven by strong
economic growth and pressure on employers due to soaring inflation, a latest report says.
Source: Livemint.com, Business Standard.com
U.S. based Apple Computer and software maker Pervasive have been joined by Powergen, a British subsidiary of
German energy supplier E.ON, in announcing their exit from Bangalore, the Silicon Valley of Indian IT industry.
Tata Consultancy Services CEO S. Ramadorai has a lot of numbers going his way, like a 44% year-over-year sales gain
last quarter. But a looming threat could derail the CEO's plans to turn TCS into a $10 billion-a-year business by 2012: the
lack of skilled labour. "Attracting and keeping the best talent is going to be a critical challenge for us," Ramadorai said in
an interview last week. Though India pumps out about 400,000 tech graduates a year, every big IT outsourcer is hiring
by the thousands. TCS plans to hire 30,500 people this year. Source: Informationweek.com
India is in danger of losing its top slot as IT R&D off-shoring given the rising costs of hiring people according to Zinnov a
management consulting company. This is already noticeable in the average cost of labour, which has risen from $18,000
in the year 2000 to $40,000 in 2008. Source: Economic Times
In 2008, employees in China are likely to get an average hike of 8.7%, in Philippines 8.4%, in Korea 6.7% and in
Singapore 5%. Salary hike in India was 15.1% in 2007, 14.4% in 2006, 14.1% in 2005, 13.7% in 2004, 11.5% in 2003
and 9.7% in 2002. However, over a period of time, the rate of annual increase in salary might come down and stabilize in
a range of 9-10% by 2012 as against the present level of 15% Source: Timesofindia.com
With growing competition, attrition has also gone up. According to the survey, insurance sector has reported the highest
attrition rate at 35.2%, followed by IT-enabled services at 28.9% and hospitality and restaurant industry at 27.1%
Source: Timesofindia.com.
According to the All India Council for Technical Education, India produced 401,791 engineers in 2003-04, 35 per cent
being computer engineers. In 2004-05, the number of engineering graduates increased to 464,743, of which 31 per cent
were computer engineers. Compared to India and China, the United States produces only 70,000 engineering graduates
every year. All of Europe produces just 100,000. Source: Rediff.com