Cognizant Technology Solutions

An Internal Analysis Report

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Table of Contents
A brief background of Cognizant Technology Solutions.................................................2
Relative Profitability Position vis--vis industry..........................................................3
Value Proposition for customers............................................................................4
Value drivers for Customers..............................................................................4
Cognizants Value Proposition............................................................................5
The 3 questions of Porter: Is Cognizants Value Proposition Unique?.................................6
Unique Value Proposition from Cognizant:.............................................................6
Benchmarking Cognizants Value proposition with competitors......................................7
Strategy Canvas and the 4-Action tool framework......................................................8
Strategy Canvas.............................................................................................8
ERRC Framework 4 Action Tool.......................................................................10
A Value Chain Analysis of Cognizant......................................................................11
Industries Value Chain:...................................................................................11
Cognizants Value chain when compared with the industry.......................................11
Zero in on price drivers..................................................................................11
Zero in on cost drivers...................................................................................11
Consistency of value chain with value proposition.....................................................12
Benchmarking Cognizants Value proposition with competitors....................................12
Key Resources and Capabilities and the VRIO test.....................................................12
Key Resources and Capabilities.........................................................................12
Now when these resources are put into a VRIO test:...............................................13
Are these resources and capabilities valuable?...................................................13
Are these resources and capabilities rare?........................................................13
Are these resources and capabilities costly to imitate?.........................................13
Are these resources organized to capture value?.................................................13
Suggestions...................................................................................................14

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A brief background of Cognizant Technology Solutions

Cognizant is a multinational conglomerate headquartered in Teaneck, New Jersey, USA.
Cognizant was founded on 26th January, 1994 and as of today its portfolio includes custom
information technology, business consulting and is also a provider of BPO services (Business
Process Outsourcing). Cognizant Technology Solutions is a division of Cognizant which is
particularly into the information technology services sector. Off late the Cognizant has defined a
separate entity for business consulting services namely CBC: Cognizant Business Consulting.
However, we will be treating the IT consulting and BPO services holistically as a part of the
internal industry analysis.
Cognizants core competencies include: Business Process, Application Development and
Systems Integration, Application Development and Systems Integration, Operations and IT
Consulting, Enterprise Information Management (EIM), Application Testing and
Maintenance.From amongst Cognizants best-performing industry sectors, financial services
revenues have gone up over 22% from the prior year.Healthcare revenues, primarily from payer,
pharmaceutical and medical device clients, rose more than 17% year-on-year.Revenues from
retail/manufacturing/logistics clients grew by almost 25%.1

Special Note: throughout the report, Cognizant has been used as a proxy for Cognizant
Technology Solutions.

Relative Profitability Position vis--vis industry

1Cognizant Annual Report 2013

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Let us consider the following 5 metrics to compare the profitability of Cognizant as a whole with
the industry namely, the Software Services Industry, the Service Sector, the S&P 500 companies
belonging to the services sector and the global market leader namely, Accenture. All figures are
mentioned as a percentage of revenues. As far as Cognizant is concerned, it is into 3 main
businesses, Consulting (includes IT consulting), Technology Services and Outsourcing
(including IT Outsourcing). Since, it is difficult to segregate the figures of CTS (the technology
services wing of Cognizant), the company wide figures have been considered for Cognizant as a
whole.
CTSH Profitability Ratio
Gross Margin 5 Yr. Avg.
EBITDA Margin 5 Yr. Avg.
Operating Margin 5 Yr. Avg.
Pre-Tax Margin 5 Yr. Avg.
Net Margin 5 Yr. Avg.

Cognizant
42.04%
20.82%
18.74%
19.13%
14.99%

Industry
43.70%
21.23%
16.66%
15.87%
10.65%

Sector
47.35%
28.21%
15.46%
12.35%
8.72%

Section A Group 3 Software Services Industry CTS Internal Analysis Report

S&P 500
38.13%
15.75%
12.80%
10.62%
7.44%

Accenture
30.70%
15.16%
13.22%
13.27%
9.07%

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Profitability Comparison between Cognizant, Industry and Industry Leader

50.00%
45.00%
40.00%
35.00%
30.00%
25.00%
Cognizant
20.00%

Industry

Sector

S&P 500

15.00%
10.00%
5.00%
0.00%

Source2

2 Figures obtained from CSImarket.com

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Accenture

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Value Proposition for customers

As per the conventional definition of Value Proposition, it is a business or marketing
statement that summarizes why a consumer should buy a product or use a service. This statement
should convince a potential consumer that one particular product or service will add more value
or better solve a problem than other similar offerings.3
Every company must have its unique value proposition, if it has to survive and achieve
some competitive advantage in the market.The value proposition of any company has a direct
bearing to the customers willingness to buy, and hence, a direct impact on the companys topline
i.e. revenues.

Value drivers for Customers

1. Integrated Services: A one place for all IT services along the customers value chain,
namely consulting services, followed by execution of the IT service, followed by after
sales support.
2. Quicker completion of project: For any customer seeking IT services, the duration of
the project matters a lot. The customers pay for the IT services projects right from the
inception of the project. The faster the project gets completed and implemented, the
sooner will the customer be able to reap the benefits of the project and thereby break even
with the project expenses. Hence a competent pool of resources (both human and
technological) with the service provider is what the customers seek.
3. State of the art and latest technology:Any customer will value the use and
implementation of the latest IT solutions.
4. Service differentiation: Value proposition of SMAC, Project Halo and Cloud
Computing
5. Lower prices: A lower price will always add value to the customers by reducing their
bottom line i.e. cost, be it in any industry.

Cognizants Value Proposition

Cognizant defines its value proposition statement as follows:
As a customer-centric, relationship-driven partner, we are redefining the way companies
experience and benefit from global services. Our unique delivery model is infused with a distinct
culture of high customer satisfaction. Cognizant delivers a trusted partnership, cost reductions
and business results. Cognizant enables global enterprises to address a dual mandate: to make
their current operations as efficient and cost-effective as possible, and to invest in innovation to
unleash new potential across their organizations.4
3Definition taken from Investopedia

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Apart from the above, one of the major things which differentiates CTS from most of its
competitors is the concept of one-stop-shop as far as IT service implementation is concerned.In
this era of IT technology, a huge number of organizations are trying to implement Information
Technologies and Systems in their organizations. For most of such organizations, IT may not be
a direct core competence. And in the absence of already implemented IT systems, many of these
organizations dont have their own IT wing or MIS departments, to effectively guide them
towards decision making as far as IT implementation is concerned. Naturally these organizations
opt for business consultants to guide them in such decisions. Many of these consultants are often
purely into consulting and dont have an integrated IT services execution team of their own. This
is where Cognizant differentiates itself form the herd. They have their own business consulting
group name CBC. They act the front end partner for CTS, who are specialized in the execution of
IT services. CBC has thus the capability of offering a packaged deal to its customers of both the
IT related consulting as well as the execution services. This saves the customers from getting
into unnecessary hassles of appointing separate consulting and execution service suppliers and
the corresponding cost saving achieved by Cognizant through the achieved scale in business also
gets passed on to the customers. Thus it acts as a win-win situation for both the client as well as
Cognizant.

The 3 questions of Porter: Is Cognizants Value Proposition

Unique?
We can analyze Cognizant on the lines of the three questions of Porter:
a. Which Customers: Various customer categories come under the purview of the software
services such as banking and financial services, insurance, healthcare, automotive, power
sector etc.
b. Which Needs: Cognizant is able to meet the dual needs of customers through an
integrated consulting cum IT service package. Besides, Cognizant is able to cater to a
largeareas of application development for ERP (Enterprise Resource and Planning), SCM
(Supply Chain Management), CRM (Customer Relationships Management) and various
other emerging needs in todays organizations.
c. What Price:When it comes to Cognizant, it delivers a unique value to customers by
offering reasonable prices and not premium prices. Cognizant is able to achieve the same,
through smooth integration of consulting and technology services. Besides, since
Cognizant is a significantly large company with multiple clients from the various sectors,
they are able to reap benefits through sharing of resources thereby achieving an
economies of scale within the organization.

42014 Cognizant Fact Sheet

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Unique Value Proposition from Cognizant:

S M A C in c lu d e s th e p o w e r o f S o c ia l m e d ia , M o b ile a s p la tf o rm , A n a ly tic s a n d C lo u d .
C o d e H a l o i n t e g r a t i o n w i t h c o m p a n y 's p r o v i d e f r a m e w o r k 'C r o s r o a d M o d e l ', h e l p s c l i e n t s o t a k e d c i s o n q u i c k l y a n d m o r e a c u r a t e l y .
B T hU i S s I e N n a E b S l e s C c o L m O p U a Dn i e s t o s u p o r t i n o v a t i o n a d p o t e n a i l t o f i n d b u s i n e s i m p r o v e m n t a r e s .
It is antreoadsu cre do tf ing aotrhme atihoendfaotr cpu esto pmle grs ntoe raxtep lovite rbyu sdianye sb oepx oretsu ni tgy ahve milaseb v isn oth ed img atrkl ent aw do rtk si,m wp rio vnegthceaird sxoir thn go use rhv itcaens bcya tmio anksi. g m e a n i g fro m C o d e H a lo .
A l th e s a re s c o m p le m t e a c h o th e rs a c tiv e s , It w o rk a s m u ltip e r in te rm s o f v a lu e a d it o n .
It is n tr o d u c e d to g a th e r th e d a t p e o p le g n e r a te v e ry d a y b e x p re s in g th e m s e lv s o n d ig ta l n e tw o r k s , w ip n g c a rd s o r th o u g h tr a n s c a tio n s .
TS hM isA eCn aib le us dceosm thp a n ie sw tor sufpS ocrtailnm oevda ti,oMn a b dilep oa tse n pa il to rfmin,dAb uasliyntecs iamn dp rCo lv eumd .n t a re s.
It is a tre a s u re o f in o rm a tio n fo r c u s to m e rs to e x p lo it b u s in e s o p o rtu n ity a v ila b e in th e m a rk e t a n d to im p ro v e th e ir x is t n g s e rv ic e s b y m a k in g m e a n i g fro m C o d e H a lo .
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Benchmarking Cognizants Value proposition with competitors

Let us analyze the value proposition of the nearest competitor of CTS i.e. Accenture, which
is also involved in both IT consulting as well as Information Technology services. Let us keep
the value proposition statements of both Cognizant as well as Accenture side by side and analyze
compare them to each other:
Cognizants Value proposition statement:
As a customer-centric, relationship-driven partner, we are redefining the way companies
experience and benefit from global services. Our unique delivery model is infused with a distinct
culture of high customer satisfaction. Cognizant delivers a trusted partnership, cost reductions
and business results. Cognizant enables global enterprises to address a dual mandate: to make
their current operations as efficient and cost-effective as possible, and to invest in innovation to
unleash new potential across their organizations.5
Accentures Value Proposition statement:
Over the past two decades, outsourcing has dramatically changed the way companies create and
distribute value. From its origins as a hardware operations play, the practice has moved first to
applications and software, and then to higher-level business processes and services. The next
wave of change will take outsourcing into unexplored territory: strategic value and innovation.6
There are clear signals that Cognizant tries to lure in customers on the lines of lower costs
for them and also tries to flaunt their global reach in order to propose world class services to their
customers. One of the aims of Cognizant is also to build long term relationships with the clients.
As the conventional marketing wisdom says, the cost of developing a new client is nearly ten
times as that of retaining and serving an existing client.
As far as Accentures value proposition is concerned, they clearly try to lure customers by
flaunting their ability to provide innovative solutions and adding strategic values as far the
customers business is concerned.
So clearly, it is seen that Cognizant on one hand is focusing to become a cost leader, whereas
Accenture is trying to adopt a differentiation strategy to sustain a competitive niche for itself.

5The 2014 Cognizant Fact Sheet

6http://www.accenture.com/SiteCollectionDocuments/PDF/Accenture-Outlook-New-Value-PropositionOutsourcing.pdf

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Strategy Canvas and the 4-Action tool framework

Strategy Canvas

Industry Strategy Canvas

10
8
6
4
ScoringCognizant

Accenture

IBM

2
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Factors of Competition

Section A Group 3 Software Services Industry CTS Internal Analysis Report

Igate Patni

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E-R-R-C Framework 4 Action Tool

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A Value Chain Analysis of Cognizant

Industries Value Chain:
When we analyze the type of services provided by the industry it is primarily software
development and secondly software enhancement. These services help multiple verticals
to perform better. When we look into software development, it has multiple stages:
Conceptualization, requirement analysis, high level design, low level design, coding,
testing and support.
This being the software services life cycle, when the value chain is looked in business
perspective:
1)
2)
3)
4)
5)
6)

Analysis of the problem of the given vertical

Use preexisting design to solve the problem else develop a new design
Project implementation
Project Testing
Project presentation and delivery
Project up gradation and support

When the process is looked in detail it could be found that only step 5 and 6 derive value
to the customers, but still other steps are necessary for completion of the service and
value addition.

Cognizants Value chain when compared with the industry

Every software firm in the industry follows the similar value chain but cognizant meets
dual needs of the customer using integrated consulting as a service package. It looks into
the customers need apart from the problem and acts in accordance. CTS also cater to
various needs of the organization today by using ERP and CRM. They also perform
software up gradation on a timely basis unlike the industry which waits for the customer
to ask for one.

Zero in on price drivers

They develop good customer relation with not only innovative services but by learning
the customers need and solving them automatically. They do not charge the customers
with premium prices instead they have considerable prices with long term relations.

Zero in on cost drivers

Using integrated consulting and technology services they achieve economies of scale
within the organization. This helps them cut down their costs unlike other firms in
industry which provides specified solutions to the problems.

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Consistency of value chain with value proposition

Cognizant Technology Solutions value chain is highly consistent with its value proposition. In
reference to previous finding we could find that Cognizants value proposition is its customer
satisfaction, good long term relations with customers and cost reduction. The value chain of CTS
is similar to the industry except automated up gradation (enhanced customer satisfaction),
automatically leaning the needs of customers before the bring up the problem (To maintain good
relations with customers) and using integrated consulting and technology solutions to cut internal
operating cost and to provide services beyond customers expectation (Customer satisfaction and
cost cutting).

Benchmarking Cognizants Value proposition with competitors

Unlike its competitors cognizant was a late entrant in India. It was established only in the 90s, by
then its competitors were established. In IT industry flexibility is the most important factor to
engage in new projects. So being a late entrant in was able to make slight changes in its value
chain which was much more effective. Being an international firm it has better access to
customers, so have a lesser marketing expenses unlike other Indian firms. Accenture which is its
global rival provides highly attractive solutions to its customers with enhanced design. The
design provided by Accenture is distinctive when compared with other firms in the industry.
(When compared to CTS they have a better designing model). CTS on the other hand try to
provide solutions with preexisting design and try to upgrade after delivery. Since both have
contrasting value chain and proposition CTS cannot adopt the enhanced design part of
Accentures value chain as CTS focuses on cost reduction and integrated solutions.

Key Resources and Capabilities and the VRIO test

Key Resources and Capabilities
Cognizant has 1242 active customers over multiple industry verticals like Banking & Financial
Services; Communications; Consumer Goods; Energy & Utilities; Healthcare; Travel &
Hospitality; Information, Media & Entertainment; Insurance; Life Sciences; Retail;
Manufacturing & Logistics; Technology. Their most valuable resource is their customer base.
They also have a very good long lasting relation with their customers. They anticipate their needs
and they satisfy them.
They have an efficient global delivery system; they have 24X7 delivery availability. They have
more than 20,000 outsourcing projects delivered in 40 countries. They have 75 development
centers around the world (these centers are spread throughout the globe). They have a good
geographical reach, they have 25 regional sales and client relationship offices.
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Another most important capability is their partnership and relations with reputed organizations
like SAP, Microsoft, Oracle, IBM, SAS etc. They have a very good recognition throughout the
globe, their key resources are their brand image and their loyal customer base.

Now when these resources are put into a VRIO test:

Are these resources and capabilities valuable?
Yes, resources like long-term good customer relations cannot be built in a short period, it
requires effort over years. Developing a loyal customer base is a goal for every company
and CTS has successfully done it. Having such relations keeps the customers from
switching and improves profitability. When we consider its global reach, having a global
presence enables the organization to service a larger customer base. As they have large
amount of customers they implement similar design and models to the similar firms of
the verticals, which cuts their costs significantly.

Are these resources and capabilities rare?

Yes, CTSs current customer base is rare, it cannot be captured as the customers are loyal
to CTS and wont switch out. Out of the 6 US PBMs CTS has 5 of them as clients, out of
the worlds 10 most profitable biotech companies CTS has 9 of them as its clients out of
the worlds 15 most profitable industrial manufacturing companies CTS has 7 of them as
its clients and similarly they have many such clients who are very few are rare throughout
the globe.

Are these resources and capabilities costly to imitate?

Yes, since the customer bases are unique it nearly impossible to make them switch. If any
of the firm would want to make the customer base to switch out then they have to offer
the customers something very attractive in terms of cost and quality. Having a global
presence is also costly to imitate, as it would take huge capital to set up 75 global
development centers. Most importantly the brand image of Cognizant cannot be imitated,
the only way to imitate the brand is to acquire or buy the organization.

Are these resources organized to capture value?

Yes, having a global presence helps the organization to cater to the needs of clients
worldwide. The service centers and development centers are played strategically
throughout the globe to capture wide range of customers. Having such long-term
relations with clients keeps them loyal to the service provider, which gives a strategically
advantage as the clients wont switch and also they would bring in additional problems to
be serviced in their new ventures.

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Suggestions
Since CTSs key resources and capabilities passed the VRIO test, it could be inferred that the
firm has a sustained competitive advantage. The key resources and capabilities like customer
base, customer relations, global presence, and brand image are extremely important to be one of
the leading software service providers. In addition to all these resources CTS lacks in one of the
resource which its competitor possesses, innovative and a new design for every one of its
customers (Accenture). The capabilities which Accenture possess are completely contrasting to
the capabilities of CTS which focuses on resource and design sharing for cost cutting. Cognizant
is losing out on customers who expect innovative and different solutions. For CTS to capture this
base must come up with a separate business plan distinct from the earlier one, where it could fuel
its resources to come up with innovative beyond expectations of the customers. In future the
clients wont be able to know or predict their problems, so it would be ideal if the software
service provider would come up with innovative designs to overcome and predict such problems.
So CTS must focus on making such design and remain as the global leader in software services
and consulting.

Section A Group 3 Software Services Industry CTS Internal Analysis Report