Setting an ambitious revenue target of $5.79 billion for the financial year 2011 and earmarking $500 million towards offshore delivery expansion, IT giant Cognizant wishes to strike the right balance between linear and non-linear delivery models of growth. R Chandrasekaran, president and MD, global delivery, Cognizant, tells S Saroj Kumar of FE about the need for comfortable co-existence of both models of delivery that best suits the business and commercial interests of clients.
You recently crossed the 100,000 employee-mark and hinted at the possibility of more hiring. Surprisingly, Cognizant is also part of the non-linear chorus that is buzzing among large IT players in the industry. How do you reconcile this dichotomy?
At Cognizant, we don?t see this as a scenario. What we mean is traditional, commercial and delivery modes will continue to offer significant value to clients. We will continue to focus on efficient global service delivery, ongoing service improvements and economies of scale. But our clients are now starting to wrestle with challenges associated with new ways of enterprise work and, in some cases, new commercial and delivery models will make good business sense. One of our core goals is to continue to develop services where we can deliver disruptive levels of value by completely aligning technology with a business outcome.
Except for large players in the consulting domain, non-linear model of delivery seems to be a non-starter among application development and maintenance companies (ADM). What are the challenges in transition for ADMs to take the non-linear avatar?
Here again, we don?t see this as a pure black-and-white dichotomy. Regardless of whether you call a service linear or non-linear, our customers are interested in multiple facets of overall business value and that?s what we are focused on. We believe that by integrating robust platforms of collaboration, we can offer a more compelling value proposition to our customers. A few years ago, Cognizant signed a five-year agreement with AstraZeneca to provide application maintenance services to AstraZeneca’s global enterprise in the areas of research, clinical development and sales and marketing. Cognizant is working with AstraZeneca’s Global Shared Services providing end-to-end application maintenance services. In this agreement, Cognizant is using an ?outcome? or ?effect-based? model to provide these services by leveraging its global delivery network, talent pool and best practices. This ensures a predictable service model, reduces the overall cost of IT ownership and delivers year-over-year efficiency improvements.
What is happening in the outcome-based pricing scenario? Are clients preferring input pricing model or outcome-based pricing in signing new contracts?
Our view is that there are multiple models for pricing. Input-based pricing is clearly more aligned to our delivery costs, so they are generally more closely related to the number of people working on something. Process-based pricing models are generally aligned to process metrics like service level agreements (SLAs). Customers are paying for the provider to meet certain technology process measures like server uptime or time-to-resolve an issue.
Is trust-deficit among clients an issue in inking outcome priced contracts?
We?re finding that customer interest in outcome-based sourcing models is based on having real evidence that the service provider can deliver the services and value while managing the business risk. You could call this ‘trust’, but for us, it is more about building a demonstrable foundation of delivery excellence and risk management. You’ll find this true across the business technology space. We have to prove ourselves capable of this level of service before exploring new commercial models.
With the majority of Indian IT workforce employed in fixed bid engagement, what kind of a roadmap do you envisage to build scale in outcome-based pricing?
Our goal is to give options to customers so they can make the best decision for their businesses. We are not saying outcome-based pricing is best. The thing to keep in mind is that our customers are increasingly engaged with creating new business models to thrive in the context of the pressures associated with the future of work.