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Cognizant India: reinventing the value proposition

Tripti Sharma Tapabrata Ghosh
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Tripti Sharma Tapabrata Ghosh , (2015),"Cognizant India: reinventing the value proposition", Emerald Emerging Markets
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Cognizant India: reinventing the

value proposition
Tripti Sharma and Tapabrata Ghosh
Tripti Sharma is Assistant

Professor and
Tapabrata Ghosh is a
Student, both at the
Institute of Management
Technology, Ghaziabad,
Uttar Pradesh, India.
As the Indian information technology (IT) industry progressed rapidly towards

commoditization, price had become the sole differentiating factor for IT companies. With
existing players scaling up operations and reducing prices to increase their market shares,
the prevalent situation showed glimpses of engendering a price war that could have
adversely affected the bottom line of IT sector companies.
Cognizants forecasts for revenues in 2012 reflected a sense of caution brought about by
the slowing trend in demand for IT outsourcing (Economic Times, 2012). The reduction in
its 2012 sales growth estimate to 20 per cent, from 23 per cent in the previous year, was
an indicator of the sluggish acceleration in demand in the IT sector as a whole (Economic
Times, 2012). This was likely to put more pressure on the stock prices of Indian IT
exporters. In such a situation, the most pertinent question for the companys management
remained, What strategies should Cognizant adopt to ensure growth in this price-sensitive
industry and to avoid falling into the trap of pursuing a price war?
According to Malcolm Frank, Executive Vice President, Strategy and Marketing,
Cognizant social, mobile, analytics and cloud technologies would play a major role in
reshaping IT enterprises. These technologies were not merely new technologies that could
be synchronized with current business models, but these technologies would transform
companies business models themselves (Frank, 2012).
The Indian IT industry

The Indian IT industry budded in the late 1990s primarily because of its cost effectiveness.
It gained prominence in 1998 when a majority of the Y2K projects initiated worldwide were
outsourced to Indian firms. Many US corporations were sceptical of the claims that their
mainframe applications may crash at the beginning of the twenty-first century and, hence,
they outsourced Y2K work on many of their critical applications to software firms in India.
Disclaimer. This case is written

solely for educational
purposes and is not intended
to represent successful or
unsuccessful managerial
decision making. The author/s
may have disguised names;
financial and other
recognizable information to
protect confidentialit.
DOI 10.1108/EEMCS-11-2014-0271
Thereafter, this sector grew at an impressive compound annual growth rate (CAGR) of 30
per cent up until the global meltdown of 2008 (PricewaterhouseCoopers, 2010), after which
its progress slowed primarily due to the constrained expenditure of Western clients.
However, despite the global meltdown during which the world experienced negative
growth, the IT industry in India continued to grow by 5.5 per cent.
The IT sector in India is a major contributor to the countrys gross domestic product (GDP).
With its 8.1 per cent share of national GDP, this sector was considered as the highest
impact sector for India, according to a 2014 assessment by Indias National Association of
Software and Services Companies (NASSCOM). The total sectoral revenue projected for
the 2014 financial year (FY) was USD 118 billion, with Indias IT firms taking an approximate
64 per cent share of IT services in the domestic marketplace. The growth in this sector was
VOL. 5 NO. 8 2015, pp. 1-35, Emerald Group Publishing Limited, ISSN 2045-0621 EMERALD EMERGING MARKETS CASE STUDIES
PAGE 1
largely due to exports, as the variable impact of currency fluctuations had led to negative
growth of 1.2 per cent in the domestic IT market. This sector was also responsible for
creating considerable employment, attracting investment by private equity (PE) firms and
venture capitalists (VCs) and offsetting nearly half of Indias oil import bill (NASSCOM,
2014). Refer to Exhibit 1 below for selected statistics pertaining to the Indian IT sector.
Indian IT sector phases and segmentation
The Indian IT sector was practically non-existent before the 1960s. There was government
protection of the hardware industry in India. However, during the late 1960s, a need for
external sources of software was identified in the West, as the inbuilt software in established
systems was not sufficient to handle increasing workloads. The government of India saw an
opportunity to earn revenue from foreign exchange and this resulted in the formation of the
Software Export Scheme in 1972. This scheme allowed companies to import hardware in
exchange for exporting software.
Despite governmental initiatives, there was no substantial growth in software exports

because they were dependent on the related importation of hardware. In addition, India
lacked infrastructural facilities for software development. To counter this, the government
removed the import duty on hardware for software developers.
With the reform of the Licence Raj in 1991, many foreign multinational corporations (MNCs)
established operations in India and set up the Offshore Model, whereby the IT operations
for foreign clients were performed in India. The Offshore Model was later modified to
become the Global Delivery Model, whereby offshore development centres were set up
across the globe. Owing to the entry of foreign players into this market, competition
became intense.
The beginning of the twenty-first century marked a boom in the Indian IT industry. Global
problems such as the Y2K scare and the dotcom crisis compelled many US firms to seek
the services of Indian IT companies (Goldenberg, 1998). With this increasing demand,
large-sized contracts came to India. Many firms focused their operations on leveraging this
increasing demand. In 2007, there were as many as five Tier-1 Indian companies whose
revenues exceeded USD 1 billion i.e. TCS, Cognizant, Infosys, Wipro and Satyam. These
organizations had different positioning strategies. TCS positioned itself as the cost leader,
whereas Infosys positioned itself as a premium service provider. However, these firms still
accounted for less than five per cent of worldwide IT sourcing revenues. Global
powerhouses such as Accenture and International Business Machines (IBM) offered
extreme competition to the Indian Tier-1 IT players.
Thus, with the IT sector reaching its maturity phase, there was an urgent need for the firms
to innovate to sustain the trend of IT commoditization. Niche firms like Cognizant and
Accenture gradually increased their focus on leveraging social media, mobile services,
cloud technology and the effective use of big data analytics. Refer to Exhibit 2 for the
different phases of the Indian IT industry.
The IT industry in India could be primarily divided into three business process outsourcing
(BPO) segments software, IT services and IT-enabled services (ITeS).
Advantage India
The initial reason for the migration of IT operations to India was the abundant availability of
affordable IT professionals there. According to a report published by A.T. Kearney,
offshoring to India roughly translated into a cost advantage of 25-60 per cent of the base
cost of an operation (Matejic, 2005). Apart from that cost advantage, the robust telecom
infrastructure of the country and the large proportion of English speakers amongst the
population were some of the most important benefits of doing business in India. Also, there
was a huge talent pool of technically proficient individuals, of whom more than 50 per cent
were below the age of 25 years.
PAGE 2 EMERALD EMERGING MARKETS CASE STUDIES
VOL. 5 NO. 8 2015
Growth and trends of the IT industry

With the evolution of several e-commerce companies, technological growth in India was
paramount. According to NASSCOM, the IT/ITeS sector had earned revenues of
approximately USD 87.6 billion in the FY 2011-2012. However, with the rising demand for
exports and increasing global footprints, it was expected to reach USD 225 billion by the
year 2020.
E-commerce, online retailing and cloud computing were some of the major growth drivers
of the Indian IT industry. According to the Internet and Mobile Association of India (IAMAI),
India had more than 121 million Internet users, with approximately 17 million being Internet
shoppers.
According to NASSCOM, Indian IT-BPO exports were expected to grow at a rate of 12-14
per cent for the FY 2014 and reach USD 87 billion in the period. Advanced services like
analytics, advanced mobile apps and cloud-based software as a service (SaaS) activities
were expected to drive the growth of IT in India.
The government too supported the growth of this sector. It had approved both the National
IT Policy (Press Information Bureau, 2012a) and the National Electronics Policy (Press
Information Bureau, 2012b) which aimed to bolster the countrys revenues from the IT and
ITeS sectors and create manufacturing hubs for electronic goods. These initiatives
promised to go a long way in encouraging innovation and promoting and developing
solutions pertaining to social media and cloud- and location-based services and other
utility models (Pahwa, 2014).
Cognizant
In 1994, Cognizant Technology Solutions was founded as an American MNC which was an
exporter of IT, consulting services and business process management. It was initially an
in-house technology unit of Dun & Bradstreet (Mishra, 2013a). Headquartered in New
Jersey, Cognizant began its outsourcing operations in 1996. Cognizants initial public
offering (IPO) was launched in 1998, and this made it the first software service firm to be
listed on NASDAQ (Mishra, 2013a).
The growth of Cognizant was fuelled by the dotcom crisis. During the crisis, Cognizant
accepted the application maintenance projects, which were declined by bigger companies
such as IBM and Accenture. Gradually, it entered into mainstream IT services and
consulting, and was eventually included in the Fortune 500 list in 2011 (Rediff news, 2011).
In the same year, Fortune named Cognizant as the third most admired IT service provider
after Accenture and IBM (Fortune magazine, 2011).
Among the IT giants in India, Cognizant was the fastest growing in the field of IT
outsourcing. The US-centric model followed by Cognizant enabled it to blend the depth of
IBM along with the front-end proficiency of Accenture. It enjoyed a high share of
expenditure amongst a few large customers, and this enabled it to earn a considerable
amount of revenue through repeat business. This also ensured growth, even during times
of crisis. However, Cognizant got the majority of its business from the USA. Also, it was yet
to prove its mettle in the BPO business.
Business model
Cognizant followed the Global Delivery Model via its establishment of various offshore
centres located across the world. It operated a number of offshore development centres
outside the USA and near-shore centres in the USA and Europe. By 2007, Cognizant had
a presence in 15 cities in 5 countries. Client-centricity was one of the primary goals of
Cognizant. Given that a major chunk of its business came from the USA, Cognizant was the
first Tier-1 firm to set up its headquarters in the USA.
VOL. 5 NO. 8 2015
EMERALD EMERGING MARKETS CASE STUDIES
PAGE 3
Cognizants business model was tailored to clients and the firm encouraged clients to treat
Cognizant as a business partner rather than merely as a vendor. As a result, Cognizant was
selective in choosing its clients. Of its 430 clients in 2007, 43 belonged to the Fortune 100
list.
Cognizant also intended to be an employer of choice. A strong relationship with more than
100 schools in India, gave it the opportunity to choose its human resources from a vast and
diverse talent pool. Cognizant also had its own academy the Cognizant Academy which
was an in-house training centre. The Academy had the capability to offer both
classroom-based and online learning programmes. It primarily offers continuing education,
role-based training, executive training and certifications (Company website, 2014h).
In its quest to make continuous process improvements, Cognizant was certified Capability
Maturity Model Integration (CMMI) level 5 across all locations throughout the USA, Europe
and India (Business Wire, 2003). Apart from that, Cognizant was the only Tier-1 company
which could leverage the global delivery model enterprise-wide for all its quality initiatives,
and owing to these, it was certified ISO 9001:1994, ISO 9001:2000, SEI-CMMI Level 5,
P-CMM Level 5 and BS 7799 (Business Wire, 2003).
Two-in-a-box model
The two-in-a-box (TIB) model was a proprietary methodology incorporated by Cognizant
which helped the company gain a delivery edge over its competitors. It aimed to remove
the death of distance between the client and the offshore development team by optimally
combining the cost efficiencies of offshoring with the care of an onsite presence. Unlike the
traditional models followed by IT outsourcing vendors such as Pass the Baton (whereby
project responsibility passes on to different business units during different phases of the
deliverable) or Thrown over the Wall (by which offshore project managers monitor client
needs remotely), the TIB methodology represented a radical change in IT service delivery
models (Cognizant White Paper, 2007).
For the TIB model, a senior leader within Cognizant was posted to the client location to
manage customer relationships. At the same time, another senior manager was assigned
to manage the service deliveries from offshore facilities in India. Beyond the low-cost
delivery of the latest technologies, Cognizants leadership maintained that forging strong
and close client relationships was essential to generating business.
According to Niko Canner, co-founder and Managing Director of the strategy consulting
firm Katzenbach Partners, the TIB model followed by Cognizant illustrated many broader
questions about how to design an organization to be global and to succeed globally
(Cognizant News, 2014a).
The TIB model was designed specifically to reduce the IT spending of the organization
by freeing up IT assets and deploying them to more strategic areas which would
generate higher business value. In this model, a relationship team was selected based
on its in-depth domain knowledge of the operating industry. The leader of the
relationship team (also known as the client partner) worked with the clients to absorb
their organizational culture, operational processes and business goals. The client
partner would then consult with the client on strategic initiatives, in turn, bringing
additional business to Cognizant.
Similarly, from the offshore development team, a critical TIB member was identified as the
global delivery manager (DM). The synchronization between the client partner and the DM
was instrumental in delivering precision services tailored to the specific needs of clients[1].
The success of the TIB model spoke for itself, as approximately 90 per cent of the revenue
earned by Cognizant came from repeat business[2].
VOL. 5 NO. 8 2015
Three-in-a-box model
With the IT industry reaching maturity, it was not enough for firms to deliver services
pertaining to client requirements. As a result, to enrich the delivery portfolio, firms started
providing consulting services to clients. Rather than simply being technology vendors, they
sought to become strategic partners. With this in view, Cognizant initiated the
three-in-a-box model to ensure that their front-end sales and customer support teams were
skilled enough to take discretionary measures (Mishra, 2013b).
In the three-in-a-box model, there was a senior business leader and a delivery head (as
there was for the two-in-a-box model). In addition to this, there was a dedicated
consultant who was appointed to oversee particular accounts of large customers. The
consultants used their formidable business and technology acumen, to study the
businesses of customers and recommended solutions which would add value to their
businesses.
The three-in-a-box model was mostly an account-focussed strategy for consultants wherein
they were matched to particular accounts and worked closely with the client business. In
an interview conducted by The Hindu with Mark Livingston, Senior Vice-President,
Cognizant Business Consulting, he stated that Cognizant would not consider adding more
people to the established processes to make it four-in-a-box etc., as that would start
confusing the client. At times, a multiplicity of delivery and consulting roles assigned to a
single account may become confusing for clients (Kumar, 2011).
Inorganic growth through strategic acquisitions
Cognizants overtaking of Infosys in the first quarter of 2012 was one of the most significant
headlines in the IT sector at that time. However, it did not come as a surprise. What had
Cognizant done differently so as to go past Infosys, which had been ahead of Cognizant for
close to two decades? The answer to this question lay in the drastic differences in the
approaches of the two firms with respect to strategic reinvestments.
The radical growth story of Cognizant could be attributed, in a great part, to three engines
of growth exploring new business opportunities in unknown terrain and tying this to its
organizational structure; strategizing key acquisitions to achieve prompt scalability, as well
as access to any acquired firms existing base of customers; and, third, striving
aggressively to maximize its market share rather than just clinging on to its existing
markets.
Cognizant had made close to 17 niche acquisitions from 2007 to 2014. A few of the
strategic acquisitions included TriZetto (an integrated health care technology) (Cognizant
News, 2014b), Odecee (an Australian digital solution company) (Cognizant Investor
Report, 2014), marketRx (analytics space), etc. These were established firms in their fields
of operation. Acquiring these firms, Cognizant got access to their talent pool as well as their
clientele strength.
Cognizant ensured it was flexible and lean enough to accommodate these transitions
across its business units. This ensured that all the acquired companies became a part of
Cognizant and did not act as wholly owned subsidiaries. This eventually led to the
streamlining of the business and its operations. The firm was more than receptive to altering
its existing structures to accommodate newer and more innovative changes. In an interview
conducted by Business Standard, the group CEO of Cognizant clarified that these
acquisitions were mainly made in order to add strategic capabilities to the company, and
were not merely for building capacity (Narasimhan, 2013). The aim of these acquisitions
was to help the company expand its geographical reach and influence, fill in the gaps in the
solution spectrum and to enable Cognizant to move up the value chain by focussing on
high-end services like consulting and analytical domains.
VOL. 5 NO. 8 2015
PAGE 5
Vertical and horizontal segments

Cognizant offered its solutions across 15 industry verticals banking, financial services
and insurance (BFSI), communications, consumer goods, education, energy and utilities,
health care, information services, life sciences, manufacturing, media, retail, travel, etc.
Cognizants expertise in business process services and its prowess in industrial domains
helped it to build trust and credibility across a diversity of industrial sectors.
Cognizant also provided a plethora of services for each of the industry verticals. These
included application services, analytics, business process services and solutions based on
cloud computing, consulting, digital business, engineering and manufacturing, IT
infrastructure services, mobility, quality engineering and supply chain management,
amongst many others (Company website, 2014a).
Cognizant had several proprietary products and platforms which helped it to deliver
state-of-the-art solutions to clients across diverse industries. A few of its products included
Cognizant S3P, Cloud360, LifeEngage, OrderServSmartTrials, etc. Some of these products
were specific to certain industries, like the Mobile Risk Engineering Solution (Company
website, 2014b), which pertained to the manufacturing industry, and there were generic
solutions as well, such as Cloud360 which was the companys proprietary business cloud
platform (Company Website, 2014c).
Cognizant Business Consulting
The idea of creating a separate entity of business consultants emerged in 2002. Before
then, each industry vertical had its own individual industry experts. However, there were a
lot of practices common across industries. This led the management to formally organize
these around strategic consulting groups, leading to the establishment of Cognizant
Business Consulting (CBC).
CBC took the formal structure of a consulting firm in 2007 and a large number of the clients
availed themselves of CBCs services to finalize their IT projects. Hence, CBC started
playing a major role in generating business for Cognizant.
Primarily, CBC delivered strategic consulting via domain and technology expertise. With
more than 3,300 consultants with profound expertise in diverse fields, CBC focussed on
driving the Future of Work for its clients. CBC helped design futuristic solutions which
would help clients improve the productivity and effectiveness of their operations through
the optimal use of IT enterprise solutions (Vault Career Intelligence, 2014).
The various consulting services provided by CBC included IT strategy and roadmap
development, process reengineering and transformation, enterprise architecture and
technology selection and domain solutions. The different functional areas served by CBC
included enterprise analytics, IT infrastructure, customer solutions (ERP/CRM) and process
and quality consulting, to name just a few (Vault Career Intelligence, 2014).
Cognizant 2.0
Cognizant 2.0 (C2) was the delivery platform developed by Cognizant to enhance the
seamless sharing of knowledge and for managing large IT projects by delivering
higher-quality results faster. C2 made use of Web 2.0 technology and ensured four key
attributes first, it provided an innovative approach for improving the overall productivity of
the workforce through real-time knowledge management. It aimed at capturing 60 per cent
of the tacit knowledge available and ensured real-time knowledge transfer. Second, it
provided a new way to manage complex projects. It ensured there was the just-in-time
expertise needed to complete a project task through real-time process guidance, which
included online checklists, procedures, samples, etc. Third, the C2 framework had shifted
the global service model from labour arbitrage to intellectual arbitrage through real-time
collaborations. The C2 model allowed employees to collaborate naturally, discuss pertinent
issues in a forum, identify subject matter experts and seek their guidance, etc. Finally, one
VOL. 5 NO. 8 2015
of the fundamental components of C2 was workflow management, which facilitated

collaboration to capture the actual workflow using dashboards. These dashboards enabled
offshore leaders and onsite managers to track the progress of projects and manage them
accordingly (Cognizant White Paper, 2009).
Apart from these innovations, C2 also had inbuilt project management systems which
helped manage all necessary project templates, samples and incorporated best practices
for each project. Also, any novel practice introduced by a project manager was logged in
the system for future reference and application. These ensured higher predictability and
reliability in operations. Managers did not have to keep buffers in terms of budgets, project
completion days or employees.
Financials
With a market capitalization of USD 29.5 billion, Cognizant was one of the powerhouses of
the global IT industry. The key strength of Cognizant lay in its client relationships. The
passion of its clients and their investment in innovation were some of the major factors
resulting in better, longer-term results.
As per the FY 2013, Cognizant had revenues worth USD 8.84 billion which made it the
second largest player in India (after Tata Consultancy Services [TCS]). It had an operating
income of USD 1.67 billion which eventually led to a net profit of USD 1.22 billion[3]. As of
2014, Cognizant employed more than 180,000 employees (Company Website, 2014d).
Following the global economic crisis, Cognizant had been able to maintain consistent
growth rates in both its revenues and operating profits. Refer to Exhibit 3 for the revenues
and operating profits of Cognizant. The geographical breakdown of revenues was skewed
towards North America, followed by the European markets. In 2013, owing to the addition
of a number of clients in North America, the revenue from North American operations grew
by 18 per cent. On the other hand, owing to an impressive 48 per cent growth in Continental
Europe, the revenues from Europe grew by 32 per cent.
As in most other firms, Cognizant generated the most business in the BFSI sector, followed
by the health care sector (Edelweiss, 2012). Refer to Exhibit 4 for a vertical revenue
breakdown.
Competitive landscape
The Indian IT/ITeS industry had been instrumental in putting India on the global map. Owing
to demographic advantages which included the existence of a large pool of English
speakers, a young population in the job market, a large talent pool, as well as other cost
benefits, the Indian IT industry had been witnessing thriving sales, projected to touch USD
17 billion at a phenomenal growth rate of 30 per cent per annum (India Brand Equity
Foundation, 2014).
Given the lucrative market potential, there was intense competition for market share and
this led to firms focussing on the reduction of costs. Significant cost pressure and budget
constraints forced companies to leverage more on their available assets. As the top line
grew, the attention paid to businesses bottom lines became more nuanced. It had become
imperative for firms to shift their focus from cost reduction to value delivery (PwC report,
2011). This shift of focus required strategic alignment within businesses to ensure that
clients perceived vendors offerings as being value for money. In view of this, various Tier-1
players started to strategize with the aim of attracting business based on non-price stimuli.
International Business Machines
IBM, one of the leading players in the technology and consulting space, headquartered in
New York, offered high-quality infrastructure and consulting services across a wide gamut
of portfolios ranging from mainframes to nanotechnology (IBM Research, 2015). In 2012,
IBM boasted more than 435,000 employees (which made it the second largest employer in
VOL. 5 NO. 8 2015
PAGE 7
the Fortune ratings). In addition, it ranked 4th in terms of market capitalization, 19th in terms
of overall revenues (top line) and 4th in terms of net profits (Fortune, 2012).
The points of difference, which set IBM apart from its competition, were its uncompromised
focus on research and the flexibility of its operations. As of 2013, the organization held the
record for having the largest number of patents filed for 22 consecutive years (Barinka,
2015). A few of IBMs notable patents included those for the automatic teller machine
(ATM), for hard drives and for the relational database management system (RDBMS).
Although it was a pioneer in the field of hardware, IBM was prompt and flexible enough to
realise that the hardware market was progressing towards commoditization. This led to a
steady shift in its management objective of moving from being a commoditized business to
becoming a high-end value chain business concerned with consulting, business
intelligence, etc. The firm shed a number of its hardware businesses such as Lexmark (a
printer manufacturer) and sold its PC product lines to Lenovo. It also strategized certain
acquisitions including PricewaterhouseCoopers (PwC)s consulting business and SPSS.
This initiative reaped instant results and IBMs operating margin expanded radically from
16.8 per cent in 2004 to 24.8 per cent in 2013, with an increase of 7.5 per cent in its net
profit margin (from 9 per cent in 2004 to 16.5 per cent in 2013). In 2014, it had operations
in more than 170 countries and generated revenues worth more than USD 92 billion. The
employee strength as of 2014 was approximately 380,000.
IBM pioneered the component business model in 2003. Refer to Exhibit 5 for the business
model developed by IBM. The model presented a logical representation of business
components and helped analyze the level of synchronization between organizational
capabilities and enterprise strategy. The model stressed the point that an organizational
strategy must be an offshoot of its capabilities, i.e. the core competence (an inward-looking
mindset). It also helped in lean management by identifying redundancy in business
processes and prioritizing and zeroing in on transformational decisions for ensuring
sustainable growth.
IBM operated mainly in five business areas, namely, global technology services, global
business services, global financing, software and systems and technology. Among these
business verticals, global technology services generated a major chunk of the overall
revenues, followed by the software business. Refer to Exhibit 6 for an annual breakdown of
IBMs revenues by business segment.
Accenture
In fiscal 2013, we extended our track record of creating exceptional shareholder value
Pierre Nanterme, Chairman and CEO, Accenture.
Accenture was one of the leading organizations in the world which provided management
consulting, technology and outsourcing services across the globe. With an employee
strength of over 293,000, operating in more than 200 cities in 56 countries and with revenue
worth USD 28.6 billion (Company Website, 2014e), it was a global powerhouse in the IT and
consulting segment.
The end-to-end portfolio of services offered by Accenture was mainly classified under five
operating groups. These five operating groups were, in turn, mapped to 19 focussed
industry groups (Accenture newsroom, 2014) which catered to a diverse set of businesses
across the globe. The industry-focussed model provided Accenture with an in-depth
understanding of the industry dynamics, business challenges, the applicable technologies
and the forecasted growth model which helped them deliver customized solutions specific
to each industry.
Accentures growth platforms Accenture Strategy, Accenture Digital, Accenture
Technology and Accenture Operations were the horizontals which ran across all the five
operating groups. These innovation engines helped Accenture develop world-class skills
VOL. 5 NO. 8 2015
and capabilities to manage and acquire key assets which were important in the creation of
integrated and tailor-made solutions specific to the needs of each industry. Refer to Exhibit 7
for the business model followed by Accenture.
One of Accentures major strengths was that its revenues were equitably allocated across
all of its five operating groups. Although it earned the maximum from products and financial
services, all the other groups contributed substantially to the overall growth of the firm.
Refer to Exhibit 8 for year-over-year (YOY) revenues and to Exhibit 9 for a revenue
breakdown by operating group.
Accenture earned the majority of its revenues from consulting projects which were
rewarded by high margins. Hence, any growth in its consulting business ensured a healthy
bottom line for the company. Approximately 53 per cent of the revenues earned by
Accenture were from consulting projects, the rest being from outsourcing.
Accenture had maintained its focus in the European markets and had recorded an
impressive 13 per cent growth in the EMEA region. Refer to Exhibit 10 for the companys
revenue breakdown based on geography. With an improvement in the technology
spending in upcoming quarters of 2014 in Europe, Accenture was all set to take a major
chunk of the market share. Moreover, the consulting giant was promising to digitize banks
in Europe with a guaranteed increase in productivity of 20 per cent (Gurufocus, 2014).
Infosys
Infosys was the third largest player (by revenues) in the Indian IT industry. Headquartered
in Bangalore, India, it provided consulting and technology services to clients in more than
30 countries. With revenues of USD 8.25 billion (FY 2014) and over 160,000 employees, it
aimed to build tomorrows enterprise for its clients (Company website, 2014f).
The business portfolio of Infosys was broadly divided into four verticals BFSI,
manufacturing, retail and life sciences and energy/utilities/communications and services.
This industrial demarcation helped Infosys to deliver customized solutions specific to
particular industries.
The various service offerings under each of the verticals (called horizontals) were
application maintenance and maintenance, business process management, infrastructure
management service, product engineering services, testing services and others. Apart
from this, Infosys also claimed to deliver consulting services to clients. These service
offerings, juxtaposed with individual industry verticals, helped Infosys enhance and
leverage its technical and domain skills promising enhanced customer satisfaction. This
was reaffirmed by the fact that 97 per cent of their business came from repeat customers
(Infosys newsroom, 2010). Refer to Exhibit 14 for the numbers of Infosys clients.
Infosys was the pioneer of the Global Delivery Model (GDM) which ensured that entire
applications were distributed into different life-cycle stages so that they could be handled
as silos prior to their integration. This required less coupling between different life-cycle
stages. The key drivers of GDM included processes, quality, tools, knowledge
management, programme management and risk mitigation (Company website, 2014g). All
these components helped employees to track a particular project end to end with proper
documentation and monitoring.
From the very outset, Infosys had positioned itself as a premium player compared to its
competitors by charging a higher margin for its services. However, owing to the high
cost-sensitivity of the IT industry, this approach gradually led to lower growth in terms of
revenues, profits and market capitalization. Refer to Exhibits 11, 12 and 13 for Infosyss
YOY revenue, profits and its market capitalization, respectively. The BFSI sector had been
the predominant revenue generator for Infosys, and its contribution grew by 2 per cent
sequentially for the fiscal year 2014. Its clients in the BFSI sector accounted for 33.5 per cent
VOL. 5 NO. 8 2015
PAGE 9
of its total sales during the third quarter (Economic Times, 2014). Refer to Exhibit 16 for the
percentage contributions of revenue to Infosys by industry.
Infosys had been generating a considerable proportion of its revenues from operations in
North America. However, there had been a decrease of approximately 2 percentage points
in revenues. On the other hand, revenues from Europe had increased by 1 percentage
point (Infosys Investors site, 2014). Refer to Exhibit 15 for Infosyss revenue breakdown
based on geography.
In 2014, Infosys had tried to enter into the consulting segment by acquiring the
Swiss-based Lodestone Holding AG, which was a global management consulting firm
(Infosys news room, 2014). However, more than 60 per cent of its revenues came from IT
services. Refer to Exhibit 17 for contributions to Infosyss revenues by service offerings.
Tata Consultancy Services

Established in 1968, TCS was the first and the largest IT services, business solutions and
consulting company, offering innovative and transformational services to global enterprises
across the globe. It has a global presence in 44 countries with operations spanning 199
offices. It has approximately 285,250 employees which has made it the largest employer in
the Indian IT industry. It also has the largest software R&D centre in India. It has boasted
a top-line growth of 22 per cent (CAGR) over a period of nine years. See Exhibit 18 for the
top-line growth of TCS.
The business portfolio of TCS largely comprised four verticals, namely, BFSI, telecom, retail
and distribution and manufacturing. In addition, it also delivered its services across other
industries such as hi-tech, life sciences and health care, travel and hospitality, energy and
utilities and media and entertainment. Over the decade beginning in 2000, there had been
a double-digit growth in all its verticals, demonstrating the companys phenomenal success
in delivering its solutions across the board[4]. Refer to Exhibit 19 for TCSs revenues per
vertical segment for the nine-year period discussed. Among the verticals, the BFSI sector
was TCSs largest revenue generator, followed by the retail and distribution sector[5]. See
Exhibit 20 for the percentage breakdown of revenues across different verticals.
Under each of these verticals, TCS had broadly classified their service offerings into eight
horizontals namely application development and maintenance, enterprise solutions (which
includes business intelligence), assurance services, engineering and industrial services,
infrastructure services, global consulting, asset-leveraged solutions and business process
services (BPSs)[5]. Among these, application development and maintenance was the most
prevalent, followed by enterprise solutions. This was testimony to the fact that the majority
of TCSs projects were development or maintenance projects. Refer to Exhibit 21 for the
percentage breakdown of revenues across different horizontals.
TCS was the pioneer of the Global Network Delivery Model (GNDM), a model that ensured
real-time collaboration in terms of round-the-clock service delivery that spanned
technologies, domains, geographies and business intelligence (BI) services (Company
Website, 2012). The GNDM model dealt with the BI Centre of Excellence (COE) which
integrated best-in-class methodologies, established delivery frameworks and global
delivery centres (GDCs) for cost and scale benefits. Refer to Exhibit 22 for an overview of
the GNDM framework.
TCS had been generating a major proportion of its revenues from North America, followed
by the UK. However, over the past 10 years, starting in 2000, the company had a CAGR of
28 per cent in the UK, whereas, for North America, it grew at a CAGR of 25 per cent[4].
Moreover, in growing markets like Latin America, Asia-Pacific and some Middle Eastern
countries, TCS had experienced a growth rate of over 35 per cent. Refer to Exhibit 23 for
TCSs revenue spread across markets.
VOL. 5 NO. 8 2015
Wipro
Wipro was one of the powerhouses of the Indian IT industry and a global leader in IT
services, outsourcing, BPSs and business consulting. With a legacy of 25 glorious years of
excellence, Wipro was a pioneer in creating a unique quality methodology as part of its
delivery framework, known as the Wipro Way[6]. The Wipro Way was a best-in-class
combination of practices based on Six Sigma, Kaizen, Lean manufacturing and the
Capability Maturity Model (CMM). It has a dedicated workforce of 140,000, serving more
than 950 clients across six continents. All these factors were instrumental in Wipro
achieving a consistent CAGR of 20 per cent in revenues and 14 per cent on net income
over a period of six years from 2007[7]. Refer to Exhibit 24 for Wipros YOY revenues and
profits.
Wipro had a diversified vertical portfolio, covering seven industry sectors BFSI; energy
and utilities (ENU); global media and telecom (GMT, health and life sciences (HLS) and
high-tech manufacturing); and retail, consumer packaged goods (CPG), transportation and
government (RCTG). BFSI continued to be the most profitable segment, accounting for
approximately 41 per cent of Wipros exports, whereas HLS was expected to show
promising growth in the near future[6]. All the verticals had a proportionate contribution to
the total revenues with no vertical contributing more than 27 per cent of the total. See
Exhibit 25 for the percentage contribution of various verticals to Wipros total revenue.
The service line distribution (horizontals) of Wipro was classified under six broad
headings technology infrastructure services, analytics, business application services,
BPO, product engineering solutions (PES) and application development and maintenance
(ADM). Business application services contributed the maximum to the top line and the total
integrated consulting revenues constituted more than 2 per cent of the total revenue[7].
Refer to Exhibit 26 for the percentage contribution of various services to the companys total
revenue.
The mega-alliance strategy envisaged by Wipro was its unique selling point. Its strategic
alliance portfolio included eminent players like Cisco, EMC, SAP, Oracle, Microsoft, HP,
etc.[7]. This helped Wipro to co-innovate and co-create solutions for the future.
Wipro had been generating considerable revenues from its Americas operations, followed
by those generated in Europe. Having scaled its operations in Western markets, it also had
a strong presence in emerging geographies. Continental Europe had been a favoured
market in terms of deal wins, and its US revenues had grown ahead of the companys
average (Zee News, 2014). Refer to Exhibit 27 for the percentage contribution of various
geographies to Wipros total revenue.
Future prospects
Keywords:
Strategic management,
IT strategy,
Competitive advantage,
Business model
restructuring,
Global delivery model,
IT consulting
By 2014, with the commoditization of IT services and with intense competition in the IT
industry, continuous innovation was a mandate for sustainability. In addition, all the IT
giants had made a conscious effort to enter into the consultancy framework in order to build
strategic alliances with their clients.
The Dont Get SMACked research performed by Cognizant showed how social, mobile,
analytics and cloud computing (SMAC) was the forthcoming enterprise IT model.
Disclaimer: This case is written solely for educational purposes and is not intended to
represent successful or unsuccessful managerial decision making. The author/s may have
disguised names; financial and other recognizable information to protect confidentiality.
Notes
1. Company website, Two-in-a-box, www.cognizant.com/our-approach/two-in-a-box
2. available at: http://images.businessweek.com/ss/09/03/0326_bw50/21.htm (accessed 4 November
2014).
VOL. 5 NO. 8 2015
PAGE 11
3. Annual Report Cognizant, published in April 2013 (accessed 4 November 2014).

4. Annual Report Tata Consultancy Services, published in March 2014 (accessed 5 November
2014).
5. Investors report Tata Consultancy Services, published in 2014 (accessed 5 November 2014).
6. Annual Report 2013-2014 Wipro, published in March 2014 (accessed 5 November 2014).
7. Investors presentation Wipro, published in March 2014 (accessed 5 November 2014).
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VOL. 5 NO. 8 2015
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Exhibit 1
IT Business process management highest impact sector for India
8.1 per cent relative industry share in national GDP;
3.1 million largest private sector employer;
greater than 1 million fourth largest employer of women (35-38 per cent share of total
employees);
USD 2.4 billion highest attractor of PE/VC investments;
60-70 per cent highest net value add sector;
45 per cent offsets nearly half of Indias oil import bill;
38 per cent largest share of Indias total services exports;
60 cross-border acquisitions (28 per cent share in total) spearheading the Indian
multinationals; and
99 IT Special Economic Zones in Tier 2/3 cities (promoting regional growth).
Source: NASSCOM
VOL. 5 NO. 8 2015
Exhibit 2. Phases of the Indian IT industry

Figure E1
Import duty
Few players
Related to
hardware
exports
Low end
services
Phase 1
Reducon
of import
duty
Growth in
exports
Phase 2
Removal of
Licence Raj
Oshore
model
Global
Delivery
Model
Set up of
MNCs
Phase 3
Five Tier 1 rms

in India reached
USD 1 bn
High end
services
BPO sector
Phase 4
Big data
analycs
Cloud
Social
media
Phase 5
Source: Authors creation
Exhibit 3. Revenues (in USD thousands)

Figure E2 Gradual rise in value chain of the Indian IT industry
10,000,000
8,843,189
7,346,472
8,000,000
6,121,156
6,000,000
4,000,000
4,592,389
3,278,663
2,000,000
0
2009
2010
2011
2012
2013
Operang Income
8,000,000
6,135,791
6,000,000
4,854,383
3,584,431 3,952,886
4,000,000
2,000,000
Operang Income
618,490
Linear (Operang Income)
0
2009
2010
2011
2012
2013
Source: Creation of case is the authors taken from the Annual Report/Investor Report
VOL. 5 NO. 8 2015
PAGE 15
Exhibit 4. Vertical-wise revenue breakdown (in percentages)

Figure E3
12
BFSI
41
20
Healthcare
Manufacturing, Retail & Logiscs
Others
27
Source: Creation of case is the authors taken from the Annual

Report/Investor Report
Exhibit 5. Component business model by IBM
Table I Type of Business
Direct
Business
administration
Business
development
Relationship
management
Sales and servicing
Product fulfilment
Business planning
Sector planning
Account planning
Sales planning
Fulfilment planning
Sector management
Product management
Product delivery
Relationship
Credit assessment
Credit administration
Sales management
Fulfilment planning
Contact information
Product fulfilment
Customer dialogue
Document
management
Control Business tracking

Staffing
Execute Staff
administration
Product
administration
Marketing campaigns
Financial
control
Portfolio
planning
Compliance
Customer
account
Ledger
Source: Case created by authors, taken from various sources
Exhibit 6. Revenue breakdown for IBM across business units

Figure E4
120
100
80
Systems & Technology
Soware
60
Global Financing
Global Business Services
40
Global Technology Services

20
0
2010
2011
2012
2013
2014
Source: Creation of case is the authors from the Annual Report/Investor Report
VOL. 5 NO. 8 2015
Exhibit 7. Accenture Business Model Operating Groups vis-a`-vis Growth

Platforms
Figure E5
CMT
Resources
Products
Financial
services
Health and
public
service
Accenture Strategy
Accenture Digital
Accenture Technology
Accenture Operaons
Source: Authors creation
Exhibit 8. Revenues before reimbursements (years ending August 31st)

Figure E6
Revenues before Reimbursement in USD billions)
35
30
27.9
28.6
2012
2013
25.5
23.4
25
19.7
20
15
11.4
11.6
11.8
2001
2002
2003
13.7
15.5
16.6
2005
2006
21.6
21.6
10
5
0
2004
2007
2008
2009
2010
2011
Source: Creation of case is the authors from the Annual Report/Investor Report
VOL. 5 NO. 8 2015
PAGE 17
Exhibit 9. Revenue breakdown based on operating groups

Figure E7
% of net revenue (Year to Date FY 2014)
30
25
22
25
19
20
17
17
15
10
5
0
Comm, Media and Tech
Financial Services
Health and Public

Services
Products
Resources
Exhibit 10. Revenue breakdown based on geography

Figure E8
% of net revenue (Year To Data FY 2014)
60
47
40
40
13
20
0
Americas
EMEA
Asia Pacic
Exhibit 11. YOY revenues (in USD million)

Figure E9
10,000
8,000
6,000
4,000
2,000
0
6,041
6,994
7,398
2012
2013
8,249
4,804
2010
2011
2014
VOL. 5 NO. 8 2015
Exhibit 12. YOY net profit (in USD million)

Figure E10
2,000
1,313
1,500
1,499
1,716
1,725
1,751
2012
2013
2014
1,000
500
0
2010
2011
Exhibit 13. YOY market capitalization (in INR crores)
Figure E11
200,000
186,100
150,110
164,592
165,917
2012
2013
188,510
150,000
100,000
50,000
0
2010
2011
2014
Exhibit 14. YOY number of clients

Figure E12
1,000
575
620
694
2010
2011
2012
798
890
500
0
2013
2014
VOL. 5 NO. 8 2015
PAGE 19
Exhibit 15. Revenue breakdown based on geography

Figure E13
Geography wise revenue distribuon (Q3FY2014)
80
60
60
40
24.9
12.5
20
2.6
0
North America
Europe
India
Rest of World
Exhibit 16. Per cent revenue contribution by industry
Figure E14
27.2
30
24.6
22.8
25
19.1
20
15
10
6.3
5
0
Banking and Financial Services
Insurance
Manufacturing
Retail and Life Sciences Energy, Ulies, Communicaon & Services
Exhibit 17. Percentage revenue contribution by service offerings

Figure E15
70
60
50
40
30
20
10
0
61.3
33.4
5.3
Business IT Services
Consulng, Package
Implementaon & Others
Product, Plaorms & Soluons
VOL. 5 NO. 8 2015
Exhibit 18. YOY revenue of TCS (in USD million)

Figure E16
Top-line growth of TCS
15,000
10,000
5,000
2,200
3,000
4,100
2005
2006
2007
5,800
6,000
6,200
2008
2009
2010
8,100
10,100
11,700
0
2011
2012
2013
Exhibit 19. Vertical-wise revenues of TCS
Figure E17
40,000
2005
35,000
2006
30,000
2007
25,000
2008
20,000
2009
15,000
2010
10,000
2011
5,000
2012
2013
0
BFSI
Telecom
Retail &
Distribuon
Manufacturing
Others
2014
VOL. 5 NO. 8 2015
PAGE 21
Exhibit 20. Revenue spread across verticals

Figure E18
Revenue across vercals (in %)
2.2
3.8
BFSI
4.8
3.4
Telecom
Retail & Distribuon
5.7
Manufacturing
43.1
5.4
Hi-Tech
Life Sciences and Healthcare
8.4
Travel & Hospitality

Energy & Ulies
13.9
Media & Entertainment
9.3
Others
Exhibit 21. Revenue spread across horizontals

Figure E19
Revenue across horizontals (in %)
Applicaon Development &
Maintenance
Enterprise Soluons
12.5
2.7
Assurance Services
3
42.8
Engineering & Industrial Services
11.5
Infrastructure Services
4.6
Global Consulng
7.7
Asset Leveraged Soluons

15.2
Business Process Services
Source: Creation of case is the authors taken from the Annual Report/Investor
Report
VOL. 5 NO. 8 2015
Exhibit 22. GNDM framework

Figure E20
SOLAR
framework and
soluons
GNDM for BI
delivery
Global Talent
Pool
CO-INNOVATION
Network
GDC and
Proximity
Centres
Report
Exhibit 23. Revenue breakdown across geography

Figure E21
North America
7.1 2
Lan America
6.9
UK
11.2
Connental Europe
53.2
India
17.3
Asia Pacic
Middle East & Africa
2.3

VOL. 5 NO. 8 2015
PAGE 23
Exhibit 24. YOY revenue and profits of Wipro

Figure E22
600
500
400
300
Prot
200
Revenue
100
0
2007
2008
2009
2010
2011
2012
2013
2014
Report
Exhibit 25. Vertical-wise contribution to the total revenue

Figure E23
Contribuon to total revenue (in %)
BFSI
18.7
GMT
26.9
ENU
9.9
RCTG
14.3
15.1
HLS
15.1
Mfg-HiTech

Exhibit 26. Service-wise contribution to the total revenue

Figure E24
Contribuon to total revenue (in %)
Technology Infrastructure Services
21.5
23.7
Analycs
Business Applicaon Services
7.5
7.1
8.8
31.4
BPO
PES
ADM

VOL. 5 NO. 8 2015
Exhibit 27. Region-wise contribution to the total revenue

Figure E25
Contribuon to total revenue
1
10.7
Americas
India and Middle East
49.9
Europe
29.6
APAC
Japan
8.8

Report/Investor Reports
About the authors

Prof. Tripti ghosh sharma is currently an Assistant Professor, Marketing, at the IMT,
Ghaziabad. She teaches Services Marketing, Marketing Communication and Business
Research methods. Her research broadly focuses on exploring marketing issues using
quantitative models across diverse sectors such as insurance, media and entertainment,
e-commerce, tourism etc. She also has keen interest in developing India specific case
studies, her focus being in the domains of strategy, social enterprises and
entrepreneurship. Tripti ghosh sharma is the corresponding author and can be contacted
at: tsharma@imt.edu
Mr Tapabrata Ghosh is a second year PGDM student of IMT Ghaziabad specializing in
Information Systems and Consulting. Prior to this, he has a work experience of 3 years with
Infosys. He completed his B.TECH in Electronics and Communications in 2005.
tapabrata.lookme@yahoo.co.in
VOL. 5 NO. 8 2015
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Tata Consultancy Services

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3. Annual Report Cognizant, published in April 2013 (accessed 4 November 2014).

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8.1 per cent relative industry share in national GDP;

3.1 million largest private sector employer;

Product, Plaorms & Soluons