FOURSIGHT

I I M B V I S TA S 2 0 0 5

COGNIZANT CASE No. 3

Submitted by:

Anshoo Sharma Gaurav Maria Nimesh Bhandari

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 Cognizant:
Moving up from
pure technical
solutions to
consulting
solutions
Report on trends
and issues in
strategic
consulting and
how Cognizant
can create a
differentiation

2
 Table of Contents

How are IT and Strategy inter-related? 3

What it takes to go up to consulting? 3
How to develop an edge in its consulting proposition? 4
What will be its unique value proposition? 5
How to arrange the building blocks? 6
How to choose the best business model? 6
How to best play a balancing act? 7
The final game plan 8

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 Executive Summary – Case # 3
Based on our analysis of Cognizant’s strengths and market opportunities we believe that
Cognizant’s entry into strategic consulting is a positive step. We propose the setting up of an
independent business unit that has a distinct value proposition of offering “360 o consulting
solutions” with an emphasis on “feasibility & effectiveness” of implementation. A complete entry
strategy with implications on the IT Services business has been analyzed and outlined in the
report. Key objective of our solution have been optimization of resources and delivering clear
signals on Cognizant’s positioning to all stakeholders. Our key recommendations include:
 Setting up a high end strategy consulting division
o As an independent business unit through acquisition of small
strategy consulting firms possibly with a client overlap with Cognizant’s existing client
base.
o Recruitment of consultants and transfer of domain experts from
the IT services division
 Expanding its outsourcing services to offer strategy support services
o Strategy support services to be used as a stepping stone
towards strategic consulting
o These services will provide the necessary knowledge pool in
specific domains, and nurture clients and employees to move into the consulting space

The various elements of our proposed entry strategy based on the AVDSE framework1 are as follows:
Economic Logic: What will Cognizant achieve through consulting? An entry into Strategic consulting will
improve the bottomline because of higher margins, and also translate into increased top-line by helping
Cognizant provide end-to-end solutions

Vehicle: How will Cognizant get there? We propose that Cognizant should offer KPO services to build
credibility amongst its clients for its domain expertise. KPO with its low entry barrier can help Cognizant
provide clients and domain expertise thereby preparing a solid ground for entry into Strategic Consulting.

Differentiator: What will Cognizant Consulting Offer? The most often cited problem with consultants’
solutions is its lack of feasibility in implementation. Cognizant will offer to its clients a 360 o consulting
solution which takes into perspective its feasibility and effectiveness from the point-of-view of
implementation.

Staging: What will the sequence of moves?

Cognizant can acquire a small Strategic
Consulting firm to get acquainted by the
processes and culture in a consulting
organization. The acquired firm will become a
part of a Strategic Business Unit dedicated to
provide consulting. The domain experts earlier

1
Are you Sure you have a strategy, Donald C. Hambrick and James W. Fredrickson
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dedicated to “Services” division will move to the consulting division while Competency experts will remain
part of Services.

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 Exhibit I How are IT and Strategy inter-related?
Orientation

Business Business
Partner Leader In today’s highly automated business world, IT strategies and directions
Outward
To increasingly form the basis for the overall corporate strategy2. Decisions about
IT IT
Service leveraging IT now influence a company’s competitive position as it can
Provider Entrepreneur
Inward profoundly transform the economics of innovation, segmentation and
To
IT differentiation for most businesses.3
"Cognizant faces a
strategicFast-Follower
inflection point
Leading Edge
Innovation
in its business… Today, most Indian IT companies are techno-centric and are engaged with
Well aligned enterprises understand the clients mainly as service providers (Exhibit I). However, in the coming years,
value of information and technology and
agree on the role of IT opportunities to act as a business partner or leader will increase manifold, as IT
A unique differentiated becomes the corner stone of corporate strategies.
positioning in the
consulting space will
help Cognizant become a Cognizant, with its dominant IT services, global delivery capabilities and a strong
leading business business focus is well poised to exploit these emerging opportunities in high-end
solutions proider strategic consulting by turning commoditized IT services into value-added
business consulting.

Cognizant: What it takes to go up to consulting?

Understanding the market need and economic logic, Cognizant has realized the
need to move up the value chain and into the business consulting domain. Some
of the positives for Cognizant in this direction:

 Cognizant’s BTC (Business Technology Consulting4) group, which provides

high-value technology consulting with a business perspective
 Significant brand wealth as a high-end IT solutions provider. Cognizant’s
inclusion in the prestigious NASDAQ-100 index is an instance of this brand
strength5.
 Cognizant’s “Fourth Generation Offshore Outsourcing”6 Model which
emphasize on working with clients as partners
 Cognizant gives significant importance to recruiting top managerial talent
(internally called SBAs) dedicated to analyzing clients and prospects and

proactively architecting solutions for them7.

 Cognizant gives high importance to domain specific certification. For e.g.
LOMA, Seibel

2
Measuring IT Value, Infosys
3
Why IT Really Does Matter, Michael Schrage
4
http://www.cognizant.com/services/bustechconsulting/btc_over.htm
5
http://www.nasdaq.com/newsroom/news/pr2004/ne_section04_121.stm
6
http://www.cognizant.com/aboutus/fourthg.htm
7
Cognizant’s secret sauce, Gartner Research, 2005
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Cognizant faces a
Strategic Inflection
Point …
Creating a differentiated
service offering in the
consulting space is
essential for it to compete
against the old boys and
the new rookies
Exhibit II
Experience in strategy support processes will
help Cognizant ease its move into the strategic
consulting domain
Cognizant faces a
Strategic Inflection
Point …
Creating a differentiated
service offering in the
consulting space is
essential for it to compete
against the old boys and
the new rookies
However, despite the above initiatives, Cognizant has not been able to complete
its transformation into a strategy consulting organization:
 Cognizant has not bagged any major top-notch consulting projects till now.
Pricing continues to be perceived as its significant competitive advantage
 Major competitors (Tier I) are aggressively pursuing opportunities in high-
end consulting. Some competitors have also setup Business Process
Outsourcing centers which allows them to extend the customer accounts
right across the value chain. Cognizant has not been able to create a
distinctive niche for itself in this regard
Clearly, there is a distinct need for Cognizant to redefine its consulting strategy in
a way that best exploits marketplace opportunities without sending mixed signals
to its clients and internal organization. The way forward for Cognizant is to create
a unique positioning in the consulting domain that blends word-class business
strategy with its strong technology execution capability.
Cognizant: How to develop an edge in its consulting proposition?
To understand how Cognizant can create a differentiated consulting offering, we
analyze the strategy lifecycle within an organization. As shown in Exhibit II, a
typical process consists of three distinctive sub processes:
 Strategy Formulation
 Strategy Implementation
 Strategy Support Processes
Cognizant’s present positioning as IT service provider helps in strategy
implementation. It is making an attempt to
move up the value chain into high-end
business strategy formulation. However, this
region forms the core of any organization and
most businesses are reluctant in sharing /
discussing this core process with a company
without proper domain-specific track record.
This is where the importance of the Strategy
Support Process lies. Strategy formulation
depends heavily on this process for its
business knowledge. Increasingly, there is a
trend towards outsourcing this process
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 through Knowledge Process Outsourcing (KPO). Companies working in this
domain enjoy significant credibility on account of their domain expertise.
Examples include equity research, business intelligence, etc. For Cognizant, a
very innovative way to become a stronger player in business strategy and enter
the corporate boardroom can be by means of providing strategy support
services. The entry barriers in KPO are lower compared to that in consulting and
Cognizant can build its credibility for consulting by a track record of KPO clients
and projects.

Thus, armed with this new portfolio of extensive domain expertise, client
relationships acquired through its strategy support systems arm, and its
renowned technology prowess, Cognizant will have much higher credibility and
experience to become a strong contender for the role of a strategy consultant.

Cognizant: What will be its unique value proposition?

The most often cited problem with consultants’ solutions is its lack of feasibility in
implementation. Cognizant with its unique business model, as proposed below,
o
A 360 consulting will offer to its clients a consulting solution which takes into perspective its
solution with a clear feasibility and effectiveness from the point-of-view of implementation. This “360-
cut emphasis on degree consulting solution” (Exhibit III) will position Cognizant uniquely against
delivery feasibility new and old players in the consulting domain. Cognizant’s ability to offer
and effectiveness… “feasibility” in the solution will be ensured by pooling knowledge from its services
business and “effectiveness” will be ensured by pooling knowledge from its KPO
arm.
…will give Cognizant the
unique advantage to Exhibit III
compete with its peers

Value Proposition: To provide 360 degree consulting solutions with a eye on feasibility
and effectiveness 6
 Cognizant: How to arrange the building blocks?
Based on the analysis of Cognizant’s offering and its unique value proposition we
propose the following road map to achieve the desired objectives:
 Setting up a high end strategy consulting division
o As an independent business unit
o Through acquisition of small strategy consulting firms possibly
with a client overlap with Cognizant’s existing client base
o Recruitment of consultants and domain experts to bring in
experience and clients relationships to the consulting arm
 Expanding its outsourcing services to offer strategy support services
o Strategy support services to be used as a stepping stone
towards high end strategic consulting
o These domain specific support services will provide the
necessary knowledge pool, add to Cognizant’s experience in
specific industry domains, and nurture clients and employees to
move into the consulting space

The rationale for each of the above choices is explained under Cognizant’s
choice of business model.

Cognizant: How to choose the best business model?

Division Structure:
Cognizant has the following two options in structuring its consulting division
which would define its business model:
 Offer “Strategic Consulting” as a service offering (like BTC8)
 Launch consulting business as a strategic business unit (SBU)

8
BTC: Business Technology Consulting
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 Even though starting a different SBU is suboptimal in terms of resource
utilization, the advantages of better perception about the consulting service
offering and cultural alignment of the units more than offsets its disadvantages.
Cognizant is known in the industry for its “relationship management” 9 and it has
used it effectively to ramp up its accounts. This strength of Cognizant will also
help it get the downstream business once it gets the consulting part. Hence, the
risk of poor cross selling opportunities due to independent business units, is
lower for Cognizant vis-à-vis its peers.

Build or buy decision:

Cognizant has the option to either acquire a small consulting organization and
hire other top-notch consultants or it can provide adequate training to star
analysts in its KPO division to help them migrate to the consulting. We believe
that to start with acquisition of a small organization involved in strategic
consulting will not only reduce the time required to create a minimum threshold of
competencies before getting into mainstream consulting but also help Cognizant
understand the culture and processes of a consulting organization. With the
experience of previous acquisitions of technology consulting firms Ygyan and
Fathom, it is well equipped to deal with post acquisition issues.

Cognizant: How to best play a balancing act?

Restructuring:
In order to utilize its resources optimally, the organization structure needs to be
realigned. Presently, Cognizant is divided into Verticals (e.g. Retail) and
Horizontals (e.g. CRM) with both competencies essential in a “services”
execution. Cognizant’s Senior Business Analysts (SBA’s) either specialize in
vertical domains or horizontal competencies. This domain expertise is required
both in the consulting division and “services” project execution.

Cognizant can either:

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Cognizant’s Secret Sauce: Forrester Research, 2005
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  Transfer these domain experts to the consulting SBU, or
 Create a new pool of domain experts for the consulting SBU

The first option necessitates that, domain experts from the consulting division
work together with “IT Services” team when required while the second option is
Exhibit IV resource intensive requiring large number of consultants for both SBUs.
However, this rules out any coordination
hiccups and communication gap.

To determine an optimal solution we map

all three client interaction roles on the
“domain” and “technology” dimension. As
seen in Exhibit IV, the most economical
solution that utilizes the available
resources to the best extent possible
suggests that competency experts should remain with the “Services” division
while “domain experts” moved to “Consulting”.

Internal Working:
Each project will be pitched for and executed by the consulting, services or KPO
division based on the nature of project. Project teams might comprise employees
from all divisions based on project needs. For an end-to-end solution, the division
that won the project will take overall lead. Thus, there will be a sufficient incentive
for every division to expand the scope of the project. This way Cognizant can
expect a higher percentage of end-to-end solutions project compared to its
competitors.

Implications on “Services”:
For a “Services” project, which requires a person from consulting division with
huge pay packets might not be ready to work in a project lead by a project
manager who is paid less than him.

A unique value
proposition, strong Consistent with the culture of Cognizant where no distinction is made between
employees based on their levels, by promoting the same informal “Fun while
values and culture
working” culture this problem can be ironed out.
will set Cognizant’s
Consulting business Cognizant: The final game plan
on the path of We have applied the AVDSE framework on the various elements of our strategy
success as shown in the Executive Summary. Based on our analysis we are confident

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that all broad aspects of the strategy for Cognizant to march ahead and enter the
corporate boardroom are securely in place. s

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