The purpose of this essay is to analyze how cognizant has continued to adapt its services to fit the demand of its clients which make up an important part of its environment. The aim is to show how different methods adopted by Cognizant have helped to meet its clients continuously changing needs. The first section illustrates the external environment for Cognizant's development. Then, the next section deals with how the Two in a box model implemented by Cognizant fit its environment and the tension it generated and how they were overcome. C2 programme will be specified in second section in terms of organizational structure. The last section presents the lesson drawn from Cognizant's growth.
COGNIZANTS' EXTERNAL ENVIRONMENT
The external environment of a firm plays a key role in determining the strategy employed by top management. The external environment is divided into four broad groups. For cognizant these are opportunities - high demand for India's IT offshoring services; threats - strong competition from other offshoring companies; uncertainty-foreign exchange fluctuation and resources availability - high quality manpower though predicted to be insufficient (Eccles et al 2008).
High demand for Indian software services exports
This is a major opportunity for Cognizant. This is because Cognizant provides an inexpensive source of highly skilled workforce to clients
From exhibit 1, the growth of revenue on software exports increases gradually from 1993 to 2001, and the rate was over 50% during the last 6 years. The US market is the biggest client accounting for more than half of export revenue for Indian offshoring IT services during 1997 and 1998 (Arora et al 2000).
Strong Competition from other Outsourcing Firms
Despite high demand from markets, Cognizant currently faces very competitive software outsourcing market. In the domestic environment, Cognizant has been sharing the cake with other Indian companies whose revenue went beyond $ 1 billion.
As shown in Exhibit 3. Cognizant is not the best performer among them. Additionally, it is more stressful when playing in global battlefield. Collectively, compared with global peers such as Accenture, EDS and IBM, India's offshores merely constitutes less than 5% of IT outsourcing market share worldwide (Eccles et al 2008).
Foreign Currency Fluctuation
This creates high uncertainty for operation. In 2007, Cognizant stated that the appreciation of rupee versus the US dollar led to a 2.1% drop in their operating margin. [1] However, the depreciation of rupee versus the US dollar had a sympathetic influence on their operating margin by 1.19% in 2008. [2] As a result of the massive impact, Martyn Hart (2008), chairman of the National Outsourcing Association, indicated that outsourcing providers should keep a close eye on the financial market and be cautious to hedge on the rising and falling of currency.
Shortage of IT Talent
The growth of Indian software services exports relies heavily on the availability of highly skilled IT employees. From exhibit 4, the proportion of Indian employees as a % of total employees of global IT companies is high. This increases the competition of recruitment of IT talent. However, a shortfall of nearly half a million engineering professionals is predicted by 2010 (Eccles et al 2008).
Farrell et al (2005) estimated that demand for suitable engineers will reach 138% of local supply and wage inflation for Indian IT engineers' soars at average of 15% per year.
PRIOR TO C2, HOW DID COGNIZANTS ORGANIZATIONAL STRUCTURE FIT ITS ENVIRONMENT
According to Francisco D'Souza (2008), before 2000, Cognizant was organized such that most teams reported to managers located in India. As a result of new demand by clients for more sophisticated services, Cognizant changed its organizational structure. As a result, the two in a box model was created. The two in a box model implies that for every client project, Cognizant had an onsite partner referred to as the client partner that 'works on the client location and the offshore delivery managers who are dedicated to key client projects and coordinate service delivery' (Eccles et al 2008)
In 2002, Cognizant became the first to organize around business industry verticals defined as groups of customers in industry sectors with particularly high revenue potential. These verticals included financial services, healthcare, retail, manufacturing and logistics etc. (Eccles et al 2008). Cognizant divided its market along customer axis (D'Souza, 2008).
Firstly, the change in the way reporting structure worked made Cognizant more flexible and responsive to client needs. This was because onsite partners were empowered to make executive decisions. As a result, teams in India around the world did not have to report to India. Rather, report was to the customer facing executives; cognizant employee close to the client site. Cognizant believed that this was the best way to implement the discipline of customer intimacy which was required in its environment characterized by high demand and fierce competition. This also gave it a competitive edge in the market (Chandrasekaran 2009).
Secondly, this organizational structure eliminated two defective practices which most offshore IT serviced delivery firms suffered. These are 'pass the baton' and 'thrown over the wall'. 'Pass the baton' involved the rotation of vendor counterparts which inhibited continuity of a vendors knowledge while 'thrown over the wall' implies that since decisions are shifted offshore, customers found it hard to access projects progress while vendors found it hard to stay informed about client needs.
Finally, Cognizant's offshoring and outsourcing services helped clients to reduce cost. Cognizant substituted clients IT staff with less costly offshore personnel and helped clients leverage its IT talent pool to grow their business. This also enabled the client's managers to focus on other aspects of the project thereby minimizing time spent. Also, because the client partner is empowered to make executive decision about the project, this saves time and reduces bottle necks in decision making.
HOW DID THE PREVIOUS ORGANIZATIONAL STRUCTURE GENERATE TENSION
Cognizant swung the pendulum too far in the direction of customer intimacy. It was found that although Cognizant was successful in ability to be responsive to customer needs, they were unable to draw their entire global team into one single cohesive team that would behave as one global seamless team. According to D'Souza (2008), this organizational structure was against traditional organizational structure as there was 'no single point of accountability and escalation'. As a result, there was difficulty in monitoring activities on client sites.
Secondly, the preservation of Cognizant distinct culture also posed a problem. As the company grew, the employees stationed at client sites felt disconnected from the company. There was also the issue of time difference between the onsite and offshore partners. According to D'Souza (2008), 'this came to the head when client partners were on the verge on resigning. The major frustration was that after they finished their USA work day they had to stay up at night to talk to the Indian workers as a result of the difference in time zone'.
There was also the issue of conflicts where the onsite and offshore managers could not agree. Though the onsite and offshore managers have a common goal of meeting client expectations, how this translates to their day to day responsibility can be different, sometimes even conflicting. The offshore manager has to deal with career aspirations of associates while the onsite manager has to deal with a client who wants the same Cognizant team on his project for continuity (Eccles et al 2008).
Finally, this organizational structure implied that for every project Cognizant had to devote a minimum of two employees (D'Souza 2008). The client partners in the model were typically MBAs. The delivery manager tended to have strong computer science background (Eccles et al 2008). As a result of the competition for skilled employees in India, this caused a challenge as Cognizant had to find two qualified employees for each client project.
HOW DID COGNIZANT OVERCOME THESE TENSION
Cognizant was able to monitor activities on client's site by ensuring effective communication channels between the onsite employees and top management. This helped to ensure that all activities were carried out with the Cognizant code of conduct.Cognizant was able to overcome the problems of preservation of culture by organizing quarterly events to bring onsite professionals together with their central office colleagues. This helped employees stationed at client sites to reduce the feeling of disconnectedness from the company.
"Transform while perform" methodology enabled Cognizant to help companies across industry to attain greater levels of productivity without additional costs. This is through containing IT costs, modernizing underlying IT infrastructure and driving new business capabilities (Cognizant 2009). Seeking optimal solutions and win - win results between onsite partners and delivery partners helped to ensure that the common goal of meeting client expectations are met (Eccles et al 2008).
Finally, despite the insufficient labor in India, Cognizant was firmly committed to maintaining its 'Employer of choice status' in India. This was made possible due to its long-standing alliance with the top technical; universities and business schools in India, where competition for the best students is formidable. (Cognizant Annual report 2003). As a result, Cognizant has an edge in recruiting the best brains
HOW DOES 'C2' FIT THE ENVIRONMENT?
Change is the only constant law in the world. Hence Malcolm Frank, Cognizant's vice president, identified four changing macro phenomena that created a need for a global delivery model. These aredecoupling of work and geography; mobility of knowledge and second work (Eccles et al, 2008) and described a new framework called Cognizant 2.0 (C2) in terms of the flexible environment. Cognizant created its next generation model 'C2' to take advantage of these trends.C2 includes four elements, real time knowledge management, real time workflow, real time process guidance and real time collaboration (Eccles et al, 2008). Cognizant estimated that C2 could reduce project cycle time by about 20% on average (Skrupski, 2009).
For Cognizant, C2 was a completely new delivery platform designed to enhance collaboration in real time among knowledge workers at different locations around the world. This collaborative platform allowed staff to capture actual workflow in real time together. This ensures that employees from all over the world work as a whole. Thereby preventing fragment in terms of lack of sharing information. As a result, client needs could be serviced more quickly.
Secondly, Cognizant will post formal, context specific guidance in a working form based on Cognizant's previous best practices. This ensures that work can be finished and integrated in the same format, helping people reduce time expense on understanding, and giving Cognizant's client confidence because of the professional and consistent working process. It also ensured that only the best people were selected leading to high quality and enhancing Cognizant's quality assurance and output consistency.
Finally, C2 framework encouraged natural collaboration providing specific solution across the firm worldwide. This ensures that, using the WEB 2.0 technology, experts can offer the best suggestion through they do not take charge of the process. There are some unexpected benefits, including identifying unknown talents and enhancing employees' sense of belonging.
PROBLEMS ASSOCIATED WITH THE DEVELOPMENT OF C2
Firstly, there was the problem of acceptance by the older generation. This is because the group 50-plus have the disadvantage of learning new technology, but meanwhile, they are the decision-maker in the company (Büchel, 2010). Malcolm Frank, cited in Leahy (2010), admitted that, "Breaking bread and having a few drinks together - that still matters." There is still nothing that can replace a face to face meeting for the senior generation. In the crisis, Cognizant gathered senior executives quarterly to sit down and discuss the challenges from global. The new platform gave senior executives a communication channel, but people preferred to follow the traditional way.
Secondly, C2 discourages innovation on the part of the employees. Since the best experience is more available to obtain and imitate at present, C2 enhances standardized output resulting in moving the solution from one client to another. 44% of 430 IT professors who worked in Indian IT offshore companies said turnover was a big matter (Anonymous, 2008). Noshir Kaka (2009), the director in McKinsey's Mumbai office, argued that "The best way for India's IT service to go straightforward is becoming more innovative." For offshore IT service companies like Cognizant, customization and innovation should be the core competence but not standardization.
Finally, there may also be the problem of inaccuracy of the database. The Halo Effect identifies the basic human tendency to make specific inferences on the basis of a general impression (Rosenzweig, 2007). As a result, the database could be inaccurate. In practice, a brilliant idea of problem solving might have a negative response due to the economic downturn. Conversely, a mimic idea could get a positive feedback in terms of the economic boom. Business is not science. We cannot guarantee one who performed well in the database is available to do well next time.
LESSONS FOR MANAGING CROSS-BORDER SERVICES
Cognizant operated excellently, and maintained more than 17% operating margin from 2006 to 2008. [3] It is a good example to discuss what vital factors for overseas service are.
The first lesson to be learnt is that time zone difference causes lack of communication resulting in lower quality of service. Interview with Jagdish Panjwani, who worked in Infosys Technologies Ltd. as a software engineer, claimed that time zone is definitely a big issue since engineers have strong wish to contact with clients to know more details.
Alternatively, time-saving in business was involved in different time zones (Kikuchi and Marjit, 2010). According to a McKinsey report in exhibit 6 (Kikuchi and Van Long, 2010), the working problems of US organizations are sent to the Indian center at the end of US workday by e-mail. Indian software engineers provide solution during their working hour and by the time US organizations reopen, the solution has already arrived.
Secondly, lessons can also be drawn as regards the efficient and effective communication between various aspects of the project. In this case, both vendors and clients found it difficult to assess how the other side was evolving (Eccles et al, 2008), the same as college relationship within the corporation. Cognizant created C2 platform combining all the "native" software, such as Office, in order to solve the instant communication problem and keep all the working process consistent. Skrupsi (2009) mentioned that C2 embraced over 4,000 projects at what will soon extent to more than 600 customers. That is what strategy Cognizant did to preserve Cognizant's credibility and reputation. Meanwhile, that is what overseas service can seriously think about.
CONCLUSION
