Cognizant Technology Solutions Corp. is seeking to grow beyond its core markets of health care and financial services outsourcing and move toward complex application development and high-end business process outsourcing. Lakshmi Narayanan, who was named president and CEO of the Teaneck, N.J., company early this year, is guiding that initiative. Narayanan discussed Cognizant's approach to outsourcing last week with eWEEK Executive Editor Stan Gibson at Ziff Davis Media offices in New York.
JPMorgan Chase decided to discontinue a large deal with IBM. You also have JPMorgan Chase as a customer. Will you continue with them?
I couldn't answer that specifically because we have a confidentiality agreement with JPMorgan Chase. But the relationship they have with IBM is very different than the one that they have with us.
JPMorgan's CIO, Austin Adams, and its CEO, Jamie Diman, believe in owning their own IT and may not be open to discussion of the question.
I wouldn't go that far. At Bank One [Corp.] even before the merger, they did a significant amount of outsourcing. I would say that JPMorgan and Bank One are not as opposed to outsourcing as many would think. There are certain types of outsourcing that they are opposed to—the big multiyear agreements. We feel quite comfortable with the relationship that we have.
Is there a trend to preserve competition among outsourcers and preserve some kind of competitive bidding?
That's a good point. That's clearly something that we see. In the large monopoly-type outsourcing deals, where you give up everything, there are certain capability gaps. We are a niche player in the application development and management area. We have certain skills that you can benefit from without having to outsource the whole thing.
Business process outsourcing is something you are developing a specialty in. How fast do you see it growing?
Everything that we hear about BPO is that it's increasing, but that's in the call center area, what we would call the lower end of the spectrum. We haven't seen as significant growth in the higher end of the business process outsourcing—in some cases the analytical processing that investment banks are doing or the complete claims processing in the insurance industry. There were very few cases of outsourcing happening in these areas, and where it has happened has been on a captive basis, i.e., [The] Goldman Sachs [Group Inc.] establishing an outsourcing facility or something of that nature.
A big issue with IT people in the United States is compliance with laws such as the Sarbanes-Oxley Act. Can you handle that kind of work as an offshore outsourcer?
Yes. We're in a fortunate position because we have to undergo the Sarbanes-Oxley process ourselves. We are engaging external consultants who are coming to help us understand the implications. We have to look at our internal systems to make sure there are sufficient controls. I have to personally sign off on that. To that extent, we are better equipped to build systems that are compliant for our customers. This is an area in which we are developing expertise.
Which area of expertise is growing fastest right now?
We call it complex program development—large, complex applications. In the traditional areas of application maintenance and midsized development, many customers are very comfortable working with Cognizant. However, when it comes to working on a very large program, in terms of architecture and program management, many large customers still believe that the Indian industry, including Cognizant, does not have the expertise. So that's an area in which we have focused and invested in hiring in the last 12 to 18 months.
Do you believe that your heritage as part of a U.S. company gives you an advantage over Indian competitors?
We offer a greater presence in the market in the U.S., and we have a model of operating that is based on building a unique relationship with the clients, with sharp focus in specific areas. We're focused on investing in people, in training, in order to deliver greater value.
Would this mean that your toughest competition might not be a Tata [Consultancy Services] or Wipro Ltd. but might be a Keane Inc., for example, which is U.S.-based but has operations in India?
The competition is more Infosys [Technologies Ltd.] and Wipro. The U.S. providers are still in the early stages of developing their Indian operations. At this stage, the best approach for many big customers is to work with someone with an established presence in India and among those pick the one with the best client relationship model to partner with.
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