Background

DBSS, a joint venture between Dun & Bradstreet Corporation (D&B) and Satyam Computer
Services (SS) was formed in 1994. The objective was to serve as back-end IT operations centre
for D&B and its affiliates in Chennai. Later, it started serving non-D&B clients. But since there
were many such companies, DBSS had to differentiate itself. After studying the “Big 5”
consulting firms it realized the differentiator could be providing quality service that was at par or
better than its competitors but at offshore price. D&B underwent major restructuring splitting
into multiple divisions and it bought out Satyam’s 24% stake. In 1996, one such division became
an independent company called Cognizant Technology Solutions.
In 1998, Cognizant was listed in NASDAQ as the first software and services company with
major operations in India. Within 12 years, in 2006, its revenue grew over $1 billion and its
turnover, by 2007, surpassed $2.11 billion which showcased a growth of 50% YoY. Cognizant is
a Forbes global 2000 company, with a place in the NASDAQ 100 index, S&P 500 index, and
Fortune 1000 companies. Cognizant was unique in the aspect that compared to other Indian IT
companies, it generated 80% of its revenues from the United States.
The core competencies of the company include web-centric applications, data ware-housing,
component-based development, and legacy and client-server systems. Cognizant measured
success particularly in terms of customer satisfaction and customer retention matrices. A third-
party Customer Interactive Management Application (CIMA) performs the customer survey on
several parameters that include both quantitative and qualitative feedback about the performance
of the company.
The industry segments that Cognizant’s operations were aligned with, where the domain
knowledge was critical, are called verticals and are as follows: Financial Services,
Manufacturing/Retail and Logistics, Healthcare, and others including Communications, Media
and Information Services, and High Technology.
Mission:
Cognizant's single-minded mission is to dedicate our business process and technology innovation
know-how, our deep industry expertise and worldwide resources to working together with clients
to make their businesses stronger.
Vision:
To lead sustainable growth with environment friendly practices and responsible use of natural
resources.

Implementation of Mission and Vision

1. Transparency: Cognizant believes in the culture of open exchange of information. This

was evident from Cognizant’s two in a box relationship model where the delivery of
services was not tied to any one of the delivery centres, rather it could be connected from
any part of the globe to any centre.
2. Passion: At Cognizant, employees have a can-do attitude which can be seen from their
continuous approach of taking challenges and reaching milestones. (e.g. Within 4 years
of its inception, Cognizant was listed in NASDAQ in 1998 as first software and services
company with its operations in India)
3. Empowerment: Cognizant encourage end to end ownership, responsibility, accountability
and recognition to its employees. It formulated strategy to overcome challenges that were
faced in delivering operations in India which has a sizeable population. Entrusting and
empowering employees were the key aspects of this strategy. On choosing the right
people for the job and entrusting them with special assignments, increased the motivation
level of employees tremendously and it brought better results for both client and the
company.
4. Collaboration: At cognizant people believe in working collaboratively to achieve
common goal. The goal during incubation of the organization was to provide customers
with the experience and delivery of better in quality than its competitors but at offshore
prices and this was achieved by its unique onsite/offshore delivery model where teams at
both the location worked collaboratively to achieve the goal.
5. Customer Focus: Cognizant measured success particularly in terms of customer’s
satisfaction and customer retention matrices. For this, it has partnered with a third party,
Customer Interactive Management Company (CIMA). They perform customer survey on
several parameters that included both quantitative and qualitative feedback about the
company.
6. Integrity: Cognizant believes in valuing opinion of customers and employees and it work
towards improving their experience every time. It’s seen in their Performance
management system where it has allowed the employee to disagree with the managers’
evaluation and provided a chance for next level up for review.
Challenges Faced by Cognizant

1. Expanding worldwide delivery – while ensuring correct territory is identified to aid future
growth was a challenge. It was important to maintain customer relations in these areas
since the concept of global delivery was still new. The global delivery system or
‘Cognizant 2.0’ provided the advantage of dispersing talent and expertise-based teams,
having varied experience to different locations based on client requirement, providing
higher quality services efficiently This helped provide differentiated, transformational
value to their end customers
2. Maintaining Work Culture – With the Two-in-a-Box relationship model and employees
placed in separate parts of the world, Cognizant requires reinforcement of its culture and
organisation purpose. This is especially important as the organisation plans to grow in
size and makes several acquisitions. Entrusting and empowering employees is an integral
part of its culture.
3. Hedging against risk – It was essential to develop in other service sectors apart from
financial services, manufacturing/retail, logistics, healthcare to hedge against risk. IT
infrastructure development, BPO and KPO were identified as potential growth zones
4. Competition – Rapid changing environment and the entry of companies such as IBM, HP
and Accenture were a threat to Cognizant since they had greater financial, technical and
marketing resources, larger brand name and could copy the organisation’s
on-site/overseas offshore delivery model.
5. Job Responsibility Conflicts – During its initial years, Cognizant had to change its
organisation structure to ensure smooth functioning and minimum friction related to job
roles. While the ‘delivery teams’ were industry segment based, management and
‘customer- centric teams’ were geographic. To meet their targets, onsite client finding
teams would’ve find clients irrespective of industry segments, which created difficulties
for the delivery team. Onsite client relationship teams shifted towards a segment-based
approach and domain experts were employed to head respective fields.
6. Recruitment and Retention of Human Resources – As several consulting firms in the
market fight for top talent from a limited resource pool, Cognizant needs to attract
skilled, qualified workforce for various verticals. Retention of the workforce and
simultaneous hiring is needed to keep attrition rates in check.
7. Strategic Problems – The operations setup and processes that Cognizant considered
cumbersome to put-up, was soon adopted by competitors in the Indian IT market.
Visa requirements, rising cost of skilled labour and depleting operating margins due to
changing exchange rates posed additional problems.
Porter’s Five Forces:
Bargaining Power of Buyers:
Bargaining power of customers is medium as Cognizant provides multiple services, starting from
technology development to business process out-sourcing and consulting. While consulting is a
comparatively new service introduced, it has been expanding rapidly through the Cognizant
Business Consulting wing. More over all such services are provided along different segments
like Financial Services, manufacturing/ Retail Logistics, Healthcare and so on. Hence, customers
can rely on Cognizant to provide a bouquet of services at once. However, Cognizant does have a
lot of competitors like TCS, Wipro, Accenture who also have a strong customer base and
provided the same kind of services. Hence, cost of switching to competitor brand is also medium.
Bargaining Power of Suppliers:
The bargaining power of suppliers is low. Since Cognizant is an IT consulting firm their
deliverables to the client are not influenced by any supplier. The only source of raw material they
obtain from suppliers are related to IT infrastructure like computers, data centres, strong LAN
connections, modems, etc.
Threat of New Entrants:
Threat of new entrants is low. India’s market for IT services is dominated by giants like
Cognizant, TCS, Infosys and so on. It would be difficult for a new company to enter the market
and take up any of their place.
Brand Preference and Consumer Loyalty: Cognizant values customer service and provides
services to different locations all over the world. Their Two in a Box Model ensure strong
relation with eh onsite team, improving their quality of service.
Capital Requirement: The capital required to set up operations on a level that CTS is operating
would be difficult as they are a well-established player.
Threat of Substitutes:
The threat of substitutes is high for cognizant. Companies like Infosys, Wipro, TCS, IBM and
Accenture provide similar services. Hence, their services are not unique and can be imitated. If
we look at the revenue distribution of the Cognizant and its competitors we can see, that it does
not occupy a major market as per its competitors.
 Market Share of Cognizant & its
Competitors
Cognizant
8%
TCS
11%
Infosys
IBM 6%
46%
Accenture
24%

Wipro
5%

Rivalry Among Competitors:

High. There were multiple companies providing IT Services ranging from system integration
firms, contract programming companies, application software companies, internet solution
providers and so on. While players like TCS, Infosys and Wipro were the main competitors of
Cognizant in India, entry of Accenture and IBM with a much bigger legacy threatened its
position more. Each of the companies had one or the other unique offering. While Infosys had
their modular global solutions framework to increase efficiency in client processes, IBM with
their green data centres were carving out a new market for green technology.
SWOT Analysis
Strengths
1. Cognizant has very strong capabilities in financial services and also the healthcare
domains. They start of with a new market segment or ‘vertical’ and run it independently
till its contribution to the aggregate profits become substantial
2. It has been growing in consulting businesses continuously ever since its inception in 1994
3. It has implemented the Three Horizon Strategy which has yielded positive results in the
long run. This means
a. Horizon I: Maintain and defend core business
b. Horizon II: Nurture emerging business
c. Horizon III: Create genuinely new business
4. It has robust recruiting, training and retentions systems and a highly successful and
effective service delivery model
5. Cognizant offers a very superior client relationship model which is called a two in a box
model (TIB)
Weaknesses
1. Cognizant has concentration of business in North America.
2. It has restricted its depth and infrastructure in Management consulting.
Opportunities
1. Cognizant has expanded into other verticals and has geographies in Europe markets
2. Its healthcare business has been flourishing and can yield higher growth and profitability
like financial sector.
3. Its IT integration is across industries. They have already overtaken Wipro & Infosys and
are now aiming at TCS
4. Also, Cognizant has opportunity to venture into Big data and analytics service offerings
in future.
Threats
1. Its competitors like TCS, Wipro, Accenture and IBM have more financial capabilities to
bear the shocks and lean period of the industry and also take more risks
2. They are facing rising inflation and wage bill in India which would lead to decrease in
profits

Blue Ocean Strategy

There are two ways to establish and grow an organisation under blue ocean strategy – either
through product innovation or through demand innovation.
Product innovation involves strategy from outside in means looking at business from an outside
in, enlarging the pond they fish in, in other terms broadening the business they operate in. This is
primarily done by bringing in a product or a service that creates entirely new sources of value for
buyers thereby creating new demand.
Demand innovation means creating new growth and value by addressing the hassles and issues
that surround the product rather than by improving or bringing in a new product itself. This
create new value and new growth even in mature industries.
Cognizant, through their business model that combines traditional client facing or onshore
consulting services with offshore low-cost advantage, created demand innovation. They
employed 02 sets of employees – an onsite team to manage customers in the US and an offsite
team to create deliverables in India. This was termed as Two in a box (TIB) relationship model.
Other onsite-offsite models include “pass the baton” model which means leveraging some part of
the work to offsite team which then makes and shares the deliverables with the onsite team or
passes the baton back to the onsite team. Once done, the accountability ends. “Thrown over the
wall” means leveraging less productive/less important work to the offsite team and keeping the
important part with the onshore team. In Cognizant’s TIB, there were counterparts at each level
of the hierarchy in both onshore and offshore team and both of them worked in a collaborative
fashion, as a team. Both the teams were together held responsible and accountable for the
project. This was a hybrid model that was very well established and embedded in the DNA of
Cognizant. This model helped them save a lot of money which was reinvested in expanding
business into market segments or “verticals” like healthcare, logistics etc.
The reason why this model that changes the internal dynamics of an organisation became a
success is because Cognizant was equally transparent about it with their external clients. The
clients were clearly told that the project will not be tied to any particular delivery center basis
geography but will be shared with and undertaken by any of the cognizant office or team across
the globe basis the requirements of the projects. This model also worked because diversification
and integration worked hand in hand and at equal pace. This means as they diversified into new
market segments and business offerings, they also added new employees with enhanced skills in
the new workforce and also built the technical skills of the existing employees through strong
L&D setup.
To conclude TIB worked as a blue ocean for Cognizant because it helped them increase their
profitability, consequently boosting the speed of the growth. Having started their operations in
1994 which was 10 years later than Infosys. This demand innovation strategy made them a
significant player in the market in less time.
Conclusion
Although Cognizant is facing a lot of challenges from its competitors and ever-changing
dynamics of the IT industry, they have done well to come up with a business model that helps
them yield profits by lowering costs. In recent years, they have been able to grow at a rate faster
than their competitors.
The three primary learnings from the case are
1. Make front end – back end model collaborative: Almost all consulting companies, be it
Mckinsey, EY, Deloitte, Cognizant or IBM, have a back-end delivery team. It is
completely upto the organisation to decide the nature of the work to be allocated to the
global delivery team. An organisation can choose to go either the EY way – EYGDS
which outsources compliance and research-based roles which are only slightly connected
with the client, or Cognizant’s way where the onshore and offshore teams are treated
equally and hierarchies match at each level.

2. Focus on building capabilities: Cognizant, through their strong L&D programme, have
been able to build strong capabilities amongst its existing workforce to compete with its
rivals and deliver seamless, high-quality services. They have built an in-house academy
called

3. Choose growth over profits: Cognizant, in order to grow, expand and position themselves
against their rivals, reinvested a major chunk of its profits in order to venture into new
service offerings and market segment. For instance, they were the first company to
provide IT consulting and related service in Healthcare segment.