Thursday, September 8, 2011

View on Cognizant Strategy

Here are my views on the long term and short term strategy of cognizant.

Current strategy is expansion in verticals, however long-term strategy should be to be a substantial player in more industry verticals
Compared to other competitors (Wipro, Infosys, TCS) ,Cognizant operates in less industry verticals. Till now cognizant has concentrated on going deep into the same industry. They should focus on more industry verticals. This would not only open new revenue sources but also help them mitigate risk doing downturn.
Change in revenue model is required
Currently the contracts are geared towards per employee revenue basis. Around 30% of Cognizant’s revenue is fixed bid contracts. In long term they should push for such contracts more. This would provide Cognizant the incentive to improve their efficiency and enhance profit margins. It would also help them to manage their work force more efficiently.
Need to move to business strategy-focused consulting (Incentive Structure)
Although Cognizant seems to be concentrating on improving its consulting practice and using it as a way to improve its relationship with client and build long term relationships. The incentive structure of consulting team  is such that it is linked to amount of IT revenue the consulting practice generates. Linking the salary structure to such a condition would hamper the growth of consulting practice into new areas and new opportunities as employees would be concentrated only on doing routine work to secure their salary.
  Need for diversification – geographical and industry-wise 
They need to diversify their current focus on USA and Europe. This would again help them diversify their revenue risk and have access to more business opportunities.
HR can be used as a differentiating factor (Intra-transfer)
Current policies of Cognizant are at par with industry standard. In an environment were attrition rate is very high, Cognizant can build a differentiating HR model. For e.g. They can have a research division like IBM Indian software labs and can allow for inter transfer of employees based on performance of employees. Such steps can keep the employee motivated and can also ensure that they keep their technical knowledge updated.
They can have a well documented onsite policy.
  Need to spend on branding to increase recall value
Although they are 3rd largest IT service provider in India their brand recall is low. They are still viewed by companies as a low pricing option compared to other vendors. They need to build their brand name.

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1 comment:

  1. grt start ! welcome to the club of bloggers..:)
    Apt blog for an A Grad :P