Cognizant, frankly
Malcolm Frank bootstrapped Cognizant - from crafting a 10,000-foot strategy to executing it daily.
Malcolm Frank came into the world of software services almost by accident. The one-time college football player was trading gold, copper and crude oil on Wall Street when a chance meeting with John Donovan, Founder of Cambridge Technology Group (CTG), led to his conversion.
Cambridge Technology Partners, a spin-off from CTG, was a start-up focused on client-server consulting on the Massachusetts Institute of Technology campus. Frank took the plunge joining the 50-person unit in 1990 and, in a decade, saw it grow to be a 6,000-plus-staff firm. CTP was among the early information technology firms to go public in 1993, before it was snapped up in 2001 by Novell.
Frank - 44 today and driving strategy at Cognizant Technology Solutions for the last five years - rose to become Vice President at CTP, learning how to build a brand, managing public expectations and listing a company. That helped him ride his second wave when he founded NerveWire, an Internet and IT consulting firm, which was sold in 2003 to Wipro in a poorly-judged deal. His last start-up, CXO Systems, had Cisco Systems backing it in 2004 before taking over two years later. His fourth wave is at Cognizant.
The New Jersey-headquartered IT firm, which runs most of its operations from its centres in India, including Chennai and Bangalore, hopes Frank's success in the past will rub off on it. He brings on the experience of spotting patterns in different economic cycles and advising Cognizant on what works best.
Lakshmi Narayanan, now Vice Chairman of Cognizant, was swayed by those skills of Frank a week after he came aboard. Over a traditional south Indian lunch, Frank pushed Narayanan, then CEO, to look closely at the evolution of the industry from a centralised computing model to a client-server model and to one centred around mobility. "He got us thinking strategically...this is how we recognised that the future is in mobility and 'anywhere computing,'" says Narayanan.
Now, the tech industry is on the cusp of what Frank calls "the social enterprise" - where companies will outsource not just their IT requirements but also engage with outsourcers to manage the entire knowledge processes that will require specialisation. For instance, from drug discovery to clinical trial simulations for the pharmaceutical industry.
The advent of the millennials (employees born in or after 1980) will queer the pitch more, Frank argues. The company's in-house tool called Cognizant 2.0 wants to ride this trend, providing a virtual platform to its army of coders to collaborate more effectively. "The process (used today to solve a problem) is ponderous - you get everyone in the same room, use the same tools to find a solution," he says of the archaic work processes in his industry.
With Cognizant 2.0, when a new project kicks off, any employee can check if the company has done similar work earlier, pull out case studies, best practices and templates from the system. The employee can search for domain experts, form an e-group and reach out to them. Customers, too, can access the platform to monitor a project's progress.
While India-based market leaders Tata Consultancy Services, Infosys Technologies and Wipro were the first to tap the potential of the IT industry's global delivery model, Cognizant has made some tweaks to its business model to gain momentum in recent quarters. It keeps its margins relatively low (see ...At Low Margins), preferring to invest in domain expertise and sales and marketing, a strategy driven by Frank. As competition intensifies and consolidation gathers momentum, Frank believes this will be a key differentiator for Cognizant.
Second, Cognizant focuses on only four key markets - financial services, life sciences, manufacturing and retail. That strategy has paid off so far with customers ready to engage for the long term. For instance, the firm started working with 3M, the maker of products ranging from Post-it to Scotch-Brite, nine years ago on just IT application services. The relationship has since grown to include outcomebased development contracts for software used in research, supply chain and manufacturing. 3M is an early user of Cognizant 2.0.
Kunal Sangoi, a tech analyst with Mumbai's Edelweiss Research, marvels at how Cognizant has ramped up its customer-facing teams. Since 2007-08, the size of the sales and marketing team at Cognizant has nearly doubled to 950 people from 500, compared to 800 from 604 at Infosys and 560 from 425 at Wipro. "The company is aggressive and doesn't shy away from making heavy investments in building its front end, even if that comes at the cost of profitability," says Sangoi.
If you ask Frank, future growth won't come from big buyouts but from buying companies of $80-100 million revenues or "perhaps up to $200 million". He dismisses rumours of a $1-billion deal to buy India's top business process outsourcing or BPO services firm Genpact. "What would we do with 41,000 people? It would be dilutive to our earnings, culture and management focus." He prefers deals like marketRx, an analytics and IT services specialist, a buyout that analysts say gave Cognizant industryleading BPO margins. One estimate puts Cognizant's BPO business revenues at $100,000 per employee, which is more than three times what some of its rivals make.
Still, Frank knows the firm can't get complacent now. The decades-old linear business model of adding employees at the same pace as revenues is nearing its end. "The industry needs to make the painful switch," he says. "We need to move to a model which is focused on intellectual property with some labour arbitrage, rather than the other way around."
Fifteen years after the firm was germinated as a joint venture between Dun & Bradstreet and Satyam Computer Services, Cognizant is beginning to snap at the heels of its more established competition. Not only has it outpaced Infosys in its key financial services vertical, if its growth sustains, analysts expect it to overtake Wipro in revenues in the next couple of years. That will be another wave Frank would have surfed.
Cambridge Technology Partners, a spin-off from CTG, was a start-up focused on client-server consulting on the Massachusetts Institute of Technology campus. Frank took the plunge joining the 50-person unit in 1990 and, in a decade, saw it grow to be a 6,000-plus-staff firm. CTP was among the early information technology firms to go public in 1993, before it was snapped up in 2001 by Novell.
| Cognizant's Mr. Strategy A Quick Bio Name: Malcolm Frank, Executive VP and Chief Strategist, Cognizant Age: 44 Grew up near Cleveland. Father was an archaeologist and college professor. Mother, a Scot, was a doctor Education: Went to Yale Milestones:
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The New Jersey-headquartered IT firm, which runs most of its operations from its centres in India, including Chennai and Bangalore, hopes Frank's success in the past will rub off on it. He brings on the experience of spotting patterns in different economic cycles and advising Cognizant on what works best.
Lakshmi Narayanan, now Vice Chairman of Cognizant, was swayed by those skills of Frank a week after he came aboard. Over a traditional south Indian lunch, Frank pushed Narayanan, then CEO, to look closely at the evolution of the industry from a centralised computing model to a client-server model and to one centred around mobility. "He got us thinking strategically...this is how we recognised that the future is in mobility and 'anywhere computing,'" says Narayanan.
Now, the tech industry is on the cusp of what Frank calls "the social enterprise" - where companies will outsource not just their IT requirements but also engage with outsourcers to manage the entire knowledge processes that will require specialisation. For instance, from drug discovery to clinical trial simulations for the pharmaceutical industry.
The advent of the millennials (employees born in or after 1980) will queer the pitch more, Frank argues. The company's in-house tool called Cognizant 2.0 wants to ride this trend, providing a virtual platform to its army of coders to collaborate more effectively. "The process (used today to solve a problem) is ponderous - you get everyone in the same room, use the same tools to find a solution," he says of the archaic work processes in his industry.
With Cognizant 2.0, when a new project kicks off, any employee can check if the company has done similar work earlier, pull out case studies, best practices and templates from the system. The employee can search for domain experts, form an e-group and reach out to them. Customers, too, can access the platform to monitor a project's progress.
While India-based market leaders Tata Consultancy Services, Infosys Technologies and Wipro were the first to tap the potential of the IT industry's global delivery model, Cognizant has made some tweaks to its business model to gain momentum in recent quarters. It keeps its margins relatively low (see ...At Low Margins), preferring to invest in domain expertise and sales and marketing, a strategy driven by Frank. As competition intensifies and consolidation gathers momentum, Frank believes this will be a key differentiator for Cognizant.
| Expanding revenues... Cognizant is growing fast  ...At Low Margins Its profits are conservative on purpose.  |
Kunal Sangoi, a tech analyst with Mumbai's Edelweiss Research, marvels at how Cognizant has ramped up its customer-facing teams. Since 2007-08, the size of the sales and marketing team at Cognizant has nearly doubled to 950 people from 500, compared to 800 from 604 at Infosys and 560 from 425 at Wipro. "The company is aggressive and doesn't shy away from making heavy investments in building its front end, even if that comes at the cost of profitability," says Sangoi.
If you ask Frank, future growth won't come from big buyouts but from buying companies of $80-100 million revenues or "perhaps up to $200 million". He dismisses rumours of a $1-billion deal to buy India's top business process outsourcing or BPO services firm Genpact. "What would we do with 41,000 people? It would be dilutive to our earnings, culture and management focus." He prefers deals like marketRx, an analytics and IT services specialist, a buyout that analysts say gave Cognizant industryleading BPO margins. One estimate puts Cognizant's BPO business revenues at $100,000 per employee, which is more than three times what some of its rivals make.
Still, Frank knows the firm can't get complacent now. The decades-old linear business model of adding employees at the same pace as revenues is nearing its end. "The industry needs to make the painful switch," he says. "We need to move to a model which is focused on intellectual property with some labour arbitrage, rather than the other way around."
Fifteen years after the firm was germinated as a joint venture between Dun & Bradstreet and Satyam Computer Services, Cognizant is beginning to snap at the heels of its more established competition. Not only has it outpaced Infosys in its key financial services vertical, if its growth sustains, analysts expect it to overtake Wipro in revenues in the next couple of years. That will be another wave Frank would have surfed.
