Kirk LaughlinThe days of cost arbitrage in the global outsourcing market are numbered, according to Chandra Sekaran, president and managing director of Global Delivery for Cognizant. For global BPO/ITO players to thrive they will need to accelerate their ability to offer “intellectual arbitrage,” where value to the client will be built around domain-level expertise.
So how will Cognizant, with its relatively small presence in Latin America, climb higher on the smartness meter and differentiate itself from rivals? Sekaran explains below.
When Nearshore Americas checked in with Sekaran a few weeks ago, he made it very clear that growing through acquisition is a high priority for Cognizant. Recently rumored as a potential acquirer of Genpact, Sekaran said New Jersey-based Cognizant “continuously looks for acquisitions” particularly for services firms in the $20 million to $200 million range. “For us, $80 million would be the right acquisition,” he says. Key benefits from gobbling another company would include “helping us with skill we don’t have” and expanding the firm’s customer base.
Specialization in specific tasks and mastery in certain vertical industries are big operating mantras at Cognizant. “We need people who understand the customers’ pain points and business requirements…we hire the maximum number of domain experts who have the right tech skills and business knowledge.”
Life sciences, financial and consumer goods sectors represent Cognizant’s main regional clients out of its Argentina-based center, which employs about 200 people. Kimberly-Clark, one of the firm’s largest consumer goods clients, was the firm’s anchor partner in decision to open the delivery center in early 2008.
Its Mexico facility employs about 100 individuals and is solely focused on financial services customer delivery. Cognizant does not seem content, however, with just two delivery centers in all of Latin America. “We are looking actively at other geographies,” he says. “LatAm for us is very strategic.”
Cognizant, which competes with such firms as Wipro, Infosys and Tata Consultancy, has clearly taken a lower profile in Latin America. Like many firms before it, the company must navigate new terrain, build relationships with new partners and determine how to best utilize delivery centers which are commonly aligned with 75% of its global business – generated from the U.S.
Not surprisingly, Cognizant’s focus on strengthening its LatAm footprint fits into a larger philosophy designed to stimulate a robust, worldwide delivery architecture so the firm is “local to the customer.”
“For us to provide that local flavor, we need to have global capabilities.” Cognizant has 50 delivery centers in 14 countries.
Commenting on the debate around whether the US truly lacks a sufficient labor pool in science and technology fields, Sekaran says: “ If you really look at – there is a definitely a shortage of tech talent.”
The company last year joined on as a support of “Change the Equation/ STEM”, a private and public cooperative effort to improve performance and engage more U.S. students in science and math.
Sorry but I do not buy the premise that "The days of cost arbitrage in the global outsourcing market are numbered". I guess that is what the India-based companies would like to think. Cost arbitrage will exist, like it or not. Corporations will look for apples-to-apples productivity at the minimum possible cost, and then they will look at advantages that are difficult to quantify, like cultural affinity, or same time zone. The world is not static, and there will always be a race to be more efficient. Market shares will be gained or lost in terms of cost arbitrage PLUS skills avaiability. Where Mr Sekaran is right is that being a specialist is better than being a generalist, but even within a narrow niche there will be cost arbitrage, unless what you know how to do is absolutelly unique in the world.