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Monday, August 16, 2010

'Cos investing in future will gain'

NASDAQ-listed Cognizant competes with domestic software companies such as TCS, Infosys and Wipro, and has been growing faster than the industry in the last few years. The last quarter was no different, where the company beat its own estimates by a wide margin and also raised revenue growth guidance for calendar 2010 to 36% from 25%. While Cognizant has historically outperformed the industry, its results have underlined the resurgence of optimism in the IT industry that went through a rough patch after the recession in the US, its biggest technology market. Is the optimism sustainable? Lakshmi Narayanan, vice-chairman of the company, who was earlier the chairman of software lobby Nasscom, shares his insight on the $70-billion IT-BPO industry.
artical Picture “If you look at the data, all companies have given good growth guidance for the next quarter. Many of them have increased their guidance for the full year that clearly indicates that growth is back. The quality of growth is also good because it is broad-based, in multiple geographies and across industry verticals.

However, going forward, do we see the same level of growth that a company like Cognizant posted? Unlikely. There is a part of the growth that can be attributed to the pent-up demand that is specific to this quarter as far as Cognizant is concerned. Maybe other companies may have part of that pent-up demand coming in the subsequent quarters.”
Resentment has risen among domestic IT firms after the US Congress passed the Border Security Bill where it will augment funds for border security by hiking the application fee for H-1B and L-1 visas. This would directly hit IT firms as they use these visas when they send employees to US for projects.

But Mr Narayanan believes that it is unlikely that any policy action or regulation will have a significant impact because clients continue to invest in growth, trying out new products and dabbling in innovations. This only underscores consulting and research firm Forrester’s upbeat forecast for the technology market in 2010. While it expects the global IT market to grow 8%, the US IT market will grow faster, by 10%.
“If you look at it from the demand perspective, companies that are partnering with outsourcers say it’s something that you have to deal with, so deal with it. The promise that we make to them is, we bring the best global talent wherever it is available to make a difference to them. So, as long as we do that, the corporations, the customers will not be worried about it.”
Apart from the Border Security Bill, Senator Charles E Schumer’s acerbic comments on Infosys have evoked sharp reaction from the industry. Senator Schumer had said that companies like Infosys are ‘chop shops’ that take away high-paying American technology jobs.

The politically-charged tirade raises worries for a sector that’s just limping back to recovery and also fuels a larger concern about the perception that the developed world has about the industry.
“By and large, there is no perception issue. The Indian IT industry is considered to have top technology and leadership talent. You go to any country and people talk about India being an IT centre. Occasional remarks about comments are just an opportunistic way of looking at a situation. It doesn’t matter who calls us what, we will continue our job and we hold our heads high because we make a difference with technology globally.”
Encouraged by the blistering growth the Indian IT-BPO industry has seen in the last decade, a Nasscom-McKinsey study, Perspective 2020: Transform business, transform India, has set an ambitious export target of $175 billion by 2020. The challenge to meet this target doesn’t lie in the demand but the delivery model that will transform dramatically to keep pace with technology, reckons Mr Narayanan.
“The way devices are changing, the future of work, the future of worker and the future of an IT workplace is all going to evolve and transform. Companies that are investing in understanding that future will be successful.

With the availability of bandwidth and high-performance devices such as iPad, there is a huge opportunity for businesses in India. I don’t know if new buildings will be constructed where all people congregate in one single location — that might change in future.”

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