The Hindu Business Line : EDS: Cognizant of its strengths

IT is a fairly large alliance that has gone virtually unnoticed in the media. Just a fortnight ago, the US-headquartered Electronic Data Systems (EDS) selected the Nasdaq-listed Cognizant Technology Solutions as an alliance member to enhance its offshore delivery strength for global development and management services for its clients worldwide. Responding to a questionnaire from eWorld on this development, Francisco D' Souza, Chief Operating Officer, Cognizant, outlined the strategic intent behind this alliance and how it will benefit both EDS and Cognizant.

Over the past few years, top-tier Indian offshore players have been consciously cutting down on their outsourcing relationships with the likes of Accenture, IBM, CSC and EDS. These relationships were shed, I presume, because companies could not be competitors and partners (or subcontractors) at the same time. In this backdrop, how is your alliance with EDS different from what has been struck with these global MNCs in the past?

We believe that other relationships have been developed as a way for US-based companies to quickly establish offshore delivery capabilities. These relationships were typically a contractor/sub-contractor model established purely to take advantage of a low wage cost base; our relationship is built on our strongly aligned business models — client proximity teams, domain expertise and delivery excellence.

The Cognizant and EDS relationship complements the two companies' skills and expertise to establish a comprehensive approach to provide value to our clients. This relationship includes integrated development processes and methodologies, integrating Cognizant into targeted EDS clients and sales pursuits, joint planning on developing targeted competencies. The foundation of this relationship is around longer-term bundled IT outsourcing engagements versus the more standard staff augmentation seen in the industry.

Cognizant has stated that this alliance provides you with "an incremental opportunity to be a part of large-scale IT projects, a market segment which we do not currently serve". Could you elaborate on the nature of this alliance, the type of projects and verticals you can jointly bid for?

EDS' strengths are in large-scale bundled IT outsourcing projects and this alliance will focus on those opportunities. Cognizant does not compete with EDS for large-scale, bundled IT outsourcing projects. We are primarily focused on applications development and maintenance, and hence this alliance is more complementary than competitive.

EDS has identified specific Top-65 of its clients across various industry segments where Cognizant has an existing relationship, and we will work on a case-by-case basis to ensure optimal engagement.

Cognizant has assigned a full-time Plano-based Alliance team to work with EDS as the initial primary point of contact for Cognizant engagements. EDS and Cognizant will, on a client-by-client basis, evaluate and determine the appropriate blend of EDS and Cognizant resources, onshore and/or offshore, over a project lifecycle.

EDS and Cognizant have developed clear rules of engagement; however, we will review each client on a case-by-case basis. EDS will serve as the prime account representative with its current clients. Cognizant will hold the primary relationship with its existing client base.

With joint or new clients, EDS and Cognizant will evaluate each prospective or new client's needs and determine the best arrangement to meet the client's goals and business objectives.

How can this alliance prove to be a win-win for both parties, considering EDS has been struggling to set up the back-end in India and it will straightaway stand to gain from this alliance. Whereas your stated intent has been to build on large relationships/contracts steadily through strategic accounts (say between $5-40 million) rather than attempt a big leap into large contracts, which may not be a stable state of business and is generally margin-dilutive in the initial years. How does this complement your overall strategy?

This alliance will be a win-win for both parties. The benefits that Cognizant will receive as a result of this alliance are:

Access to large-scale, bundled IT outsourcing transactions through an alliance with EDS

Ability to be a part of large legacy transformation engagements with EDS' clients

Early involvement in pursuits, account planning, etc.

Greater predictability through a structured alliance relationship.

The benefits that EDS will receive are:

Supplements and accelerates EDS' applications delivery transformation

Best-in-class platform for global delivery

Cognizant's strengths in large-scale program/project management and deep industry/technology expertise

Allows EDS to invest more on the client-site delivery and industry-specific expertise that adds more value to clients, and increases margins in applications services

Access to world-class, high quality/low-cost applications development and management capabilities

This alliance does not take our focus away from building deep, long-term strategic relationships with our customers. Through our industry experts and relationship management teams who are located close to the customers, we will continue to enhance our relationships with our customers.

maverick@thehindu.co.in

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