understanding cognizant’s growth story cognizant’s growth story cognizant financial year is jan...

Understanding Cognizant’s Growth Story

Nov 2011 1

UNDERSTANDING

COGNIZANT’s GROWTH STORY

All information provided in this report is composed or derived from public sources and inputs from

ex-Cognizanters.

In year 2006, Cognizant crossed the billion dollar mark.

FY 2011 data is estimated based on the results as reported in first three quarters of FY 2011.

Cognizant financial year is Jan to Dec.


Nov 2011 2

1. Executive Summary ......................................................................................................................... 3

2. Cognizant – Overview ..................................................................................................................... 4

3. Organization Structure .................................................................................................................... 5

4. Dominant focus on Growth and Customer Relationship ................................................................ 6

4.1 Client Acquisition and Engagement Strategies ........................................................................... 7

4.2 Geographic Expansion ............................................................................................................... 11

4.3 Inorganic Growth ...................................................................................................................... 14

4.4 Vertical Focus and Portfolio of Services .................................................................................... 18

5 Delivery Capability Analysis .......................................................................................................... 24

5.1 Maintaining Gross Margin 2 ...................................................................................................... 24

5.2 Linear business model ............................................................................................................... 25

5.3 Revenue Per Employee ............................................................................................................. 25

5.4 Fixed Price vs. Time and Material Contracts ............................................................................. 25

5.5 Project-based contracts vs. Annuity contracts ......................................................................... 25

5.6 Delivery Model – Defined, Stated and Shared with Customers ............................................... 26

5.7 Cognizant 2.0 Delivery Platform ............................................................................................... 26

5.8 Global Delivery Model and Quality certification....................................................................... 26

6. Positioning, Branding and Perception ........................................................................................... 27

6.1 Positioning – Evolution through the years ................................................................................ 27

6.2 Branding - Awards and Recognition .......................................................................................... 28

6.3 Cognizant Community (Marketing Event) ................................................................................. 29

6.4 Cognizanti.................................................................................................................................. 29

6.5 Website and Social Media ......................................................................................................... 30

7. Appendix ....................................................................................................................................... 31

7.1 Board of Directors ..................................................................................................................... 31

7.2 Client Engagement Team Profile............................................................................................... 34

7.3 Cognizant Business Consulting (CBC) Growth ........................................................................... 35

7.4 Geographic Footprint ................................................................................................................ 37

7.5 Europe Journey ......................................................................................................................... 38

7.6 Cognizant’s Latin America Strategy .......................................................................................... 39

7.7 Acquisitions ............................................................................................................................... 40

7.8 Health Care Growth Story ......................................................................................................... 45


Nov 2011 3

1. Executive Summary

Though a late entrant in IT services industry, Cognizant has grown at a rate of 45% CAGR (industry

average of about 25%) from 2003 to 2010, while maintaining stable GM2’s in the range of 42-46%

and EBITDA of 21%. Cognizant’s outperformance owes to the following strategic decisions

Dominant focus of Growth and Customer Relationship - This consists of

Building a “separate and local” hunter team that is well supported by an offshore team for

customer research

Developing a Two-in-a-Box customer focused Account Manager/Client Partner team that is

“empowered” to take on the ground decisions. In 2010, Cognizant added a consultant to the

mix, making it Three-in-a-box model to deeply mine accounts.

A deep domain/vertical team that can position Cognizant as a full life-cycle solution partner,

with upstream ideas & know-how and downstream accountability for implementation

Adopting an “edge to core” strategy by entering into new service offerings as it was defined

core to the vertical. Generally, this entry was marked with an acquisition and then

positioning that service in all RFP’s irrespective of customer need at that point of time

Plan process that clearly defines “how” and “when” to engage a prospect or active customer

High focus on delivery cost, efficiencies and customer satisfaction - After reaching $ 1B mark in

2006, Cognizant focused on improving profitability to negate wage inflation. These include

Improving utilization levels from 52% to 70% (including trainees) and synchronizing

headcount with growth

Shifting more effort to offshore i.e. from 75% to 79%

Increasing campus hires. In 2011, Cognizant hired a campus batch equivalent to 29% of its

year starting workforce

Continuously improving the company level pricing by 1% to 2% on an annual basis

Cognizant has developed a delivery platform to aggregate all project management, metrics and

knowledge management activities. Informal sources point that it took a 400 member team about 2

years to develop this platform. The team also included some key people from Microsoft to integrate

project plans, effort tracking, project health, simulations, reporting and intelligent search (for right

people, process and similar project). The platform is owned by the Quality team.

Positioning, Branding and Perception - While 90% of Cognizant workforce and 80% of work is

performed offshore, Cognizant is still perceived as onsite centric company. The reasons for this

perception include

Dual organization structure i.e. onsite and offshore client responsibility shared by two

professionals (Onsite AM & Offshore PM; Onsite IG head & Offshore IG delivery head)

Most of the top management based out of US

“Local” account management by people that the customer is comfortable with

Focus more in being projected alongside with F2000 enterprises (industry focus) instead of

with technology product vendors and technology publications

Consistent messages across all forums (analyst calls, investor calls, business publications and

conference) on how cognizant has added business value compared to a technical solution

Focus on US based awards and recognition


Nov 2011 4

2. Cognizant – Overview

Cognizant has grown from strength to strength through the previous decade:

Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 (est.)

Revenues ($M) 229 368 586 885 1424 2135 2816 3278 4592 6,187

Revenue Growth % 60 59 51 61 50 32 16 40 34

Gross Margin 2 % 46 46 45 46 45 44 44 44 42 42

SGA % 23 23 22 23 24 23 23 22 21 22

EBITDA Margin % 23 23 23 23 21 21 21 22 21 20

EBIT Margin % 20 20 20 20 18 18 18 19 19 19 Source1: Annual Reports of Cognizant (2002 – 2010); Quarterly Reports of Cognizant (Q1, Q2, Q3 2011)

The table above illustrates that Cognizant has been consistently:

Demonstrating revenue growth, with a CAGR of 45% (between 2003 and 2010), much above the

industry average of 23-27%

Maintaining stable Gross Margin 2 (within 42-46%), through operational controls

Managing Operating Margin (EBIT) in the 18-20% range, reinvesting all profits beyond this into

growth

Additionally, this growth has been broad-based, across verticals, geographies and service offerings:

Revenue Growth across verticals ($M) Jan 2003 Dec 2010 CAGR % (2003-10)

Financial Services 82 (36%) 1944 (42%) 49

HealthCare 55 (24%) 1177 (26%) 46

Mfg/Retail/Logistics 49 (21%) 850 (19%) 43

Other (Media, Information Svcs, Telecom, Hi-Tech) 43 (19%) 621 (13%) 39

Overall Revenues 229 (100%) 4592 (100%) 45

Revenue Growth across geographies ($M) Jan 2003 Dec 2010 CAGR % (2003-10)

North America 200 (87%) 3583 (78%) 43

Europe 28 (12%) 855 (18%) 53

Other (Asia-Pacific, Middle East, South America) 1 (1%) 154 (4%) 77

Overall Revenues 229 (100%) 4592 (100%) 45

Revenue Growth across services ($M) Jan 2003 Dec 2010

CAGR % (2003-10)

IT Consulting and Technology Services: Project-based contracts (Application Development and Integration Consulting, Testing)

98 (43%) 2218 (48%) 48

Outsourcing Services: Annuity-based contracts (Application Maintenance, IT Infrastructure Outsourcing, BPO, KPO)

131 (57%) 2374 (52%) 44

Overall Revenues 229 (100%) 4592 (100%) 45 Source2: Annual Reports of Cognizant (2002 – 2010); Quarterly Reports of Cognizant (Q1, Q2, Q3 2011)

1 http://investors.cognizant.com: Annual Reports (2002-2010); Quarterly Reports (Q1, Q2, Q3 2011) 2 http://investors.cognizant.com: Annual Reports (2002-2010); Quarterly Reports (Q1, Q2, Q3 2011)


Nov 2011 5

3. Organization Structure

Cognizant’s top-level organization is lean, established and pre-dominantly based in US.

The dual vertical structure (onsite and offshore) ensures separation between onsite client-

facing teams and offshore delivery teams; an onsite, client-facing employee reports into an

onsite manager and an offshore delivery associate reports into an offshore delivery manager

This dual structure has been tightly glued, well-incentivized and institutionalized to the extent

that the onsite account managers / client partners are fully empowered to make important

decisions at the client-relationship level, thus enhancing customer satisfaction, leading to

growth; on the other hand, the offshore delivery teams are able to control costs, ensuring

stable margins

About 20% to 25% of offshore employees are fully verticalized; the rest are flexible across

verticals leading to higher utilizations (Section 5.1)

Appendix 7.1 provides details on the Board of Directors


Nov 2011 6

4. Dominant focus on Growth and Customer Relationship

Cognizant’s growth, at a CAGR of over 45% in the last 8 years, has a mix of various drivers. The key

growth drivers that emerge are:

(a) Client Acquisition and Engagement Strategies

(b) Geographic Expansion

(c) Inorganic Growth

(d) Vertical Focus and increasing portfolio of services

Each of these growth drivers is discussed in detail and with examples in the following sections of this

report.


Nov 2011 7

4.1 Client Acquisition and Engagement Strategies

The most critical growth engine for Cognizant (often referred to as its “Secret Sauce”3) has been its

“Client Acquisition and Engagement” model; focused and invested in building an excellent front-end,

client-facing team of professionals. Cognizant has strategically adopted a “reinvestment” strategy

(i.e.), typically, any profits over and above the 19-20% operating margin range are reinvested back

into client acquisition and farming strategy for high growth4.

4.1.1 Client Acquisition Strategy

Cognizant has a dedicated Sales team organized by regions (NE US, SE US, Eastern Europe etc.). The

sales team

focuses primarily on prospective clients, who have at least $1 billion revenues

is supported by an offshore market research team that performs analyses on prospective

clients and shares a “Crush Report” for the sales personnel. This report provides a

comprehensive picture of the prospective customers’ organizations along with “how” and

“when” Cognizant can make a winning proposition to these prospects

publishes a list of Top 20 prospective clients that they will pursue next year during their

annual plan meeting

has high variable component in salary (5%, 3%, 2% of the revenues booked from the

customer in first three years of relationship with customer)

Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Till Sep-11

New clients added 38 80 17 150 100 65 24 123 65

Direct Sales Personnel

29 30 50 57 57 78 86 86 86

New Clients added per sales person

1.3 2.7 0.3 2.6 1.8 0.8 0.3 1.4 0.8

Source5: Annual Reports of Cognizant (2002 – 2010); Quarterly Reports of Cognizant (Q1, Q2, Q3 2011)

4.1.2 Client Engagement Strategy

To keep growing, Cognizant has been evolving its client engagement model, being highly pro-active

and in anticipation of customer needs, quite ahead of many of its competitors. The engagement

models have been backed by investments.

Year Revenues ($); Headcount Client Engagement Model

Until 2001

$177 million; 3926

Third Generation Outsourcing6:

Integrated onsite / offshore teams

Integrated processes, networks and tools; Assured Quality

2002-05

From $229 million; 6168 To $885 million; 24,342

Fourth Generation Outsourcing7:

Business Results Focused; Flexible and Relationship driven

Client Partnership Oriented; Strategic Partner to Client

3 “Cognizant's Secret Sauce: Best Practices In Getting To Know Your Customer”; Stephanie Moore, Bill Martorelli, Olivia Ester; Forrester Research; 27-July-2005 4 http://m.economictimes.com/PDAET/articleshow/10586050.cms 5 http://investors.cognizant.com: Annual Reports (2002-2010); Quarterly Reports (Q1, Q2, Q3 2011) 6 Cognizant Annual Report 2002 7 Ibid.


Nov 2011 8

“Transforming while Performing” services

2006-08

From $900 million; 30,000

To $2.8 billion; 61,697

Two-In-A-BoxTM Model8,9

Every client project responsibility shared and managed equally by two professionals: one (Client Partner) close to the client and the other (Delivery Manager) close to the delivery team

Both managers equally responsible for customer satisfaction, project timelines, quality, revenues and profitability

This co-management structure was institutionalized across Cognizant worldwide, extending all the way upto the executive suite

2009-10

From $3 billion; 78,422 To $4.6 billion; 130,000

Three-In-A-BoxTM Model10

Cognizant Business Consultants juxtaposed into the “Two-In-A-Box” Model

The goal of this model is to use Consulting to become a trusted advisor to the client and fundamentally change how clients relate to the firm and the work they do with it

Cognizant’s client-facing teams comprise of:

(a) Account Managers and Client Partners

(b) Cognizant Business Consulting (CBC) Professionals

Account Managers (AM) and Client Partners (CP)

On an average, Cognizant has maintained more than one AM/CP Partner for every customer. Every

AM is “fully empowered” to make decisions at the client-relationship level. These decisions include

rate and contract negotiation, people need and location, additional services outside current scope

etc. Every year, each AM prepares an “Annual Account Review Plan” which details the potential of

the account, a SWOT analysis, competition information and a specific action plan for account

expansion.

Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Till Sep-11

Active Clients 153 233 250 400 500 565 589 712 777

AM/CP’s 111 150 220 328 442 724 860 900 1000

AM/CP per Client 0.73 0.64 0.88 0.82 0.88 1.28 1.46 1.26 1.29

Average Revenue per Client ($ Mn)

2.4 2.5 3.5 3.5 4.2 4.9 5.5 6.4 5.7

% Revenue from existing clients

80% 91% 96% 96% 95% 97% 97% 97%


o This has led to an increase in the Average Revenue per Client; from $2 million in 2002 to

$5.7 million in 2011, which is a 3X growth

o Further, more than 90-97% of annual revenues every year comes from existing clients

8 http://www.cognizant.com/two-in-a-box 9 http://www.businessweek.com/managing/content/jan2008/ca20080117_999307.htm 10 http://articles.economictimes.indiatimes.com/2010-03-17/news/28492502_1_francisco-d-souza-cognizant-technology-solutions-cognizant-business-consulting 11 Ibid.


Nov 2011 9

Cognizant transitions a significant number of its existing clients (as the relationship matures) into

“Strategic Clients” category (those offering potential to generate between 5 and 40 million USD

annual revenues, at maturity12). Identifying, targeting and expanding relationships with strategic

clients has been a key growth strategy of Cognizant13.

Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Sep-11

Active Clients 153 233 250 400 500 565 589 712 777

Strategic Clients 35 48 67 87 107 128 144 166 185

Strategic Clients as % of Total Clients

22.8 20.6 26.8 21.7 21.4 22.6 24.4 23.3 23.8

About 20-26% of clients fall into the “Strategic Clients” category, whereby Cognizant focuses and

invests in deepening and expanding relationship for long-run revenue stability and growth.

(Appendix 7.2 provides details of AM/CP profile, role and responsibilities)

Cognizant Business Consulting (CBC) Professionals - Consulting Focus

Since 2006, Cognizant Business Consulting14 (CBC) has been a key component of Cognizant’s

strategic agenda (for a detailed picture on the CBC growth, refer Appendix 7.3). Cognizant has been

growing its CBC practice both organically and inorganically. Cognizant’s acquisitions have, to a large

extent, been targeted towards expanding its industry-specific consulting capabilities; such as,

Fathom Solutions (Telecom consulting), Active Intelligence (Oracle Retail consulting), Strategic Vision

Consulting (Media and Entertainment consulting), marketRx (Health Care analytics and consulting),

Pepperweed Advisors (Infrastructure services consulting), PIPC group (Program Management

consulting), Zaffera (SAP retail consulting), CoreLogic India (Analytics in consumer lending space).

Cognizant has consistently invested in its CBC practice, with an average Associate-to-Consultant ratio

of 40:1 (and) an average of 3.1 CBC consultants per client; 40% of these consultants work in India15:

Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Till Sep-11

Headcount 38853 55405 61697 78422 104,000 130,000

Active Clients 400 500 565 589 712 777

Cognizant Business Consultants 1000 1800 1800 1800 2200 280016

Associate-to-Consultant Ratio 40:1 30:1 34:1 43:1 47:1 46:1

CBC consultants per client 2.5 3.6 3.1 3 3 3.6

Key characteristics of the CBC practice are as follows:

CBC consultants are completely integrated into the respective industry verticals; however, a CBC

consultant reports into both the industry vertical head and the CBC practice lead.

12 http://investors.cognizant.com: Annual Reports (2002-2010); Quarterly Reports (Q1, Q2, Q3 2011) 13 Ibid. 14 Sources: Cognizant Annual Reports (1998-2010); Cognizant Quarterly Earnings Call Transcripts from http://seekingalpha.com 15 “SWOT: Cognizant, Consulting and System Integration Services, Worldwide”, Susan Tan, Forrester Research, 12 Aug 2011 16 Ibid.


Nov 2011 10

By using the same domain expert drive both the consulting service work and the ensuing

systems implementation, Cognizant positions itself as a full life-cycle solution partner, with

upstream ideas and know-how and downstream accountability for implementation.

Cognizant has been actively hiring MBA graduates from premier business schools in India (and in

the US and Europe) for its consulting profiles, while also bringing in domain consultants from

large consulting firms and the industry. Cognizant has also made strategic hires for key senior

leadership positions in CBC; for instance, hiring Mark Livingston from AT Kearney to lead CBC

Consulting Services are charged at a premium, and the Consulting Partners have billability and

utilization targets

CBC practice growth has led to a gradual shift in the revenue streams for the company (i.e.),

project-based revenue streams now contribute about half of overall revenues:

Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-09 Dec-10

% Revenues from Project-based contracts (application development, integration, testing, consulting)

41 46 49 49 48 44 48

% Revenues from Annuity contracts (application maintenance, infrastructure outsourcing)

59 54 51 51 52 56 52

Source17: Annual Reports of Cognizant (2002 – 2010)18

17 http://investors.cognizant.com: Annual Reports (2002-2010) 18 http://www.financialexpress.com/news/we-dont-see-any-need-for-restructuring/785978/0

Key Points:

1. Cognizant has been ploughing in focused efforts to evolve its Client Engagement Model, invest in

strategic branding for the same (for example, Two-In-A-BoxTM Model), communicate it to all

stakeholders consistently and most importantly, invest and drive it down to successful execution

2. Cognizant has separated the hunters (direct sales personnel) from the farmers (account managers and

client partners). Based on consistent margins, we deduce that farmers hold P&L responsibilities and

hunters have revenue-booking targets from specified customer list

3. Cognizant’s investments in hiring client partners with deep domain expertise and from large consulting

firms have invariably paid off, with more than 90% of annual revenues coming from existing clients

4. Cognizant has been making a significant strategic move towards positioning itself as a “Consulting”

solutions partner for its clients; most of its acquisitions in the recent past have been done to

strengthen its industry-specific consulting capabilities

5. 52% of annual revenues come from Annuity contracts and 48% from Project based contracts including

consulting


Nov 2011 11

4.2 Geographic Expansion

Another strategy of the Cognizant growth story has been its strategic focus on expanding its

geographic footprint. The company was organized on a geographic segmentation19 basis until early

2000-01, after that it pioneered the industry verticalization structure.

4.2.1 Geographic Expansion

The primary revenue-engine for Cognizant has been the North American region; however, Cognizant

adopted a strategic decision20 to expand beyond the North American region, beginning 2002.

The table below charts out Cognizant’s geographic expansion through the decade (2002-11)21:

31-Dec-02 31-Dec-03 31-Dec-04 31-Dec-05 31-Dec-06 31-Dec-07 31-Dec-09 31-Dec-10

New regions added during

the year

Ireland

Netherlands, Singapore,

Japan, Australia

Norway, Switzerland,

Malaysia, China

Germany, France, Czech

Republic

Argentina Hungary

Belgium, Sweden,

Philippines, Mexico, Dubai

Spain, Denmark, Finland,

Thailand, Brazil

Note: Geographic Footprint includes one or more of these: global delivery centres, sales and marketing offices, business

development offices and regional management centres

Cognizant has added 24 regions in 10 years, which is an expansion rate of 2.4 regions per year

Cognizant has almost doubled its delivery centres (from 28 to 54) as well as Sales, Marketing,

Business Development offices (from 17 to 36), in a span of 5-6 years

Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10

Delivery Centres 28 34 40 50 54 54

Sales & Marketing, Business Development, Regional Management Offices

17 21 21 24 27 36

Appendix 7.4 shows the countries where Cognizant is present.

19 Cognizant Annual Reports (2000-2011): http://investors.cognizant.com/index.php?s=52 20 Cognizant Annual Report 2002, pp. 17 21 http://investors.cognizant.com: Annual Reports (2002-2010); Quarterly Reports (Q1, Q2, Q3 2011)


Nov 2011 12

4.2.2 Europe Strategy

Europe has been a significant contributor to the Cognizant growth story. Europe has been growing at

a CAGR of over 53% (during the period 2003-2010), much higher than the company’s CAGR

Europe Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 (estimate)

CAGR (2003-10)

Revenues ($M) 40 74 104 184 343 541 607 855 1133 53%

Growth (%) 44 84 41 77 87 58 12 41 37

Revenues as % of Total Revenues

11 12 12 13 16 19 18 19 18


Cognizant’s expansion strategy in Europe has primarily involved:

(a) Inorganic Growth: Targeted Acquisitions of local firms (UHCI, Infopulse, Galileo Performance)

and Strategic Alliances with local players (T-Systems, Ordina), who bring along local client

partners, industry expertise, customer base and local language capability

(b) Organic Growth: Continued heavy investments in:

Establishing sound regional infrastructure: 11 business development offices and 3 delivery

centres, all in a span of 10 years

Adding seasoned senior client engagement staff across the continent23

(c) “Go Local”: Cognizant has been particular about hiring experienced professionals from the

“local” markets, keeping in mind the cultural, linguistic, attitudinal and business factors across

the continent. According to Francisco D’Souza (CEO of Cognizant): “We have grown our

business in the region by recruiting experienced associates within each of the local markets we

serve, thereby combining Cognizant’s global resources with a strong appreciation of local

culture, language, and business practices”24

(d) Strong verticalized expertise in Banking and Financial Services industry and Health Care,

Life Sciences space

A detailed picture of Cognizant’s Europe journey is illustrated in Appendix 7.5

22http://investors.cognizant.com: Annual Reports (2002-2010); Quarterly Reports (Q1, Q2, Q3 2011) 23 Sources: Cognizant Annual Report 2002 pp. 4; Annual Report 2003 pp. 6; Annual Report 2004 pp. 3; Annual Report

2005 pp. 5; Annual Report 2006 pp. 4; Annual Report 2008 pp. 25; Annual Report 2009 pp.5 24 Cognizant Annual Report 2009, pp. 5


Nov 2011 13

4.2.3 China Strategy

Cognizant’s China strategy does not demonstrate as much success as its Europe story25

2003 Begins work in Mainland China with a small project, at the request of a global client

Explores China as a possibility for a global delivery centre; plans to open a small subsidiary in China

2005 Shanghai delivery centre becomes operational

Couple of global clients express interest in Cognizant supporting their operational activities in China

2006 Shanghai delivery centre houses about 300 employees

Shanghai centre’s process infrastructure becomes fully aligned with all other global delivery operations of Cognizant

Begins campus recruiting at top-tier Chinese universities

2007 Headcount increases to over 600 employees

Over a dozen global clients have some portion of their services delivered from the Shanghai Centre

2008 Expands client service activity, with headcount exceeding 800 employees

Operates out of 3 locations in Shanghai

2010 Opens a business development office in Hong Kong

Cognizant’s China strategy has been through the organic route:

(a) Supply: Largely from a talent sourcing perspective

(b) Scale: The Shanghai global delivery centre has managed to grow upto 800 employees in 4 years

and caters to more than a dozen global clients

(c) Risk Minimization, by expanding cautiously for well-defined projects with global clients

Refer Appendix 7.6 for Cognizant’s expansion strategy in Latin America

25 http://investors.cognizant.com: Annual Reports (2003-2010); Quarterly Reports (Q1, Q2, Q3 2011)

Key Points:

1. Cognizant outside US expansion has been a combination of customer led and revenue growth from

new geo. By expanding into 24 new geographies in 10 years shows that new geo entry has been

defined by market potential, investments needed, and speedy execution capabilities.

2. Cognizant has adopted the “Go Local” route in Europe, with respect to sourcing local talent from the

continent. This has been through a combination of inorganic (key acquisitions) and organic (building

regional management offices, hiring senior client partners, investing in strategic alliances) strategies.

3. Cognizant’s China expansion has been through the organic route; however, its growth in China has

been stagnant.


Nov 2011 14

4.3 Inorganic Growth

Cognizant has made targeted “tuck-in” acquisitions across geographies, for factors including

broadening and strengthening its services portfolio (“edge to core strategy”); increasing geographic

footprint; expanding industry and domain expertise; diversifying customer base. Post-acquisition,

there is a strong focus on integrating these new services in all RFP’s. This section details all the

acquisitions26 completed by Cognizant. For more details on these acquisitions, refer Appendix 7.7

Target Company Acquisition Cost ($M)

Goal of Acquisition Post-Acquisition

United Healthcare Ireland Limited (Ireland, 2002)

3 Go "Europe" - to initiate

the international expansion strategy

Begins near-shore delivery centre in Ireland

2005: Closes the facility citing increasing costs

ACES International (U.S., 2003)

4.7 To expand CRM solutions

set

Gartner (2005) includes Cognizant in the North American

CRM Service Provider Magic Quadrant27; cites Cognizant as

the only offshore player that is "Promising28

Infopulse (Netherlands,

2003) 5

European expansion strategy

Infopulse brings some of the biggest client references29

including ING Bank, Rabo Securities, Kempen & Co.

Annual Revenues (from Europe) go up by 44% YoY, the

highest in the region in 4 years

Rabobank (a customer of Infopulse), chooses partnership of

Cognizant and Ordina for a 7-year outsourcing arrangement

(2007)

Silverline Technologies (U.S., 2003)

10 To bolster leadership

position in the financial services space

Cognizant picks up its Phoenix development center

By 2011, expands Phoenix centre to 1000 employees30,

across all major service offerings (application services, IT

infrastructure services , BPO, KPO, Consulting)31

Ygyan Consulting (India, 2004)

1.6

To strengthen SAP capabilities and to cross-

sell its core SAP services to Ygyan's existing client base

Ygyan brings significant client base in Singapore, UK, India

In 2005, Forrester32 cites Cognizant as having made major

inroads in SAP services in a very short amount of time

Cognizant’s SAP revenues in 2005 touch $25 million33; Ygyan

acquisition contributes to about 12% of this.

Cognizant becomes “SAP Global Services Partner” by ‘09

Fathom Solutions (U.S., 2005)

35

To strengthen its industry consulting expertise, its

service capabilities in telecom industry and to

Fathom brings some of the biggest clients in telecom and

financial services, such as Cox Communications, Focal

Communications Corp., SBC

26 http://investors.cognizant.com: Annual Reports (2002-2010); Quarterly Reports (Q1, Q2, Q3 2011) 27 “Magic Quadrant for North America CRM Service Providers 2005”, Frances Karamouzis, Matthew Goldman, Ed Thompson, March 14 2005, Gartner Research 28 http://www.business-standard.com/india/news/gartner-rates-cognizant-aheadtop-indian-peers-in-crm-space/143547/ 29 http://www.thehindubusinessline.in/2003/12/03/stories/2003120301710700.htm 30 http://articles.economictimes.indiatimes.com/2011-01-12/news/28432529_1_delivery-center-delivery-centre-business-and-knowledge-process 31 http://investors.cognizant.com/index.php?s=43&item=11 32 “Indian SAP Services Scorecard Summary: Cognizant Technology Solutions; Key Findings from ‘The Forrester Wave’: Indian SAP Services, Q4 2005”, Stephanie Moore, Tom Pohlmann, Olivia Ester, Katherine Brown; October 21, 2005; Forrester Research 33 Ibid.


Nov 2011 15

build deep partnerships with leading telecom services customers

In 2006, annual revenues from the “Other” vertical grow up

by 75% YoY, the highest ever growth rate recorded in this

vertical

AimNet Solutions, Inc.

(U.S., 2006) 14.8

To strengthen its IT infrastructure

management capabilities and win AimNet's existing

huge customer base

Cognizant wins 80 customers from this acquisition

2007: Cognizant builds a Global Infrastructure Operations

Center platform

2007: Merck & Co. Inc. names Cognizant as a strategic

partner for a full suite of services, including IT infrastructure

management services

2007: Simon & Schuster, Inc. selects Cognizant for an end-to-

end IT infrastructure management program

IT IS practice headcount rises to 2100 associates by 2007 and

upto 2800 associates by 200834

marketRx, Inc. (U.S., 2007)

136

To strengthen its life sciences industry expertise

as well as data analytics capabilities, with plans to

extend the analytics expertise to multiple

industry sectors in the future

Cognizant gains 75 customers35, which includes all of top 20

pharma companies and 4 of the 5 largest biotech firms

With this acquisition, Cognizant begins its “Enterprise

Analytics” service area

2011: 36“Enterprise Analytics” practice grows to 600+

associates, experienced in developing analytics across

industries (manufacturing, banking, financial services, life

sciences, retail, consumer goods, media, technology)

Active Intelligence (Canada, 2008)

Undisclosed

To deepen industry-specific consulting

expertise in Oracle retail solutions

Annual Revenues from Manufacturing-Retail vertical

double37 ($443 million in 2008 to $891 million in 2011)

2011: Customer base includes 11 of the Top 30 North

American retail clients; Oracle retail practice headcount rises

to 200 functional and technical consultants38

Strategic Vision Consulting Inc.

(U.S., 2008) Undisclosed

To extend consulting capabilities in the Media

and Entertainment sectors

2010: Enters into a multi-year, multi-million dollar strategic

engagement with Harris Corporation, in the media

management software space

2010: 39Works with 4 of the top 10 Global Media companies

and 6 of the major U.S. Film Studios

2010: Media and Entertainment practice headcount rises to

over 3000 consultants

Pepperweed Advisors

(U.S., 2009) Undisclosed

To gain seasoned consulting talent in the IT Infrastructure space and

valuable intellectual property, including well-

defined ITIL-based processes, tools, and

Cognizant gains Pepperweed’s client-base, which includes

Global 2000 companies in financial services, healthcare,

retail, and manufacturing sectors

2010: Eli Lilly expands relationship with Cognizant, to

leverage its BPaaS model, which uses cloud-based IT

infrastructure

34 “Microsoft Infrastructure Solutions Tour by Cognizant”, Bob Boles, VP-IT IS, Cognizant, 2008 35 http://www.livemint.com/2007/10/20000406/Cognizant-acquires-marketRx-fo.html 36 http://www.cognizant.com/enterpriseanalytics 37 http://economictimes.indiatimes.com/cognizant-poses-challenge-to-infosys-tcs-in-retail/articleshow/7831819.cms 38 http://www.cognizant.com/OurApproach/Oracle%20Retail.pdf 39 http://www.cognizant.com/OurApproach/IME%20Overview%201.20.10.pdf


Nov 2011 16

frameworks. 2011: Forrester40 cites Cognizant as a “Leader” in IT

Infrastructure Services, based on its global delivery model,

operations and strategy consulting offerings, and overall

client satisfaction

UBS India Service Centre

(India, 2009) 75

A multi-year services agreement under which Cognizant will provide a range of BPO, KPO, RIM services to UBS divisions

around the globe

Gains over 1,600 associates with deep capabilities in wealth

management, investment banking, asset management,

research, remote IT infrastructure management

Expands BPO, KPO capabilities in the financial services

industry

Invensys Operations

Management and Invensys Rail (India, 2009)

Undisclosed To solidify presence in the

manufacturing and engineering services space

Gains over 500 associates with rich experience in providing

software solutions and consulting services for the processing

and manufacturing sectors

Launches the EMS (Engg & Mfg Solutions) practice, whose

headcount grows to 1000 associates in just 2 quarters

Annual revenues from Manufacturing-Retail vertical go up by

50% YoY in 2010, the highest among all verticals

PIPC Group (U.K., 2010)

Undisclosed

To enhance program management capabilities,

and to strengthen the ability to manage

increasingly complex global projects

41Enhances Global Program Management capabilities, across

industries such as Financial Services; Retail; Oil and Gas;

Utilities; Government & Public, Communications; and the

Environmental sector

PIPC brings in an exhaustive client base42 of 250 multi-

national clients and more than 200 program management

experts across 25 countries

Gains proprietary tools of PIPC, such as PMO (Project

Management Office) core competency and PhD (Project

Health Diagnostic) tool

Galileo Performance

(France, 2010) Undisclosed

To complement Cognizant's fast-growing global testing practice,

while extending footprint in France

Zaffera (U.S., 2011)

Undisclosed

Bring in Zaffera's SAP retail consulting expertise and

software solutions in supply chain management,

merchandising, ecommerce,

store management

Gains more than 100 professionals with an average of 12+

years of experience in SAP retail consulting and SAP-focused

toolsets43

44Manufacturing-Retail vertical revenues for 9-months ended

Sep 2011 grow up by 47%, the highest among all verticals

40 “The Forrester Wave: Global IT Infrastructure Outsourcing, Q1 2011”, Bill Martorelli, Wolfgang Benkel; March 11, 2011;

Forrester Research 41 http://news.cognizant.com/index.php?s=14083&item=20246 42 http://www.pipc.com/company/who.php 43 http://articles.economictimes.indiatimes.com/2011-09-28/news/30208833_1_francisco-d-souza-r-chandrasekaran-retail-space 44 http://investors.cognizant.com/index.php?s=43&item=187


Nov 2011 17

CoreLogic Global Services Private

Limited (India, 2011)

50

V-BPO strategy: To provide end-to-end business

processes and analytics solutions across the entire

mortgage value chain.

Expands portfolio of BPO, KPO, Analytics offerings into the

consumer lending space in North America45

CoreLogic brings in one of the largest and most

comprehensive US real estate, mortgage application, fraud,

and loan performance databases46

45 http://www.dnaindia.com/money/report_cognizant-to-acquire-corelogics-indian-business_1569771 46 http://articles.timesofindia.indiatimes.com/2011-07-27/india-business/29820427_1_francisco-d-souza-mortgage-applications-servicing

Key Points:

1. A large number of these acquisitions (9 out of 17) have been done to strengthen industry-specific, practice-

specific, high-end consulting capabilities and analytics expertise; this signals Cognizant’s strategic direction

towards moving up the value chain

2. Cognizant has entered new horizontal offerings that have been defined as core through acquisitions. These

include Ygyan consulting for SAP offering, AimNet Solutions for IMS offerings, Invensys for PLM/MES offerings.

3. In order to cross-sell, the new services acquired are positioned in all RFP presentations irrespective of customer

need at that point of time


Nov 2011 18

4.4 Vertical Focus and Portfolio of Services

Cognizant’s verticalized industry focus and continued investments in expanding its portfolio of

services have been key contributors to its growth through the decade.

4.4.1 Vertical Focus

Cognizant was the first to go “vertical”47 - verticalized back-end (delivery) as early as 1998-99 and

front-end (sales) in 2002-03. This ensured that its employees became specialized in select verticals

and sourced and serviced clients accordingly. These verticals include48:

(a) Financial Services (banking, financial services, insurance)

(b) HealthCare (healthcare, life sciences)

(c) Manufacturing/Retail/Logistics

(d) Other (information, media and entertainment, telecom, consumer goods, energy and

utilities, hi-tech, travel and hospitality)

Revenues49 ($M) Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 CAGR

(%)

Financial Services 170 290 441 680 1001 1284 1407 1944 49

HealthCare 78 116 176 331 504 688 860 1177 46

Mfg/Retail/Logistics 64 105 152 210 320 443 565 850 43

Other (Media, Hi-Tech, Telecom, Information Svcs)

55 74 116 204 309 401 447 621 39

Cognizant has been successful in demonstrating a broad-based growth; all its verticals have

shown commendable growth (with each vertical’s CAGR higher than 39%, in the 2003-10 period)

Financial Services and HealthCare emerge as the biggest growth drivers, with CAGR over 46%

47 http://businesstoday.intoday.in/story/stealing-the-thunder/1/3904.html 48 http://www.cognizant.com/ 49 http://investors.cognizant.com: Annual Reports (2002-2010); Quarterly Reports (Q1, Q2, Q3 2011)


Nov 2011 19

4.4.2 Example - Building Health Care Vertical

Cognizant has adopted a five-pronged strategy to build one of its key verticals: Health Care50(for a

detailed picture on the Health Care vertical growth, refer Appendix 7.8). Cognizant was an early-

mover in the Health Care segment, coupled with its parent-advantage (with 18% revenues just from

IMS Health, the controlling parent company and an existing customer base including IMS Health,

Sierra Health, Lifeguard, Regence Group51). For instance, Cognizant won one of its first multi-phase

contracts with Sierra Health services, primarily owing to the Erisco FacetsR managed care software

package (Erisco being fully controlled by the same parent company, IMS Health).

1. Expansion of horizontal service offerings:

While Cognizant began with the traditional IT application development and maintenance services for

its Health Care customers, the company has been continuously investing in expanding its horizontal

service offerings, such as:

2000-01

Starts building CRM Services In 2004, Gartner includes Cognizant in the North American CRM Service Provider magic quadrant, recognizing the CRM services offered by Cognizant to leading life-sciences companies, to support their sales and marketing process for drugs By 2006, Cognizant’s CRM service capabilities in the health care industry included multi-country Siebel CRM implementation for several of the world’s largest pharmaceutical companies.

2004 V-BPO Services Pioneers “V-BPO” (Vertically-Oriented Business Process Outsourcing) services in life-sciences, for a major pharmaceutical company, in the area of data management for clinical trials

2006 SAP Offerings Cognizant’s partnership with SAP drives significant traction amongst its health care customers; specifically in Europe, across pharmaceutical companies for multi-year, multi-location support of their SAP systems, specifically in ERP

2007 IT Infrastructure Management Services Merck & Co. Inc. names Cognizant as a strategic partner for a full suite of services, including IT infrastructure management services By 2008, Cognizant has won multiple contracts in this segment, such as multi tower infrastructure management and support for a healthcare business processes provider; server infrastructure management and support for a large pharmaceutical company

2009 Consulting; Business Intelligence and Data Analytics; KPO services Cognizant sees increased interest in data warehousing, business intelligence, and data analytic capabilities as customers seek to better understand the underlying drivers of their medical costs (Cognizant gained significant analytics expertise in the health care space, through its marketRx acquisition) Consulting Services are growing, to assess the impact of industry transaction standards and code sets, such as, ICD-10 and 5010 code set; Cognizant consultants (CBC) help clients address industry changes such as the advent of ICD-10 regulation

2010 Cloud: SaaS, BPaaS Cognizant invests heavily in non-Linear revenue streams, such as its proprietary platform for pharmaceutical sales force planning, which has won commitments from global pharmaceutical companies, to manage thousands of sales professionals through either software as a service (SaaS) or business process as a service-based models (BPaaS)

50 Sources: Cognizant Annual Reports (1998-2010); Cognizant Quarterly Earnings Call Transcripts from http://seekingalpha.com 51 http://www.expresscomputeronline.com/20011008/comwatch1.htm


Nov 2011 20

Eli Lilly & Co. begins to use Cognizant’s new Business Process as a Service (BPaaS) model; this model combines cloud-based IT infrastructure, software platform along with BPO services and software applications for sales and marketing operations

2011 Cognizant sees increased traction amongst its health care customers, for newer offerings such as cloud-based CRM, mobile technology and business process as a service offerings (BPaaS)

2. Expansion of vertical-specific solutions:

Another key growth driver within the Health care vertical has been the continued expansion in the

industry solution offerings; some of these are highlighted below:

2000-01

Cognizant makes a significant investment in HIPAA (Health Insurance Portability and Accountability Act)

compliance solution

With the Erisco FacetsR managed-care software package, Cognizant implements more managed-care

systems in 2001 than in all previous years combined

2005 Introduces solutions for health plans and third-party administrators dealing with the new Medicare

Part D drug benefit

Invests heavily in developing core capabilities:

(a) in FDA and EMEA regulation

(b) in supporting clinical trials for pharmaceutical companies

2006 Rolls out new service offerings for:

(a) Assisting pharmaceutical companies in addressing the cost pressures of their industry, such as

product development and IP protections processes;

(b) Regulatory compliance requirements such as the Medicare part, and National Provider Identifier;

(c) Portfolio Rationalization and Systems Consolidation services; providing customers with a

comprehensive assessment of systems integration, risk, and opportunities as they seek to strengthen

their businesses through mergers and acquisitions;

(d) Claims Audit Solution framework addresses issues (such as claims payment fraud and errors) in

manual claim audit processing and reduces turnaround time thereby minimizing payment errors

2007 Expands service offerings across all areas of the life sciences value chain, from research, development

and manufacturing to sales and marketing operations (through the marketRx acquisition)

2009 Traction in Consulting Services, to assess the impact of future industry transaction standards and code

sets, such as, ICD-10 and 5010 code set

Expanding solutions in pharmacovigilance in life sciences, developing online health insurance portal

2010 Regulatory changes such as HIPAA, 5010 and ICD-10 in the U.S. healthcare industry continue to drive new projects for Cognizant. Cognizant Business Consulting team is engaged with 5 clients to assess the impact of ICD regulations on them. This has already led to 3 large follow-on programs, 2 of which are in the remediation stage


Nov 2011 21

3. Building key sub-vertical specialization:

A strong sub-verticals52,53 focus has enabled Cognizant to scale up its Health Care practice

successfully through the decade.

Sub-Verticals Sub-vertical-specific services and solutions

HEALTH

CARE

Payers ICD-10 Transition

Healthcare Reform Compliance

Health Analytics & Business Intelligence

Claims Processing

Managed Care Product Configuration and Implementation

Privacy & Security

Quality and Claims Auditing and Reporting

Health Care Providers Regulatory Compliance

ICD-10 Transition

Healthcare Reform

Revenue Cycle Management

ACO Strategy, Roadmap & Rollouts

Care Coordination & Management

Self Service & Patient Engagement

Technology Solutions

Hospital Performance Management

EHR & HIE Implementations

Clinical Analytics & Business Intelligence

Enterprise Applications

Government and Public Health Programs

Regulatory & Healthcare Reform Compliance

Medicaid Management Information Systems

Integrated Health Management

Health Insurance Exchanges

Quality of Care and Cost Analytics

IT Implementations

Pharmacy Benefit Managers

Medicare Part D Compliance

NCPDP D.0 Compliance

Controlled Substance Dispensing

Patient Compliance

Business Capability Roadmap

Strategic Alignment Services

Resource Plan (Demand & Supply)

IT Portfolio Rationalization & Optimization

Product Development

Business Architecture

Business Process Re-Design

Post-Merger Business Architecture

Business Transformation Execution

Strategic Sourcing

Business Process Outsourcing

Business Process Implementation

52 http://www.cognizant.com/healthcare 53 http://www.cognizant.com/life-sciences


Nov 2011 22

LIFE SCIENCES

Pharmaceutical and Biotechnology Companies

Discovery and Pre-clinical services

Regulatory Compliance

Clinical Development

Pharmacovigilance

Manufacturing and Supply Chain

Sales and Marketing

Analytics

Managed Markets

Medical Devices Companies

Discovery and Pre-clinical services

Pharmacovigilance

Manufacturing and Supply Chain

Sales and Marketing

4. Targeted Acquisitions:

Cognizant has made three acquisitions in the Health Care space. Two of these (ACES, marketRx) have

contributed significantly to the growth of the practice.

Target Company Base

Location Year

Acquisition Cost

(million USD) Area of Focus Goal of Acquisition

United Healthcare Ireland Limited (UHCI)

Ireland 2002 3

Application Development and Maintenance Services

specifically for Healthcare clients

Go "Europe" - to initiate the

international expansion strategy; To establish

near-shore development facility in

Europe

ACES International U.S. 2003 4.7

CRM systems integration and support firm specializing in

Siebel CRM solutions for Fortune 500 clients in

healthcare, financial services and telecommunications

verticals

To expand CRM solutions set

marketRx, Inc. U.S. 2007 136

U.S.-based reputed provider of data analytics and process outsourcing to global life

sciences companies in the pharmaceutical, biotechnology and medical devices segments;

owns a proprietary data analytics technology platform

To strengthen its life sciences industry

expertise as well as data analytics

capabilities, with plans to extend the analytics expertise to multiple

industry sectors in the future

5. Participation in Industry Forums and Academia:

Cognizant has been quite active in its participation in industry forums and events as well as

collaborating with academia, in the Health Care space. These have helped the company remain on

the top-of-mind-recall for its health care customers and industry players alike.


Nov 2011 23

2001 Cognizant pays IMS Health a one-time fee of approximately $825,000 under an alliance agreement in which

Cognizant is named “vendor of choice” for IT services to the pharmaceutical industry.

2003 Cognizant is named the top offshore firm in the “Healthcare Informatics 100,” a list of the 100 leading global

healthcare IT providers

2004 Gartner includes Cognizant in the North American CRM Service Provider magic quadrant, recognizing the CRM

services offered by Cognizant to leading life-sciences companies

2006 Healthcare Informatics Magazine ranks Cognizant as 21 on their list of top healthcare IT providers

2007 Healthcare Informatics Magazine ranks Cognizant as 20 on their list of top healthcare IT providers

Enters into an association with Manipal University to offer a 2-year Master of Science Degree in Clinical

Research and Regulatory Affairs, for Cognizant employees in the life sciences practice

2009 Cognizant and AstraZeneca jointly win the Clinical Research Excellence “Data Management Team of the Year”

award instituted by the Good Clinical Practice Journal

Healthcare Informatics Magazine ranks Cognizant as 10 on their list of largest healthcare IT providers54

54 http://www.business-standard.com/india/news/cognizant-ranked-10th-largest-healthcare-it-provider/63665/on

Key Points:

1. Broad-based growth across verticals in Cognizant has been due to continuous investments in:

(a) Expanding horizontal service offerings (SAP, V-BPO, IT IS, Consulting, Analytics, Cloud) as per

clients/industry needs

(b) Broadening vertical and sub-vertical specific solutions and specialization

2. Cognizant’s active participation in the industry ecosystem and collaboration with academia

(relevant to its industry verticals). Focus has been to more known with enterprises than with IT

product companies.


Nov 2011 24

5 Delivery Capability Analysis

5.1 Maintaining Gross Margin 2

There has been a gradual decline in Gross Margin 2 in the recent years; nevertheless, the overall

margin range remains between a healthy 42-46%

Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 (est)

Revenues ($M) 229 368 587 886 1424 2135 2816 3279 4592 6,187

Gross Margin2 % 46.4 45.7 45.5 45.8 44.7 43.5 44.1 43.6 42.2 42.4

Effectively, Cognizant has been able to maintain its margins despite employee cost increase through

a mix of levers. The key among them are

Improving utilization levels

Utilization Rate55 % Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Sep-11

Offshore 52 58 56 64 70 73 70

Onsite 85 86 88 88 89 91 94

Only about 20% of Cognizant’s offshore employees are fully verticalized; the rest are flexible across

verticals. This explains the improvement seen in offshore utilization levels, since 2005

Shifting more(%) work from onsite to offshore

Effort Mix56 % 2003 2005 2008 2009 2010 2011

Offshore (%) 70 75 76 79.6 79.8 79

Onsite (%) 30 25 24 20.4 20.2 21

Increasing campus hire percentages

2010 2011

Year starting headcount 78,400 103,945

Year starting billable headcount, assuming 15% headcount as non-billable 66,640 88,353

Campus Hires for the Year 17,000 25,396

Campus % as year starting headcount 26% 29%

Rate increases - As per quarterly analyst calls, the message has been 1-2% annual rate

increases

Pricing Increase YoY % 2005 2006 2007 2010 2011

Offshore (%) 1.5 1.5 2 1 2

Onsite (%) 1.5 1.5 2 1.5 2

55 Cognizant Earnings Call Transcripts from http://seekingalpha.com 56 Cognizant Earnings Call Transcripts from http://seekingalpha.com


Nov 2011 25

5.2 Linear business model

Cognizant has followed a linear business model, (i.e.) revenue growth and headcount growth have

been in close sync through the years

5.3 Revenue Per Employee

Cognizant has managed to remain operationally robust; its revenue-per-employee (includes all

employees: billable + non-billable, onsite + offshore) has increased by about 18.8% since 2002

Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10

Revenues ($M) 229 368 587 886 1424 2136 2816 3279 4592

Headcount 6168 9241 15327 24342 38853 55405 61697 78422 104,000

Revenue/Employee ($) 37141 39847 38277 36391 36657 38544 45647 41807 44157 Source57: Annual Reports of Cognizant (2002 – 2010); Quarterly Reports of Cognizant (Q1, Q2, Q3 2011)

5.4 Fixed Price vs. Time and Material Contracts

Fixed Price contracts have gone up in terms of their contribution to overall revenues:

Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Sep-11

% Revenues from FP projects

26 No Data No Data 25 25 27 30 32 31

% Revenues from T&M projects

74 No Data No Data 75 75 73 70 68 69

5.5 Project-based contracts vs. Annuity contracts

Annuity-based revenue streams contribute about half of overall revenues. Annuity in business

provides stability in cost (campus infusion) and cash flows (long term).

Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-09 Dec-10 % Revenues from Project-based contracts (application development, integration, testing, consulting)

41 46 49 49 48 44 48

% Revenues from Annuity contracts (application maintenance, infrastructure outsourcing)

59 54 51 51 52 56 52

57 http://investors.cognizant.com: Annual Reports (2002-2010); Quarterly Reports (Q1, Q2, Q3 2011); http://www.wikinvest.com/stock/Cognizant_Technology_Solutions_(CTSH)/Sales_Marketing http://www.financialexpress.com/news/it-firms-ramp-up-sales-team-to-chase-large-deals/787559/0


Nov 2011 26

5.6 Delivery Model – Defined, Stated and Shared with Customers

Cognizant’s delivery model has evolved from onsite-offshore model to an atomically global model58.

5.7 Cognizant 2.0 Delivery Platform59

To graduate towards an “Atomically Global” delivery model, Cognizant has been building its next

generation global delivery system: Cognizant 2.0. The primary objectives of this platform are:

Shift the competitive field from labour arbitrage to intellectual arbitrage60

Add all clients & affiliated solution providers in an “ecosystem of people, processes and partners”

Orchestrate work around the globe, while providing a real-time view of the global work being

done for clients

Function as an Intelligent Delivery Ecosystem - a one stop shop for all project management,

metrics and knowledge management

By 201061, over 7,500 client projects (of the total about 9500 active projects) were using the C2.0

platform, including both new client engagements and existing projects. Also, projects using C2.0

demonstrated 8% improvement in on-time delivery and 15% increase in productivity.

5.8 Global Delivery Model and Quality certification

Cognizant adopts a global delivery model, whereby 20% of work is done onsite and the rest is

delivered from offshore and near-shore delivery centres located across the globe.

Dec-02 Dec-03 Dec-04 Dec-06 Dec-07 Dec-09 Dec-10

Delivery Centre added Ireland Netherland China Argentina Hungary Philippines

Mexico Brazil

All these delivery centres carry CMMI Level 5 certification62.

58 Cognizant Annual Report 2006 59 http://www.cognizant.com/cognizant-2-0 60 “Cognizant 2.0: Leveraging Web 2.0 Technologies for Driving Innovation in Offshore Delivery”, Mayur Sahni, IDC Research, Nov 2009 61 Cognizant Annual Report 2010 59 Cognizant Annual Reports (2003-11) 62 Cognizant Annual Reports (2003-11)

1994-2000

Onsite-Offshore Model

2000-05

Refined onsite-offshore model, by including strong project management, large-scale program management and architecture and deep industry domain knowledge

2006-11

Atomically Global Model:

Client tasks are divided into atomic sub-processes; distributed and executed in multiple locations worldwide and reassembled into an end-to-end solution for delivery


Nov 2011 27

6. Positioning, Branding and Perception

6.1 Positioning – Evolution through the years

Cognizant has evolved its positioning63 through its growth journey. The company has been

consistently focused in clearly stating its positioning, across all of its communication channels.

Clearly, Cognizant has been repositioning itself to keep pace with the changing landscape. Besides,

Cognizant adopts a broad “strategic theme” every year, which is communicated in all of its

messages. Every communication from Cognizant, during the year, carries this theme consistently.

63 Sources: Cognizant Annual Reports (1998-2010); Earnings Call Transcripts from http://seekingalpha.com

1999:

“A leading provider of second

generation e-business solutions”

2000-02:

“Leader in the industry; Premium service provider, higher on the value chain, with

dedicated competency and solution centers….helping customers deploy the right

business and IT strategies and maximize their return on technology investment”

2003-05:

“U.S. based Tier-1 service provider, with the size and scale to handle the

most complex client needs”

2006-09:

“Born global and grown up virtualized”

“Transcend mere labour arbitrage and the related cost savings, to

move into Intellectual Arbitrage, by delivering IT services and

specialized knowledge processes using an atomically global model”

2010-11:

“At the forefront of the new economy, guiding clients through the

future of work”


Nov 2011 28

6.2 Branding - Awards and Recognition

Cognizant has been in the news every year, in terms of independent research reports, rankings,

awards and accolades. While some of these (Forbes, Fortune, Wall Street Journal, Business Week)

have contributed towards strengthening the overall corporate brand, some others (Healthcare

Informatics, Gartner, Forrester) have significantly contributed towards strengthening the relevant

industry vertical / horizontal practices / specific business units within Cognizant. The table below

provides a comprehensive list of awards won by Cognizant.

2000 “Best of Best Practices Award” given by the Carnegie Mellon Center for Information Systems Engineering

Forbes’ Best Small Companies of 2000

BusinessWeek’s “200 Hottest Growth Companies”

Deloitte & Touche’s “Fastest-Growing Technology Companies”

Recognized as a leader in the e-services space by both IDC and The Gartner Group

2001 Tops a Forrester Research report as a “Pivotal Offshore Provider”

Ranked in the top 5 on a list of “Smart 100” companies by IT services magazine SmartPartner

2002 Top-ranked technology company on Business Week’s 2002 list of Hot Growth Companies and Forbes’ 2002 Best Small Companies list

Ranked one of the top-performing stocks for the year on Personal Finance magazine’s Bloomberg 100 list

Chosen as the top pure-play onsite/offshore company by NASSCOM

2003 Named top offshore firm in “Healthcare Informatics 100,” a list of 100 leading global healthcare IT providers

Awarded the LOMA Excellence in Education Award, a leading insurance-industry accolade

2004 Named the “Best Small Company in America” by Forbes magazine

Fortune magazine ranks Cognizant among its top growth companies

Listed on Business Week’s Infotech 100

2005 No. 2 on the Forbes list of the “200 Best Small Companies,” the fourth consecutive year for Cognizant

Top U.S. outsourcing firm on Business 2.0 magazine’s listing of fast growing technology companies

Named the Best U.S. Company in India by the Indo-American Chamber of Commerce

The Wall Street Journal names Cognizant as one of its Best 5-Year Performers ranked by total return to shareholders and compound annual returns.

Institutional Investor magazine cites Cognizant as one of the most shareholder-friendly U.S. companies based on a survey of portfolio managers and equity analysts.

Gartner includes Cognizant in the North American CRM Service Provider Magic Quadrant

2006 Named to Fortune magazine’s list of “100 Fastest Growing Companies” for the fourth consecutive year

In the BusinessWeek ranking of “100 Hot Growth Companies”

2007 Ranked 12th in BusinessWeek Top 50 Performers list (March 2007)

Ranked 15th in BusinessWeek Hot Growth Companies list (May 2007)

Ranked 9th Fastest Growing in BusinessWeek Info Tech 100 list (July 2007)

Gartner positions Cognizant in the Leaders Quadrant of its Magic Quadrant for North American Offshore Application Services in August 2007 for the second consecutive time

Forrester Research recognizes Cognizant as a leader in a report entitled “The Forrester Wave: North American Applications Outsourcing Q1 2007”

Named to Fortune magazine’s list of “100 Fastest-Growing Companies” for the 5th consecutive time

2008 Joins the ranks of Fortune magazine’s “Most Admired Companies” at #3 in the Infotech Services category

Ranked 31st in the BusinessWeek 50, the magazine’s annual listing of “Corporate Performers” across the 10 sectors that make up the S&P 500

Hit #7 on the Forbes Fastest Growing Tech Companies list

Rated 12th among FinTech 100, a respected ranking of technology providers to the financial services industry

Named the 11th largest healthcare IT provider by Healthcare Informatics magazine

Consumer Goods Technology magazine ranks Cognizant as 3rd among the top 10 IT services providers to the consumer packaged goods industry

2009 Cognizant is a Forbes Global 2000 company and a member of the Fortune 1000

Institutional Investor Magazine ranks Cognizant #1 in the Computer Services and IT Consulting sector

For a 2nd consecutive time, Cognizant is among Fortune’s “World’s Most Admired Companies”


Nov 2011 29

BusinessWeek InfoTech 100 for 2009

Cognizant and AstraZeneca jointly win the Clinical Research Excellence “Data Management Team of the Year” award instituted by the Good Clinical Practice Journal, a leading industry publication

2010 Captures first-place honors in every category in its sector in Institutional Investor’s ranking of the nation’s best chief executive officers, chief financial officers, investor relations professionals

Ranked #6 among the world’s 50 hottest high-tech companies on Bloomberg Business Week’s 2010 list of Tech Hot Growth Companies

For 3 consecutive years, Cognizant has been named to Fortune’s World’s Most Admired Companies List

Placed 11th in the Forbes ranking of the 25 fastest growing technology companies

Cited as a “Leader” in IT IS in a March 2011 report by Forrester Research Inc. titled, “The Forrester Wave”: Global IT Infrastructure Outsourcing, Q1 2011”, based on our global delivery model, operations and strategy consulting, vision for cloud services, and overall client satisfaction

2011 Ranked #79 on Fortune’s 100 Fastest Growing Companies

Consistently on this list for 9 years running, Cognizant also earns first place on the “All-Stars” list of 16 companies that appear on the list year after year

It is to be noted that most of these awards are on the demand side and in the US; giving a clear

perception that Cognizant is a US based service provider.

6.3 Cognizant Community (Marketing Event)

Cognizant organizes its flagship customer conference called “Cognizant Community”. This annual

event happens in the U.S. usually during Jan-March64, in Europe during Oct-Dec65 and in Asia Pacific

during July-Sep66. This 3-day summit features notable keynote speakers in the world of business,

technology, economics and even adventure sports, offering innovative thinking on key business and

technology challenges across industries. This summit features less of executive vendor pitches and

sales partnering events, while provides more of a space for knowledge sharing and understanding

from thought leaders.

6.4 Cognizanti

67Cognizanti is an exclusive online community that Cognizant has developed (as part of its C2.0

platform) to allow members to build and maintain their professional networks. Initiated in late 2007,

Cognizanti currently has over 2,500 community members, which include Cognizant clients at

executive levels, industry experts, academicians and industry analysts, in addition to key Cognizant

personnel such as industry/business practice leaders. The Cognizanti community allows members to

share experiences and best practices, as well as insights into industry trends. Cognizanti is neither a

sales channel for Cognizant nor is it a repository of marketing collateral, case studies, and service

offerings.

64 http://cognizantcommunityus.com/home/ 65 http://www.cognizantcommunityeurope.com/home/index.php 66 http://www.cognizant.com/SingaporeCommunity/html/home.html 67 “Putting Social Media to work at Cognizant”, Bala Iyer, Salvatore Parise, Sukumar Rajagopal, Thomas H. Davenport; Ivey Business Journal; July 2011; http://www.iveybusinessjournal.com/topics/strategy/putting-social-media-to-work-at-cognizant


Nov 2011 30

6.5 Website and Social Media

While Cognizant web-site provides details on the verticals and horizontals services, each service

offering page starts with “Why Cognizant” and the “business benefits” Cognizant brings to

customers. All pages are supported with case studies and white papers. The web-site is search

engine optimized.

Cognizant has been active in most of the social media space; however, it does not seem to have

generated considerable interest (as indicated by the amount of following it has across social

networking platforms):

Cognizant has been active on Twitter68 since November 2009. In a span of 2 years, the company

has over 1900 tweets69, which is an average of 2.6 tweets per day. However, for its size,

Cognizant does not have many followers (has only 9189 followers70). Cognizant’s tweets are

primarily on the demand side (highlighting the benefits of solutions it has been offering to

customers across multiple industries), followed by Cognizant news stories and rather lesser

tweets on the supply side

Cognizant maintains its own channel on YouTube71. This channel has seen72 121,675 views, 667

subscribers; hosted about 70 videos in 2 years, which is an average of 3 videos per month

o A large number of these videos talk about Cognizant’s industry-specific solutions (such as

ICD-10 healthcare solution) and horizontal service offerings (CRM, IT Infrastructure); the

rest focus on broad strategic themes (such as Future of Work, Shining Through The Fog,

New Thinking series) and on the Cognizant Community event

o All of these videos contain excellent quality content, featuring the top-leadership of

Cognizant (to a large extent: Cognizant Business Consulting principals) as well as industry

analysts and leaders from research agencies (Forrester, Health Industry Insights)

On LinkedIn73, Cognizant has over 117,000 followers; Cognizant actively hires lateral entrants

through LinkedIn as the job openings are provided in detail.

Cognizant is active on Facebook with at least one post per day. Most of these posts are domain

or technology centric. There are no contests or promotions. Overall, more messages coming out

from Cognizant instead of getting interactive with users.

68 http://twitter.com/#!/Cognizant; Twitter Data for Cognizant collected as on 29-Nov-2011 69 Twitter Data for Cognizant, collected as on 29-Nov-2011 70 Ibid. 71 http://www.youtube.com/user/cognizant#p/u 72 YouTube data for Cognizant, collected on 30-Nov-2011 73 http://www.linkedin.com/company/1680?trk=jobtocomp (as on 30-Nov-2011)

Key Points:

1. Articulated positioning statement that changes every three years but consistently

communicated across all events (analyst calls, social media, web-site etc)

2. Most of the awards and recognitions are from business sources and from US. This creates a

perception of a business solution provider instead of technology servicing company

3. Most communication is one-way street i.e. “What” and “how” can Cognizant help you.


Nov 2011 31

7. Appendix

7.1 Board of Directors74

John E. Klein (Compensation, Audit, Nominating / Corporate Governance Committees)

John was elected to the Board of Directors in March 1998, and has served as Chairman of the Board

since December 2003. He currently serves as President and Chief Executive Officer of Polarex, Inc.,

an organization providing executive support to software and services companies, where he has been

employed since 1994. Prior to that, John held various positions at a variety of companies, including

President and Chief Executive Officer of MDIS Group PLC, a UK listed software and services company.

In addition, he also served as Chairman of Glovia International and PRO IV Limited, two enterprise

software and services companies. Previously, John held vice presidential positions with both Digital

Equipment and IBM. He also serves as a director of Arxan Technologies, Inc., a security software

solutions company.

Maureen Breakiron-Evans (Audit Committee)

Maureen joined the board of directors in June 2009 after serving as Chief Financial Officer of Towers

Perrin from January 2007 until April 2008. Previously, Maureen was Vice President and General

Auditor of CIGNA Corp. from February 2005 until October 2007, where she was responsible for

managing the enterprise risk management and internal audit functions. From 2001 to 2004, she

served as Executive Vice President and Chief Financial Officer at Inovant, LLC, which is Visa’s captive

technology development and transaction processing company. Prior to that, Maureen held several

positions at Transamerica Corp. including Vice President and General Auditor, Vice President of

Control and Services and President of Transamerica Business Technologies Corp. She began her

career as a financial auditor, ultimately serving as an Audit Partner with Arthur Andersen & Co.

John N. Fox, Jr. (Compensation and Nominating / Corporate Governance Committees)

John was appointed to the Board of Directors in December 2007 as a Class III Director to fill an

existing vacancy. From 1998 until 2003, he served as Vice Chairman of Deloitte & Touche LLP and

Global Director, Strategic Clients for Deloitte Consulting. John has held various other positions with

Deloitte Consulting from 1968 to 2003, and in addition to his responsibilities as Vice Chairman and

Global Director, he also served on Deloitte Touche Tohmatsu’s board of directors and was a member

of the Governance (Executive) Committee from 1998 to 2003. He currently serves as a Trustee for

Wabash College and Steppenwolf Theatre Company and is a member of the board of directors of

VASCO Data Security International, Inc.

Robert W. Howe (Audit, Nominating / Corporate Governance Committees)

Robert was elected to the Board of Directors in April 1999 and since January 1994 has served as

Chairman of the Board of Directors at ADS Financial Services Solutions, a provider of information

74 http://www.cognizant.com/aboutus/board-of-directors; http://www.cognizant.com/aboutus/management


Nov 2011 32

technology services to the financial services industry. From January 1994 to December 2003, he

served as Chairman and Chief Executive Officer of ADS and from March 1980 to January 1994, as its

President. Robert also serves on the board of directors of several private companies.

Robert E. Weissman (Compensation, Nominating / Corporate Governance Committees)

Robert was elected to the Board of Directors in May 2001 following his retirement from nearly thirty

years of executive management, which included stints as Chief Executive Officer for several public

corporations. Most recently, he was Chairman of the Board of Directors of IMS Health, a provider of

information to the pharmaceutical and healthcare industries. Robert served as both Chairman and

Chief Executive Officer of IMS Health until March 1999. Prior to this, Robert was Chairman and Chief

Executive Officer of Cognizant Corp. and prior to that, was Chairman and Chief Executive Officer of

The Dun & Bradstreet Corp. Before his election as Chairman and Chief Executive Officer of The Dun

& Bradstreet Corp., Robert was President and Chief Operating Officer of that company, a position he

held since 1985. Robert joined The Dun & Bradstreet Corp. in May 1979, when The Dun & Bradstreet

Corp. acquired National CSS, a computer time-sharing company, of which he was President and Chief

Executive Officer. Since his retirement, he has been active as Chairman of Shelburne Partners, a

private investment company that works with emerging companies in the United States and Europe

and serves as a director of the following public companies: State Street Corp., Pitney Bowes, Inc. and

Information Services Group Inc. Robert is also a member of the Advisory Board for Affinnova, Inc., a

privately held market research firm.

Thomas M. Wendel (Audit, Nominating / Corporate Governance Committees)

Thomas was elected to the Board of Directors in June 2001, following his retirement as Chairman of

the Board, President and Chief Executive Officer of Bridge Information Systems, a global financial

information, transaction services, and network services company. Prior to joining Bridge in 1995, he

was founding President and Chief Executive Officer of Liberty Brokerage Inc., a major U.S.

government securities brokerage firm. Thomas previously served in various positions at Paine

Webber, Inc., including Chief Financial Officer, Executive Vice President and Managing Director. Prior

to joining Paine Webber in 1982, he was Senior Vice President and Chief Financial Officer of Pan

American World Airways.

Lakshmi Narayanan (Vice Chairman)

Lakshmi’s experience spans organizational strategy, customer relationship management, corporate

governance, risk management, and operations. As a founding member of Cognizant, Lakshmi has

been responsible for the company’s high-touch customer relationship and delivery excellence

model. Under his leadership, Cognizant became the youngest IT services company to reach the $1

billion revenue milestone. In his role as the Vice Chairman of Cognizant, Lakshmi is responsible for

strategic programs around customer advocacy, education, training, and leadership development. He

is also actively involved in delivering insights and practical advice on IT industry issues and multi-

lateral trade among nations. He is past Chairman of NASSCOM, the apex industry body for

promoting software and services in India, and is currently a Board member of the U.S.-India Business

Council (USIBC).


Nov 2011 33

Francisco D'Souza (President and Chief Executive Officer)

Francisco D'Souza has over 20 years of experience in the information technology industry in both

operational and advisory roles. Prior to his current position, Francisco was Chief Operating Officer,

with responsibility for Cognizant’s global delivery, marketing and sales, business development, and

client services organizations. Previously, he led the company’s North American and European

operations. He joined Cognizant when it was founded in 1994. Earlier in his career, Francisco spent

four years at various divisions of The Dun & Bradstreet Corporation, holding key positions in

marketing, strategic planning, and new business development in Germany, the U.S. and India.

Back to Organization Structure Section


Nov 2011 34

7.2 Client Engagement Team Profile

75“Unlike most of its offshore competitors, Cognizant makes large investments in client partners,

executive management, project heads and practice leaders who are located close to clients in the

U.S. and Europe and who are empowered to make key decisions at the client-relationship level,

greatly enhancing responsiveness and speed of decision-making”. These client-engagement teams

are organized around the industry verticals.

Profile of a Senior Account Manager (or) Client Partner at Cognizant76

Typically holds MBA from a Tier 1 or Tier 2 Business School and has demonstrated deep

expertise (10 years or above) in the client-specific industry sector (or) domain

Worked previously for a leading consulting firm

Has strategic large-deals-making skills, business development expertise

Demonstrates significant experience relevant to the specific geography (US / Europe / Asia)

Is more often a local, who understands local businesses, culture, language, attitudes, customers

Demonstrates deep customer empathy: understands what is important for the customer

The Account Manager works with the technical team to

define the scope, deliverables, assumptions and execution strategies for a proposed project

develop project estimates; prepare pricing and margin analyses

finalize sales proposals

A Consultant with Cognizant Business Consulting (CBC)77

Holds MBA from a premier Tier-1 Business School and has significant expertise (5 years of

functional experience) in client-specific industry sector (or) domain

Is trained in Business Process analysis, Process re-engineering and optimization, Functional

Consulting, Solution Design and Client Relationship Management

Works in close proximity to the client

Is verticalized; reports into both: the Vertical Head and the Consulting Practice Head

Sales Lead Generation

78The Sales and Marketing Group works with the technical team as the sales process moves

closer to the customer’s selection of a services provider. The duration of the sales process varies

depending on the type of service, ranging from approximately 2 months to over 1 year.

The marketing team maintains a prospect/customer database that is continuously updated and

used throughout the sales cycle from prospect qualification to close. As a result of this marketing

system, all sales opportunities are pre-qualified, and direct sales personnel are able to minimize

the time spent on prospect qualification. (Back to Account Managers and Client Partner Section)

75 Cognizant Annual Report 2002, pp 4 76 Sourced from Information available on LinkedIn 77 Sourced from Information available on LinkedIn 78 Cognizant Annual Report 2008, pp 23


Nov 2011 35

7.3 Cognizant Business Consulting (CBC) Growth79

2003-04

Launches the “Business Technology Consulting” practice, to provide customers with high-end IT consulting

service offerings, which include portfolio analysis, change management, IT solutions strategy or “technology

road-mapping”, post-merger technology strategy

Cognizant hires a large number of domain specialists from large consulting firms and business schools

The Business Technology Consulting practice comprises of a team of professionals with deep consulting,

analytical expertise and a senior management perspective

2005 Continues to invest in the expansion of industry-specific consulting services

Acquires Fathom Solutions, a consultancy focused on telecommunications and financial services clients

2006 Hires MBA talent from top tier institutions to broaden domain consulting capabilities, leading to an associate-

to-domain consultant ratio of 40:1

2007 Continues to build strong offerings in Consulting services; “Cognizant Business Consulting” (CBC) group grows

to more than 1,800 consultants, who provide clients with advice in such areas as IT strategy, outsourcing

strategy, business process redesign, solutions evaluation and design, and domain/functional consulting areas

CBC drives new revenue opportunities and expands customer base in the BFSI and Telecom sectors

By using the same domain experts drive both consulting service work and the ensuing systems

implementation, Cognizant becomes a full life-cycle solution partner with the upstream ideas and know-how

and the downstream accountability for implementing an effective solution

Demand for Consulting Services extends beyond the industry verticals; for example, in the data warehousing

business intelligence and performance management business, Cognizant sees increasing demand for a range of

consulting services including business case development, IT strategy, and performance management.

Cognizant also maintains sound relationships with business schools in India; hires a large number of MBAs

every year, both for summer internships and permanent positions

2008 Acquires

(a) Active Intelligence, a systems integration consultancy specializing in Oracle Retail applications in such areas

as merchandising, supply chain/logistics, store operations and corporate strategy

(b) Strategic Vision Consulting Inc., a leading Los Angeles based management and technology consulting firm

serving the media and entertainment sectors

(c) marketRx, a reputed analytics and consulting services provider in the health care space

Cognizant cites consulting as one among its fastest growing areas

CBC’s consulting areas include:

(a) Business Process Consulting;

(b) IT Strategy Consulting;

(c) Technology Consulting

Consulting services include: offshoring strategy, IT strategy, technology rationalization, business process

rationalization, post-merger integration, change management and IT solution strategy

Brings on board Mark Livingston to lead the CBC practice; Mark Livingston is a former senior partner with AT

Kearney, with over 25 years of consulting experience

2009 CBC delivers strong performance, including several key client wins in industries such as healthcare and

financial services and in several key service offerings like enterprise analytics, and ERP

Acquires Pepperweed Advisors, adding deep strategic consulting capability in key areas of Infrastructure

Services, including IT Service Management and IT Asset Management

Continues to aggressively hire domain experts, business analysts and consultants

CBC’s consulting areas include:

79 Cognizant Annual Reports (1998-2010); Earnings Call transcripts from http://seekingalpha.com


Nov 2011 36

o Business Process Consulting;

o Knowledge Process Consulting;

o IT Strategy Consulting;

o Technology Consulting

Cognizant cites its vision as: “…move the beyond technology or delivery role and position Cognizant as a

transformational partner who can drive powerful thought leadership”

2010 o CBC expands to more than 2200 consultants worldwide

o Begins hiring MBAs from key U.S. business schools, for CBC positions

o Acquires PIPC Group, a global program management consulting firm based in London, offering services such as

managing M&A integration through strategic software implementations and large-scale outsourcing programs

o CBC’s consulting areas include:

o Business Process Consulting;

o Knowledge Process Consulting;

o Program Management Consulting;

o IT Strategy Consulting;

o Technology Consulting

o CBC resources get involved in an increasing number of projects and accounts; for example, the healthcare

consulting team is engaged with 5 clients to assess the impact of ICD regulations on them. This has already led

to 3 large follow-on programs, 2 of which are in the remediation stage

2011 CBC grows to more than 2,700 consultants worldwide, across all industry verticals and geographies

Acquires Zaffera, a SAP consulting and development firm focused on the retail industry

CBC is involved in consulting work with about 40% of Cognizant’s entire client base (about 300+ customers)

Back to CBC section


Nov 2011 37

7.4 Geographic Footprint

Currently, Cognizant operates out of the following offices across the world80:

Back to Geographic Expansion Section

80 Cognizant Annual Report 2010, pp. 54

•Business Development offices: Atlanta, Boston, Bridgewater, Chicago, Dallas, Los Angeles, Minneapolis, Phoenix, San Francisco, Seattle, Teaneck, Toronto

•Delivery Centres: Bentonville, Boston, Bridgewater, Chicago, Detroit, Phoenix, Toronto

North America

•Business Development offices: Amsterdam, Brussels, Copenhagen, Frankfurt, Geneva, Helsinki, London, Madrid, Paris, Stockholm, Zurich

•Delivery Centres: Amsterdam, Budapest, LondonEurope

•Business Development offices: Bangkok, Buenos Aires, Chennai, Cyberjaya, Dubai, Hong Kong, Kuala Lampur, Manila, Melbourne, Shanghai, Sydney, Singapore, Tokyo

•Delivery Centres: Bangalore, Buenos Aires, Chennai, Cochin, Coimbatore, Guadalajara, Gurgaon, Hyderabad, Kolkata, Manila, Mumbai, Pune, Sao Paulo, Shanghai

Other


Nov 2011 38

7.5 Europe Journey 2002 Cognizant adopts an “International Strategy”; makes a strategic decision to expand operations outside US

Acquires United Healthcare Ireland Limited (UHCI) for $3 million; UHCI is an Ireland-based application development and maintenance services provider, with about 70 software professionals on rolls

2003 Acquires Infopulse (for $6 million81), a Netherlands-based IT services firm, specializing in the banking and financial services space, with annualized revenues between $5M-$6M. This provides Cognizant with a pool of local client partners, industry expertise and local language capability (especially in the Benelux region)

Signs new clients (including Credit Suisse) and expands relationship with some of its US based clients that do business in Europe

Annual Revenues (from the European region) go up by 44% YoY, the highest in the region in 4 years

Eyes Northern Europe for expansion

2004 Enters Switzerland through the multi-million franc worth Credit Suisse contract win82; also eyes the healthcare / lifesciences outsourcing space in Switzerland

Establishes sales and marketing office in Norway

Expands international executive management team, to cater to the increasing demand from Europe

Investment in Sales & Marketing surpasses competitors; large part of this investment is in European region

Annual Revenues (from the European region) sky-rocket by 83% YoY

2005 Continues to invest heavily in adding senior client engagement staff across continental Europe

Establishes business development offices in Germany, France, Czech Republic

Annual Revenues (from the European region) rise by 41% YoY, while revenues from continental Europe specifically shoot up by 83% YoY

2006 Annual Revenues (from the European region) rise by 77% YoY (the highest growth rate amongst all geographies), with continental Europe growing by a massive 114%

Invests in strengthening regional management teams across Europe, with a mix of talented local employees (through an active lateral recruiting program) and seasoned veterans in Cognizant’s network

Eyes penetration into Eastern Europe

2007 Rabobank, the largest banking group in Netherlands, chooses a partnership of Cognizant and Ordina for a seven-year outsourcing arrangement

Cognizant sets up global delivery facility in Budapest (Hungary), to support the AstraZeneca engagement

Europe is yet again the fastest-growing region for Cognizant’s services in 2007; Revenue from European operations rise 89% for the year. Countries experiencing the most increases in outsourcing demand include the U.K., Switzerland and the Benelux region.

2008 Originally created to support relationship with AstraZeneca, the Budapest delivery centre expands to serve clients in such diverse industries as consumer goods and financial services

Announces a strategic partnership with T-Systems, a division of Deutsche Telekom, in a systems integration alliance

Close to 2700 employees on rolls across Europe

Annual Revenues grow 57.8% YoY; plans to open additional sales and marketing offices in Europe

2009 Continues penetration; adds new clients in France, Germany, Belgium, Netherlands, Switzerland and the Nordic region, in a broad range of sectors

Establishes business development offices in Belgium, Sweden


Annual Revenues from Europe rise by 12.1% YoY (key sectors: Healthcare, Manufacturing/Retail/Logistics)

2010 Establishes business development offices in Spain, Denmark, Finland; opens another office in Switzerland

Acquires PIPC Group, a global program management consulting firm based in London

Acquires Galileo performance, a Paris based IT testing services provider


Annual Revenues from Europe rise by 41% YoY

2011 Launches campus recruiting programs in both the U.K. and Continental Europe83 (Back to Europe Journey Section)

81 http://www.business-standard.com/india/news/cognizant-acquires-dutch-it-firm-for-5m/156515/ 82 http://www.swissinfo.ch/eng/Home/Archive/Outsourcing_company_lures_Swiss_business_to_India.html?cid=4015754 83 http://seekingalpha.com/article/283845-cognizant-technology-solutions-ceo-discusses-q2-2011-results-earnings-call-transcript


Nov 2011 39

7.6 Cognizant’s Latin America Strategy

Cognizant’s penetration strategy in Latin America closely resembles its China strategy:

2007 Enters into a five-year, multi-million dollar IT applications outsourcing deal, to provide an array of SAP and customized software applications to Kimberly-Clark84

85Cognizant initially co-manages Kimberly-Clark's captive operation at Buenos Aires (Argentina), with about 100 employees; has an evolutionary plan to expand presence, grow the center and serve other customers from the center in the future

2008 Establishes a Sales and Marketing office in Buenos Aires

Buenos Aires center begins to serve additional clients in consumer goods, retail, financial services and life-sciences sectors

2009 Opens a delivery centre in Mexico

2010-11 Opens a delivery centre in Sao Paulo (Brazil)

Buenos Aires centre headcount goes upto 200 employees86

Mexico center employs about 100 individuals, with specific focus on the financial services space

Expresses interest in further expanding presence in Latin America87

Back to Geo Expansion Section

84 http://investor.kimberly-clark.com/releasedetail.cfm?releaseid=225746 85 http://articles.economictimes.indiatimes.com/2007-01-16/news/28474895_1_cognizant-technology-solutions-r-chandrasekaran-applications 86 http://nearshoreamericas.com/cognizant-arbitrage/ 87 Ibid.


Nov 2011 40

7.7 Acquisitions

ACES International (U.S.)

2003 Acquires ACES International Inc., for $4.7 million

ACES is a U.S. based CRM systems integration and support firm specializing in Siebel CRM solutions for blue-chip Fortune 500 clients in healthcare, financial services and telecommunications verticals

Cognizant does the acquisition to expand its CRM solutions set

88Revenues for quarter ended June 2003 rise by $ 13 million, of which $ 2.3 million is earned by ACES

89Cognizant adds 38 new clients in 2003, of which 20 new clients come from the ACES acquisition

2005 Gartner includes Cognizant in the North American CRM Service Provider Magic Quadrant90; cites Cognizant as the only offshore player with capabilities that are "Promising91

Infopulse (Netherlands)

2003 Acquires Infopulse for $5 million92

Infopulse is a Netherlands-based IT services firm, specializing in the banking and financial services space, with about 100 employees93 and annualized revenues between $5 - $6 million

With banking and financial service customers being the first in Europe to adopt a large-scale offshore strategy94, this is a strategic move by Cognizant, as part of its European expansion strategy

This acquisition provides Cognizant with a huge pool of local client partners, industry expertise and local language capability (especially in the Benelux region)

Infopulse brings some of the biggest client references95 including ING Bank, Rabo Securities, Kempen & Co.

Annual Revenues (from the European region) go up by 44% YoY, the highest in the region in 4 years

2004-06 Infopulse acquisition serves as a good head-start for Cognizant’s European penetration, with the company expanding to Norway, Switzerland, Germany, France and Czech Republic in the next 2 years

2007 Rabobank (a customer from the Infopulse acquisition), chooses partnership of Cognizant and Ordina for a seven-year outsourcing arrangement

Silverline Technologies (U.S.)

2003 Acquires the American Express services account from Silverline Technologies96, for $10 million97

Silverline Technologies is a U.S. based company, providing application design, development and maintenance services to major financial services companies

88 http://articles.economictimes.indiatimes.com/2003-07-24/news/27522320_1_cts-net-jumps-earnings-forecast 89 Ibid. 90 “Magic Quadrant for North America CRM Service Providers 2005”, Frances Karamouzis, Matthew Goldman, Ed Thompson, March 14 2005, Gartner Research 91 http://www.business-standard.com/india/news/gartner-rates-cognizant-aheadtop-indian-peers-in-crm-space/143547/ 92 http://www.business-standard.com/india/news/cognizant-acquires-dutch-it-firm-for-5m/156515/ 93 http://www.hindu.com/2003/12/03/stories/2003120304541500.htm 94 http://articles.economictimes.indiatimes.com/2003-12-03/news/27557912_1_kumar-mahadeva-cognizant-technology-solutions-infopulse 95 http://www.thehindubusinessline.in/2003/12/03/stories/2003120301710700.htm 96 http://articles.economictimes.indiatimes.com/2002-09-24/news/27333804_1_silverline-technologies-seranova-cognizant-technology-solutions 97 http://www.business-standard.com/india/news/cognizant-acquires-dutch-it-firm-for-5m/156515/


Nov 2011 41

The American Express services account of Silverline Technologies contributes annualized revenues of upto $ 15 million, with about 165 employees

Goal of the acquisition is to bolster Cognizant’s leadership position in the financial services space

It is through this acquisition that Cognizant picks up its Phoenix development center

2009 Phoenix centre houses more than 400 employees, provides delivery capability across all major service offerings (including BPO, KPO)98

2011 Expands Phoenix centre to 1000 employees99; provides a full range of services from the center, including consulting, application services, IT infrastructure services, business and knowledge process services

Ygyan Consulting (India)

2004 Acquires Ygyan Consulting, for $1.6 million

Ygyan Consulting is an India-based SAP services provider100, with about 85 SAP consultants, who offer SAP services with a strong vertical focus on manufacturing, healthcare and retail sectors.

Ygyan is a SAP services partner and selected as a channel partner of SAP India for mySAP All-in-One solutions101

With annual revenues at $3 million, Ygyan brings with it a significant client base in Singapore, UK and India

Cognizant does the acquisition to strengthen its SAP capabilities and to cross-sell its core SAP services to Ygyan's existing client base

2005 Forrester102 cites Cognizant as having made major inroads in SAP services in a very short amount of time

Forrester says Cognizant gets top marks from its existing SAP customer base

Cognizant’s SAP revenues touch $25 million103

Ygyan acquisition thus contributes to about 12% of Cognizant’s SAP revenues

2009 Cognizant becomes a “SAP Global Services Partner”

Fathom Solutions (U.S.)

2005 Acquires Fathom Solutions, for $35 million104

Fathom Solutions is a U.S. based IT consultancy, focused on telecommunications and financial services clients (two-thirds of its revenues105 are from its telecom consulting practice); has 120 employees

Fathom has a track record of high customer retention, and its clients include some of the biggest industry players in telecom and financial services, such as Cox Communications, Focal Communications Corp., SBC

Cognizant completes this acquisition primarily to strengthen its industry consulting expertise, its service capabilities in telecom industry106 and to build deep partnerships with leading telecom services customers.

98 http://investors.cognizant.com/index.php?s=43&item=11 99 http://articles.economictimes.indiatimes.com/2011-01-12/news/28432529_1_delivery-center-delivery-centre-business-and-knowledge-process 100 http://articles.economictimes.indiatimes.com/2004-02-23/news/27414686_1_cognizant-technology-solutions-acquisition-pune 101 http://www.business-standard.com/india/storypage.php?autono=145113 102 “Indian SAP Services Scorecard Summary: Cognizant Technology Solutions; Key Findings from ‘The Forrester Wave’: Indian SAP Services, Q4 2005”, Stephanie Moore, Tom Pohlmann, Olivia Ester, Katherine Brown; October 21, 2005; Forrester Research 103 Ibid. 104 http://www.thehindubusinessline.in/2005/04/19/stories/2005041900990500.htm 105 Ibid. 106 http://www.rediff.com/money/2005/apr/18cog.htm


Nov 2011 42

Annual revenues from the “Other” vertical (“Other”: includes telecom, information services, media and high-tech sectors) grow up by 56% YoY, the highest growth rate amongst all verticals

2006 Annual revenues from the “Other” vertical (“Other”: includes telecom, information services, media and high-tech sectors) grow up by 75% YoY, the highest ever growth rate recorded in this vertical

AimNet Solutions, Inc. (U.S.)

2004-05 Cognizant launches its IT Infrastructure services practice

2006 Acquires AimNet Solutions, for $14.8 million

AimNet Solutions is a U.S.-based managed infrastructure and professional services firm, with about 100 employees107

AimNet boasts of a world-class Network Operations Center in Massachusetts and a proprietary infrastructure management software platform with high-end network, infrastructure consulting capabilities in areas such as network architecture, planning, design and infrastructure security solutions.

Cognizant completes this acquisition to strengthen its IT infrastructure management capabilities.

Most importantly, Cognizant wins an exhaustive client base (80 customers) from this acquisition

2007 Cognizant builds a Global Infrastructure Operations Center platform, with dual Network Operations Centers in North America and India

Merck & Co. Inc. names Cognizant as a strategic partner for a full suite of services, including IT infrastructure management services

Simon & Schuster, Inc. selects Cognizant for an end-to-end IT infrastructure management program

IT IS practice headcount rises to 2100 associates by 2007 and upto 2800 associates by 2008108

2010 Eli Lilly expands relationship with Cognizant, to leverage its Business Process as a Service (BPaaS) model, which combines cloud-based IT infrastructure and software applications for sales and marketing operations

2011 Forrester109 cites Cognizant as a “Leader” in IT Infrastructure Services, based on its global delivery model, operations and strategy consulting, vision for cloud services, and overall client satisfaction

marketRx, Inc. (U.S.)

2007 Acquires marketRx Inc., for $136 million (the largest ever acquisition by Cognizant)

marketRx is a U.S.-based reputed provider of data analytics and process outsourcing to global life sciences companies in the pharmaceutical, biotechnology and medical devices segments

With offices in US, India and UK, and with about 430110 employees, marketRx boasts of its proprietary data analytics technology platform, annual revenues of $40 million and a prestigious client list of 75 customers111, which includes all of the top 20 pharma companies and 4 of the 5 largest biotech firms

Cognizant completes this acquisition to strengthen its life sciences industry expertise as well as data analytics capabilities, with plans to extend the analytics expertise to multiple industry sectors in the future

Cognizant adds 100 clients to its customer base in 2007, of which 75 clients come through this acquisition

With this acquisition, Cognizant begins its “Enterprise Analytics” service area

Annual Revenues from the Healthcare vertical go up by 53% YoY, of which 12% increase comes from marketRx revenues

107 http://www.thehindubusinessline.in/2006/09/07/stories/2006090703490400.htm 108 “Microsoft Infrastructure Solutions Tour by Cognizant”, Bob Boles, VP-IT IS, Cognizant, 2008 109 “The Forrester Wave: Global IT Infrastructure Outsourcing, Q1 2011”, Bill Martorelli, Wolfgang Benkel; March 11, 2011;

Forrester Research 110 http://www.livemint.com/2007/10/20000406/Cognizant-acquires-marketRx-fo.html 111 Ibid.


Nov 2011 43

2009 Cognizant names its “Enterprise Analytics” practice as a “strategically important” growth area

Cognizant expands analytics solutions in its “Enterprise Analytics” practice (beyond life sciences space) to consumer goods, financial services, media, and technology clients

2011 112“Enterprise Analytics” practice grows to 600+ associates, experienced in developing analytics across major industries.

Clients include Fortune 500 companies in manufacturing, banking and financial services, life sciences, retail, consumer goods, media and technology clients

Active Intelligence (Canada)

2008 Acquires Active Intelligence, for an undisclosed amount

Active Intelligence is a Canada-based systems integration consultancy113, with about 30 employees114, specializing in consulting and implementation services around the Oracle Retail Merchandising, Planning and Optimization suite

Cognizant completes acquisition to deepen industry-specific consulting expertise in Oracle retail solutions

2009 115Cognizant’s Oracle retail practices grows to more than 100 functional and technical consultants

2011 Cognizant's retail practice becomes the company's fastest growing business unit

Annual Revenues from Manufacturing-Retail vertical double116 ($443 million in 2008 to $891 million in 2011)

Manufacturing-Retail vertical’s contribution to overall revenues rises from 15% in 2008 to 20% in 2011

Annual Revenue growth rates in manufacturing-retail vertical are the highest amongst all verticals in Cognizant (38% in 2008, 27% in 2009, 50% in 2010, 47% in 2011)

Customer base includes 11 of the Top 30 North American retail clients

Oracle retail practice headcount rises to more than 200 functional and technical consultants117

Strategic Vision Consulting Inc. (U.S.)

2008 Acquires Strategic Vision Consulting Inc. (SVC), for an undisclosed sum

SVC is a leading Los Angeles based management and technology consulting firm with over 60 employees, providing premier consulting services to media and entertainment clients such as major film studios, broadcasters and interactive media companies.

118In addition, SVC possesses extensive experience providing technology strategy and planning, program and project management services, with specializations in Digital Distribution, Media Asset Management, Digital Rights Management, Anti-Piracy, and other emerging technology areas

Cognizant completes this acquisition to extend its consulting capabilities in the Media and Entertainment industries, clearly reflecting its evolution to a more industry-specific consulting model

2010 Enters into a multi-year, multi-million dollar worth contract with Harris Corporation, in the media management software space

119Works with 4 of the top 10 Global Media companies and 6 of the major U.S. Film Studios

112 http://www.cognizant.com/enterpriseanalytics 113 http://articles.economictimes.indiatimes.com/2009-02-11/news/27648345_1_geographic-footprint-retail-practice-consulting-capabilities 114 http://seekingalpha.com/article/120552-cognizant-technology-solutions-q4-2008-earnings-call-transcript 115 http://www.cognizant.com/retail/SiteDocument/Oracle%20Retail_FAQ.pdf 116 http://economictimes.indiatimes.com/cognizant-poses-challenge-to-infosys-tcs-in-retail/articleshow/7831819.cms 117 http://www.cognizant.com/OurApproach/Oracle%20Retail.pdf 118 http://news.cognizant.com/index.php?s=14083&item=20208 119 http://www.cognizant.com/OurApproach/IME%20Overview%201.20.10.pdf


Nov 2011 44

Media and Entertainment practice headcount rises to over 3000 consultants

Invensys Operations Management and Invensys Rail (India)

2009 Acquires Invensys Operations Management (India centre), a major provider of technology, software solutions, and consulting services to the processing and manufacturing sectors, with about 400 employees120

Acquires Invensys Rail (India), a leader in railway control, communications systems, with 120 employees121

Invensys’ solutions are used by more than 40,000 clients in more than 200,000 plants and facilities

Cognizant does these acquisitions to solidify position in the manufacturing space and expand capabilities in engineering services

Launches the “Engineering and Manufacturing Solutions” (EMS) practice122

Annual Revenues from the Manufacturing-Retail vertical grow up by 27% YoY, the highest amongst all verticals for the year

2010 EMS practice grows upto nearly 1000 associates, in just under 2 quarters123

Chosen by a Fortune 500 organization in the building controls industry as their strategic engineering partner to advance its offerings to optimize energy and operational efficiencies of buildings

Annual Revenues from the Manufacturing-Retail vertical grow up by 50% YoY, the highest amongst all verticals for the year

PIPC Group (U.K.)

2010 Acquires PIPC Group, for an undisclosed sum

PIPC Group is a London-based global program management consulting firm, with more than 200 employees124, which helps leading global companies drive business transformation by providing industry-leading program management services, methods and tools,

With expertise spanning several industries including financial services, retail, oil and gas, utilities, public sector, communications and the environmental sector, PIPC Group serves clients worldwide, with services ranging from managing post-M&A integration through strategic software implementations, with a broad range of delivery capabilities

Cognizant completes this acquisition to complement existing project management and consulting capabilities, to further Cognizant's ability to provide integrated services across consulting, technology, and BPO and to strengthen its ability to manage increasingly complex global projects while expanding geographic footprint

Back to Inorganic Growth Section

120 http://news.cognizant.com/index.php?s=14083&item=20162 121 http://articles.economictimes.indiatimes.com/2009-12-10/news/27654941_1_cognizant-president-and-md-r-chandrasekaran-rail-control 122 Cognizant Q4 2009 Earnings Call Transcript 123 Cognizant Q1 2010 Earnings Call Transcript 124 http://news.cognizant.com/index.php?s=14083&item=20246


Nov 2011 45

7.8 Health Care Growth Story

The Health Care vertical provides services to customers operating in the following industries125:

Healthcare:

Industry solutions include: Broker Compensation, Sales and Underwriting Systems, Provider

Management, Plan Sponsor Administration, Electronic Enrolment, Membership, Billing, Claims

Processing, Medical Management and Pharmacy Benefit Management, self-service portals

(member/provider/broker), consumer-driven healthcare, behavioral health, Medicare

Modernization Act (MMA), healthcare data warehousing and analytics.

Life Sciences:

Industry solutions include: Prescriber Behaviour Analysis and Insight, Longitudinal Prescription

Data Management Systems, Sales Force Compensation Systems, Sales Data and Claims Data

Management Systems, Clinical Trial Solutions, 21CFR11 Assessment and Computer Systems

Validation, Data Mining and Business Intelligence Solutions, e-Business and Data Portals, ERP

implementation, upgrade and maintenance services.

As part of application maintenance services, Cognizant assists customers in renovating their core

systems to meet the requirements imposed by new regulations, new standards or other external

events; such as compliance with the Health Insurance Portability and Accountability Act (HIPAA)

Until 1998

Early-mover in the Health Care segment, coupled with the advantage of having an existing customer

base from the Dun & Bradstreet Corporation and its subsidiaries

18% revenues just from IMS Health, the controlling parent company

Customers include IMS Health, Sierra Health, Lifeguard, Regence Group126

Services offered include predominantly application development and maintenance

Won the multi-phase contract with Sierra Health services, primarily owing to the Erisco FacetsR managed

care software package (Erisco being fully controlled by the same parent company, IMS Health)

2000 Invests in recruiting experienced industry practice leaders and developing new industry solutions

For example, in healthcare, Cognizant makes a significant investment in a HIPAA (Health Insurance

Portability and Accountability Act of 1996) compliance solution

Invests in expanding technology offerings in the Health Care sector

2001 Wins contract from UnitedHealth Group

Due to prior investments in its CRM practices, wins an end-to-end CRM contract from a multi-billion

dollar pharmaceutical firm

Health Care practice grows to more than 650 consultants with domain and technology expertise

Cognizant implements more managed-care systems in 2001 than in all previous years combined

Huge Demand for:

(a) FacetsR, the leading managed care application from TriZetto (formerly Erisco)

(b) Cognizant’s HIPAA compliance solution

Customers include more than 25 health care organizations including Regence Group, UnitedHealth

Group, Lifeguard, Intermountain Health Care and leading Health Maintenance Organizations (HMOs)

and Third Party Administrators in the U.S.

125 Cognizant Annual Reports (1998-2010); Earnings Call transcripts from http://seekingalpha.com 126 http://www.expresscomputeronline.com/20011008/comwatch1.htm


Nov 2011 46

Cognizant pays IMS Health a one-time fee of approximately $825,000 under an alliance agreement in

which Cognizant is named “vendor of choice” for IT services to the pharmaceutical industry.

2002 Expands offerings in the Health Care vertical

Acquires UHCI (United Health Care Ireland), a subsidiary of UnitedHealth group. UHCI provides

application development and maintenance services, using 70 software professionals. This acquisition

enables Cognizant to provide a wide range of services to its clients in Europe and worldwide

2003 Cognizant is named the top offshore firm in the “Healthcare Informatics 100,” a list of the 100 leading

global healthcare IT providers

Acquires ACES, a company specializing in CRM solutions for blue-chip clients in the healthcare, financial

services and telecommunications verticals

HealthCare vertical revenue increases by 41% YoY

2004 Makes significant investments in expanding the life-sciences practice

Customers in the life-sciences practice include most of the major firms who perform drug validation

work and many of the top drug makers

Recruits experts with special life-sciences backgrounds and education, to work in areas such as analysing

the complexities of clinical data for pharmaceutical companies.

Pioneers “V-BPO” (Vertically-Oriented Business Process Outsourcing) services in life-sciences, for a

major pharmaceutical company, in the area of data management for clinical trials.

Gartner includes Cognizant in the North American CRM Service Provider magic quadrant, recognizing the

CRM services offered by Cognizant to leading life-sciences companies, to support their sales and

marketing process for drugs.

HealthCare revenue increases by 48.4% YoY, primarily due to the continued expansion of services

within existing North American customers.

2005 Wins one strategic health care client

Works with 3 of the top 5 Healthcare companies in the US and 7 of the world’s top pharmaceutical

companies

Introduces solutions for health plans and third-party administrators dealing with the new Medicare

Part D drug benefit

HealthCare vertical revenue increases by 51% YoY, primarily driven by continued expansion of existing

customer relationships as well as a significant number of new customers and acceptance of expanded

portfolio of services

Expands domain expertise in life sciences, by actively building internal knowledge repositories

Invests heavily in developing core capabilities:

(a) in FDA and EMEA regulation

(b) in supporting clinical trials for pharmaceutical companies

(c) in solutions across the spectrum of the life sciences value chain, from discovery to

commercialization

2006 Works with 7 of the top 10 global pharmaceutical companies; 5 of the world’s largest biotech

companies; 8 out of the top global life sciences organizations

HealthCare vertical revenue increases by 88% YoY, with 80% increase in revenue from existing

customers and 8% from new customers, with strong growth in demand from life-sciences customers

CRM services are in great demand, ranging from multi-country, Siebel CRM implementation for several

of the world’s largest pharmaceutical companies to large-scale enterprise customer implementations for

a global pharmaceutical company and one of the largest biotech firms

Rolls out new service offerings for:

(a) Assisting pharmaceutical companies in addressing the cost pressures of their industry, such as

product development and IP protections processes;

(b) Regulatory compliance requirements such as the Medicare part, and National Provider Identifier;


Nov 2011 47

(c) Portfolio Rationalization and Systems Consolidation services; providing customers with a

comprehensive assessment of systems integration, risk, and opportunities as they seek to

strengthen their businesses through mergers and acquisitions;

(d) Claims Audit Solution framework addresses issues (such as claims payment fraud and errors) in

manual claim audit processing and reduces turnaround time thereby minimizing payment errors

(e) A comprehensive portfolio of integrated services to health care clients, such as offering a single

solution covering application development, platform development, maintenance, infrastructure

management as well as delivery of services using the platform

Cognizant’s partnership with SAP drives significant traction amongst its health care customers;

specifically in Europe, across pharmaceutical companies for multi-year, multi-location support of their

SAP systems; Cognizant wins one strategic client owing to SAP expertise in the health care space.

Health Care practice headcount goes upto 4000 associates

Healthcare Informatics Magazine ranks Cognizant as 21 on their list of top healthcare IT providers

2007 Healthcare Annual Revenues rise up 52% YoY, with 47% from expansion of existing customer services

and 5% from new customers

Revenue from life sciences customers increases 61% YoY, as a result of clients broadening their

relationships with Cognizant to cover the full spectrum of service offerings in IT infrastructure services,

BPO and consulting.

Huge Demand from:

(a) “transforming while performing” solutions which enable companies to lower their operating costs

while freeing up resources to make significant process improvements, drive innovation and invest in

R&D and pipeline development. This value proposition was a major catalyst for the multi-year

engagement with Merck

(b) Demand for services across diverse areas, such as supporting development and approval process for

new medicines by helping to manage global clinical development programs, including data

management planning, clinical study set-up for electronic data capture, medical coding, adverse

event reconciliation, clinical data management and training for clinical sites and investigators.

(c) ERP business from customers

(d) Traction amongst customers in the medical devices area

Won 3 strategic clients (each with anticipated revenue of $100 million or more over a multiyear period).

These engagements represent a broad range of service offerings including applications, IT infrastructure

services and clinical BPO

Works with 27 of the top 30 global pharmaceutical companies, 9 of the top 10 biotech companies, 2 of

the top 5 medical device companies.

Acquires marketRx, Inc., a leading provider of data analytics and related services, in the healthcare

space; owns its proprietary data analytics platform; Its client list includes 75 life sciences customers,

including all of the top 20 pharmaceutical companies and 4 of the 5 largest biotech firms

Expands service offerings:

(a) Across all areas of the life sciences value chain, from research, development and manufacturing to

sales and marketing operations (through the marketRx acquisition)

(b) Creating shared services centers of excellence with customers, to allow them to benefit from the

synergies amongst their divisions

(c) BPO and analytics services to drug makers, to meet the challenge of discovering new treatments,

using capabilities to support drug development, testing, sales, marketing and administrative

functions


Enters into an association with Manipal University to offer a 2-year Master of Science Degree in Clinical


Nov 2011 48

Research and Regulatory Affairs, for Cognizant employees in the life sciences practice

2008 Healthcare vertical revenues increase by 36.4% YoY, with 33% from continued expansion from existing

customer relationships and 3.4% from new customers; 66% of this increase from life-sciences customers

Major client wins include:

(a) AstraZeneca: BPO agreement with AstraZeneca, for a centralized, end-to-end solution for its clinical

data management processes, spanning 5 years. In addition, through the market Rx capability,

Cognizant agrees to provide AstraZeneca with a range of Consulting and KPO services in the space

of sales and marketing effectiveness

(b) Health Net, Inc: Extends relationship to provide application development testing and monitoring,

application maintenance and support services, project management services and BPO services in

the area of claims processing (claims adjudication, adjustment, audit and process improvement

services), under a multi-year, multi-million dollar contract

(c) Emdeon: Emdeon enters into a contract with Cognizant in both IT and BPO in areas such as quality

assurance, data center integration, systems operations and application development and

maintenance.

(d) Multi tower infrastructure management and support for a healthcare business processes provider

(e) Server infrastructure management and support for a large pharmaceutical company


2009 Healthcare vertical revenues increase by 25% YoY, with 23% from continued expansion of existing

customer relationships and 2% from new customers

Increase in growth due to:

(a) Increased interest in data warehousing, business intelligence, and data analytic capabilities as

payers seek to better understand the underlying drivers of their medical costs

(b) Consulting Services, to assess the impact of future industry transaction standards and code sets,

such as, ICD-10 and 5010 code set; Cognizant consultants (CBC) are helping clients address industry

changes such as the advent of ICD-10, a regulation hitting major healthcare players

(c) Increased traction in BPO areas such as claims, medical bill reviews, benefits coding and medical

management

Expanding solutions in: pharmacovigilance in life sciences

Cognizant and AstraZeneca jointly win the Clinical Research Excellence “Data Management Team of the

Year” award instituted by the Good Clinical Practice Journal

Major Client Engagements include:

(a) National Health Insurance Company of UAE: Launching the first online health insurance portal

providing round the clock access to insurance policy records and claims

(b) Sanofi Pasteur: Global partner for clinical trial data management among other areas. Pricing model

with Sanofi Pasteur is transaction and outcome based

(c) Rodale Inc.: Deploying a Remote Infrastructure Management (RIM 2.0) platform

2010 Healthcare vertical revenues increase by 36.8% YoY, with 34% from continued expansion of existing

customer relationships and 2.8% from new customers

Growth Drivers:

(a) Increasing demand from healthcare insurance clients, driven by movements from the assessment

stage to the remediation stage for code set 5010 implementation

(b) Demand for data warehousing and analytics services to understand and control medical costs

(c) Expansion of BPO services, including claims, benefits quoting and enrolment

(d) Regulatory changes such as HIPAA, 5010 and ICD-10 in the U.S. healthcare industry continue to

drive new projects for Cognizant. Cognizant Business Consulting team or CBC is engaged with 5

clients to assess the impact of ICD regulations on them. This has already led to 3 large follow-on

programs, 2 of which are in the remediation stage.


Nov 2011 49

(e) Non-Linear revenue streams: Cognizant's proprietary platform for pharmaceutical sales force

planning, which already has commitments from global pharmaceutical companies to manage

thousands of sales professionals through either software as a service (SaaS) or business process as a

service-based models (BPaaS)

Major Client Engagements:

(a) Eli Lilly & Co.: Uses Cognizant’s new Business Process as a Service (BPaaS) model; this model

combines cloud-based IT infrastructure, software platform along with BPO services and software

applications for sales and marketing operations

(b) Cognizant adds one strategic client in the Health care space, during 2010

2011 HealthCare vertical revenue increases by 38% (for the period Jan-Sep 2011 over Jan-Sep 2010)

Demand driven by:

(a) Increased Consulting activity, with key pharmacy benefit management clients, focused on

transforming clinical and commercial processes; as well as ICD-10 consulting work

(b) Growing demand for analytics, such as the conversion of data and information for the marketing

and R&D areas of the pharmaceutical industry, to better predict and control medical costs

(c) Increased traction for newer offerings, such as cloud-based CRM, mobile technology and business

process as a service offerings (BPaaS)

(d) Expansion of BPO services including clinical operations, claims, benefits coding and enrollment

(e) Code set 5010 testing work and ICD-10 consulting and remediation work

Cognizant teams with Eagle Genomics to develop a first of its kind cloud-based platform to support

Pistoia’s mission to tackle intercompany information sharing barriers that are standing in the way of

innovation

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