Project Attrition

7/27/2019 Project Attrition

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SR.NO TABLE OF CONTENTS PG.NO

1 Executive Summary

2 Introduction

3 Objective of study

3 What is employee Attrition?

4 How to calculate attrition rate?

5 Reasons for Attrition

6 Cost of Attrition

7 Employees Retention Strategies

8 Benefits of attrition

9 Consequences of Attrition

10 Introduction to Cognizant technology Solutions

11 Company Profile12 Interview of an HR senior executive

13 Findings

14 Conclusions

15 Bibliography

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2021

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EXECUTIVE SUMMARY

In the current scenario of high economic growth and rapid globalization, the fightfor talent is becoming increasingly intense. Talent or human resource is a majorasset for any company. Company Invest high amount of money for theirrecruitment, selection & training and what happens to company if these Talents orEmployees leave the organization in short while seeking new opportunities.Plagued by erratic attrition trends and cutthroat global competition,organizations are now realizing the need to understand the supply-demandequation better in order to garner strong mechanisms to attract and retain top talent.Employee retention is critical to the long-term health and success of anyorganization; however it is becoming increasingly difficult for companies

across the globe to attract, motivate and retain key talent. Attrition rates arestill on the rise and as the war for talent becomes more intense each year it is

becoming increasingly important for companies to ensure they have the rightpeople in place to guide future business success. Overall attrition rates arecontinuing to rise in Asia.At 39 percent, overall employee turnover was highest at the professional/supervisor/ technical level. Unsurprisingly, attrition was lowest amongsenior/top management at just 0.5 percent. The Banking and Finance sector sawthe greatest employee turnover at 25 percent, while the lowest turnover wasrecorded in the manufacturing industry at 11 percent. The facts revealed thatexternal inequity of compensation was the main reason for employeesleaving their organization; however other causes include limited growthopportunities and role stagnation. Retention also remains a key challenge inIT/BPO and pharmaceutical industry.

Managing attrition is not a very easy task to do in the BPO industry. It is theroute to their survival.Turnover is of considerable concern for managers

because it disrupts normal operations andnecessitates the costly selectionand training of replacements, the costly hiring and training thenew employeeto regain the lost customer and supplier contacts. The employee retentionisobviously one of the most important challenges in organization and avoidsunwanted turnover.Staff attrition represents significant costs to mostorganizations. It is odd, therefore, that manyorganizations neither measuresuch costs nor have targets or plans to reduce them.Employee turnover or


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resign could disrupt normal operation necessities the costly selectionandtraining of replacement. Reducing employee turnover required themanagement efforts of thecompaniesThe main objectives of the study are tounderstand the reasons leading to attrition , to identifythe major problemsfaced by employees in the organization which lead to attrition.


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Introduction

In an environment of rapid growth, globalization and expansion, the pressureto attract and retain outstanding employees has become a scary reality formost organizations. The new-age economies, with their attendant paradigmshifts in human capital management, have placed a heavy demand ontodays organizations and Attrition is emerging as a key business concern fororganizations. It is turning into a bigger issue than attracting talent. Theannual attrition rate is 20-30 per cent(reduction in the number of employeesthrough retirement, resignation or death) across industries in India. It is ashigh as 44 per cent in BFSI(banking, financial services and insurance) vertical and 35 per cent in BPO(business process outsourcing). Attracting and retaining key talent has become one ofthe key drivers of overall business performance in organizations and

companies have been utilizing a diverse range of methods to draw in newhires and ensure they stay as Attrition is an expensive phenomenon,

potentially impacting the bottom line of businesses. The cost of attrition isnot just the loss of that employee but it includes an array of hidden costssuch as recruitment costs, selection costs, training costs, cost of coveringduring the period and opportunity costs. The organizational costs associatedwith the turnover in terms of hiring, training and productivity loss costs canadd up to more than five percent of an organizations operating costs. As faras India is concerned, attrition is a serious trend, especially in todaysknowledge-driven marketplace where people are the most important assets.While organizations cope with attrition by devising compelling retentionstrategies, it is imperative for organizations to predict attrition early in therecruitment process to curtail loss of time, cost and effort.


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MEANING OF ATTRITION:

The wearing down of an Adversary, making him weaker by repeal

attacking them or wearing down of resources i.e. the process of reducing the

number of people who are employed by an organization by not replacing

people who leave the job.

What is Employee Attrition?

A reduction in the number of employees through retirement, resignation ordeath is called Attrition. Attrition is also called total turnover or wastage

rate.


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How to Measure Employee Attrition Rate

Employee attrition rate allows you to determine the percentage ofemployees that left your business over a specified period of time, usuallyone year. Attrition includes all employees who leave the company,whether the leaving was voluntarily and involuntarily. An employee whochooses to leave a company for another job is an example of voluntaryemployee attrition. On the other hand, an employee fired by the companyis an example of involuntary attrition.

Step 1

Calculate the average number of employees who worked at the companyduring the year. To calculate a simple average, add the number ofemployees who began the year with the company to the number ofemployees remaining at the end of the year and divide this sum by two.For example, assume a company had 1,000 employees at the beginning ofthe year and 1,100 employees at the end of the year; 1,000 plus 1,100equals 2,100, divided by two equals 1,050. This figure represents theaverage number of employees employed by the company during the year.

Step 2

Determine the number of employees who left the company during theyear by examining the past year's employment records. If your companydoes not keep a running tally of employee attrition, physically count thenumber of employees who left the company over the year. As an example,assume that 300 employees left the company during the year.

Step 3

Divide the number of employees who left the company during the year bythe average number of employees employed by the company during theyear to arrive at an employee attrition rate. Continuing the aboveexample, 300 divided by 1,050 equals .286. Multiply this figure by 100 toarrive at .286, or 28.6 percent. This figure represents the company'semployee attrition rate for the past year.


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Reasons for attrition

It is not easy to find out as to who contributes and who has the control onthe a t t r i t ion of employees . Var ious s tudies /survey conductedindica tes tha t every one i s cont r ibut ing to the prevai l ingattrition. Attrition does not happen for one or two reasons. The way theindustry is projected and speed at which the companies areexpanding has a major part in attrition. F o r a m o m e n t i f w e l o o k

b a c k , d i d w e p l a n f o r t h e g r o w t h o f t h i s industry and answerwill be no. The readiness in all aspects will ease the problems to someextent. In our country we start the industry and then develop theinfrastructure. All the major IT companies have faced these realities. If youlook within, the specific reasons for attrition are varied in nature and it is

interesting to know why the people change jobs so quickly. Eventoday, the main reason for changing jobs is for higher salary and

better benefi ts. But in cal l centers the reasons are many and it is alsotrue that for funny reasons people change jobs. At the same time the attritioncannot be attributed to employees alone.

External inequity of compensation

External inequity arises when an employee realizes that some otheremployeefrom a different organization puts in much less efforts thanhe does, butreceives a much higher compensation than him. Thiscould cause anemployee to feel that maybe he is not gettingcompensated fairly and cancause him to quit the job

Work Timings

The work timings in BPO are very odd. This affects the family life of theemployee. Moreover, the male to female ratio in BPO is quiet low. The number offemales in BPO can be as large as 35%. This means that working hour

problem is quiet acute in their case especially after they get married, as aftermarriage comes social and family pressure to adjust work timings and take careof families.

C areer Growth


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Only 2 out of 10 employees on an average go on to be at the seniorlevel.This means that other employees look forward to change their job at other

places where they can get better opportunities toprogress. Also, anotherproblem arises with the mis-match of expectations and qualifications of theemployees. Along with

that,some employees see no career growth in this sector, so they move ontoother companies in search of changing the sector.

4) Higher Education

This is a problem as most of the employees in this sector are pretty young andaspiring. They join the firm because of lucrative salary. But with time, they try tomove on to other sectors or top management and one of the ways to do this

is higher education.

5) Role stagnation

Attrition rate is higher at knowledge level (middle level) in which theemployee has to do the same work again and again, which makes his workmonotonous and due to lack of responsibility and authority his growth isrestricted to a particular role, so they move to other companies where they can playdifferent roles and handle responsibility.

Work life imbalance

The scientific approach towards management and organization resulted in arigid structural hierarchy, exhaustive specialization of jobs, deployment ofunskilled employees and an unfavorable work environment. This led to highemployee turnover, decline in productivity, absenteeism.

7) Lack of recognition

When an employee feels that he is not getting due recognition for hisachievement, a feeling of demotivation creeps into him, and this can causehim to consider leaving the organization. Employees have an expectationthat when they work well, they will get some recognition from their managersin the form of a personal appreciation or an award etc.

8) Under-utilization of skills


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Proper utilization of skills has a tremendous impact on the satisfactionof employees. Ifa work is given to an employee it must be supportedby adequate powers andresponsibilities which enable them to move

up the career ladder and when their skills and potential is being overlookedthey end up with leaving the job.

9) Performance assessment

An employee may feel disappointed by the performance appraisal report andfeel that he has not been appraised in an unbiased manner. It may happen that hefeels that the appraisal process itself is flawed and the appraisers are biased.This can cause the employee to put in his papers and leave the organization.

10) Internal inequity of compensation

Internal inequity occurs when the employee feels that the amount of effortshe puts in to do his job are much more than what rewards he gets in returnfor them. This can cause him to feel de-motivated and nurture feelings ofdissatisfaction and eventually resign from his post.

11) Business instability

Many a times, when the organization faces some kind of instability oruncertainty with regards to operations, an employee might quit his job

before he is asked to leave. Many a times when employees get a whim thatthe organization is going to down-size or is going to be taken over byanother company, they tend to feel safer quitting the job than worrying aboutwhether the organization will retain them.


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TALENT POACHING

Losing employees to competitors is common; but now partners are

increasingly finding their employees poached by their own vendors and

distributors The term employee poaching can be defined as an act ofenticing key employees to move from one firm to a competitor. It has

emerged as the biggest HR challenge for enterprises, both big and small,

across all industry verticals. In the recent times, the aviation sector has been

the worst hit, and state- owned airlines have lost several of their in-flight

crew and ground staff to the new airlines. Retail is likely to emerge as the

next hotspot for poaching, as large players enter the fray and roll out their

stores. The IT industry has traditionally been a happy hunting ground for

poachers, for obvious reasons. Attrition rates of engineering, software and

BPO companies have always been steep compared to the rest of the

industries. Employee attrition is part of every manpower-intensive business.

There is a misconception among employers that emoluments matter most in

attracting talent. An employee changes jobs for many reasons. Retaining

human resource, especially on whom much has been spent to hone their

skills, is a headache for firms. Job satisfaction is something that varies from

individual to individual.

Job satisfaction and employee loyalty are better in companies that allowtheir staff the freedom to unleash their creativity and never fail to appreciate

a job well done. Too much of interference and bossing stifles growth and

creativity, the motivation levels of employees plunges and they look for the

exit. An atmosphere of distrust too could lead to employee attrition.

It is in the institutions interest to provide a congenial atmosphere and take

initiatives that would keep the workforce morale high. Contentment and job

satisfaction certainly matter more than fat pay packets and perquisites

though with the usual exceptions.

There are many factors that contribute to the problem of employee turnover.

Some of these factors cannot be directly controlled by organizations, such as

area economic or labor market conditions. It appears that the high


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unemployment rate of graduates looking for professional work experience is

a major force responsible for excessive employee turnover in India.

The level of turnover may exceed a companys capability to handle it and

can force a strategic crisis schedule slips, quality degradation, businessprocess breakdown, delivery delays, and the resulting potential of customer

attrition.

The kind of treatment meted out to the new recruit by the organization and

co-workers during this crucial transition period can determine the

candidates decision to either continue in the job or call it quits.

Considering that it can cost a company between 50 and 150% of an

employees salary to find a suitable replacement, it is simpler and far more

economical to extend the red carpet treatment to new recruits, and go all out

to ensure that they fit in comfortably with the office culture.

Reports indicate that much of the voluntary turnover of companies takes

place within the first one year of employment, corroborating the widely held

belief that first impressions play a significant role in an organizations ability

to find and retain talented employees.

During this time, newcomers are often quietly sizing up the organization and

testing waters to see if the job is an ideal fit. Not surprisingly, organizations

that make them feel wanted and welcome are the ones they choose to build

their careers with.


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COST OF ATTRITION

There are a number of costs which are incurred by a BPO when theyhire anynew employee. These costs can be in terms of monetary orcan be in terms oftime wasted or any other intangible things. Some of these costs can be asstated below: -

Costs Due to a Person Leaving

1)Recruitment Cost s

1.The cost of advertisements; agency costs; employee referral costs; internetposting costs2.The cost of the internal recruiter's time to understand the position

requirements, develop and implement a sourcing strategy, review candidatesbackgrounds, prepare for interviews, conduct interviews, prepare candidateassessments, conduct reference checks, make the employment offer and notifyunsuccessful candidates. This can range from a minimum of 30hours to over100 hours per position.3.Calculate the cost of the various candidate pre-employment tests to helpassess candidates' skills, abilities, aptitude, attitude, values and behaviors.

2)Training Costs

1) The cost of orientation in terms of the new person's salary and cost of theperson who conducts the orientation. Also include the cost of orientationmaterials.2)The cost of departmental training as the actual development anddeliverycost plus the cost of the salary of the new employee.Note that the cost will

be significantly higher for some positionssuch as sales representatives andcall center agents who require4 - 6 weeks or more of classroom training.3) The cost of the person(s) who conduct the training.The cost of various

training materials needed including companyor product manuals, computer

or other technology equipmentused in the delivery of training.

4)Lost Productivity Costs


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As the new employee is learning the new job, the company policies andpractices, etc. they are not fully productive. Use the following guidelines tocalculate the cost of this lost productivity:1)Upon completion of whatever training is provided, the employee iscontributing at a 25% productivity level for the first 2 - 4weeks. The costtherefore is 75% of the new employees full salary during that time period.

2)During weeks 5 - 12, the employee is contributing at a 50%productivitylevel. The cost is therefore 50% of full salary during that time period.

3)During weeks 13 - 20, the employee is contributing at a 75%productivitylevel. The cost is therefore 25% of full salary during that time

period.4.Calculate the cost of mistakes the new employee makes during thiselongated indoctrination period.

4)New Hire Cost

1) The cost of bring the new person on board including the cost toput theperson on the payroll, establish computer and securitypasswords andidentification cards, telephone hookups, cost of establishing email accounts,or leasing other equipment such ascell phones, automobiles.2)The cost of a manager's time spent developing trust and

buildingconfidence in the new employee's work.

5)Lost Cost sale

Calculate the revenue per employee by dividing total companyrevenue bythe average number of employees in a given year.Whether an employeecontributes directly or indirectly to thegeneration of revenue, their purpose isto provide some definedset of responsibilities that are necessary to thegeneration of revenue. Calculate the lost revenue by multiplying the numberof weeks the position is vacant by the average weekly revenue

peremployee. Thus we can say that if a person leaves a job company has to

sufferlosses as it involves many costs.


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WHAT IS EMPLOYEE RETENTION?

Employee retention refers to the various policies and practices which let

the employees stick to an organization for a longer period of time.

Every organization invests time and money to groom a new joined, makehim a corporate ready material and bring him at par with the existing

employees. The organization is completely at loss when the employees leave

their job once they are fully trained. Employee retention takes into account

the various measures taken so that an individual stays in an organization for

the maximum period of time.

It is a process in which the employees are encouraged to remain with

the organization for the maximum period of time or until the completion ofthe project. Employee retention is beneficial for the organization as well as

the employee.

WHAT IS RETENTION ALL ABOUT?

R- REMUNERATE COMPETITIVELY

E-ENCOURAGEMENT AND EXPECTATION

T-TRAINING AND DEVELOPMENT

A-ANNUAL REVIEW CYCLES

I- INFORM AND INVOLVE

N- NURTURE


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Need and Important of Employee Retenion

Let us understand why retaining a valuable employee is essential for an

organization. Hiring is not an easy process: An organization invests time and money in grooming an individual and

makes him ready to work and understand the corporate culture:

When an individual resigns from his present organization, it is morelikely that he would join the competitors:

The employees working for a longer period of time are more familiarwith the companys policies, guidelines and thus they adjust better:

It has been observed that individuals sticking to an organization for alonger span are more loyal towards the management and the organization

It is essential for the organization to retain the valuable employees havinghigh potential.


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Role of HR In Employee Retension

The Human Resource team plays an important role in employee

retention. Let us find out their role in the same:

Whenever an employee resigns from his current assignments, itis the responsibility of the HR to intervene immediately to find

out the reasons which prompted the employee to resign

It is the duty of the HR to sit with the employee and discuss thevarious issues face to face. Understand his problems and listen

to his side of the story as well..

The HR person must ensure that he is recruiting the rightemployee who actually fits into the role. A right person doing

the wrong job would never find his job interesting and certainly

look for a change.

The human resource department must conduct motivationalactivities at the workplace. Organize various internal as well as

external trainings which help the employees to learn something

extra apart from their routine work.

The HR must launch various incentive schemes for the topperformers to motivate them. This way the employees feel

important for the organization and strive hard to perform even

better the next time.

Performance reviews are a must. The HR along with therespective team leaders must monitor their team members

performance to ensure whether they are enjoying the work or

not.


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The HR professional must try his level best to motivate

the employees, make them feel special in the organization so

that they do not look for a change.


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Challenges in Employee Retension

Monetary dissatisfaction is one of the major reasons for anemployee to look for a change. Retention becomes a problem

when an employee quotes an exceptionally high figure beyond

the budget of the organization and is just not willing to

compromise.

In the current scenario, where there is no dearth ofopportunities, stopping people to look for a change is a big

challenge. Employees become greedy for money and position

and thus look forward to changing the present job and join thecompetitors..

Individuals speak all kind of lies during interviews to get a job.It is only later do people realize that there has been a mismatch

and thus look for a change. Problems arise whenever a right

person is into a wrong profile. The human resource department

should be very careful while recruiting new employees.

Some individuals have a tendency to get bored in a short spanof time. They might find a job really interesting in the

beginning but soon find it monotonous and look for a change.

The management finds it difficult to convince the employees in

such cases.

Unrealistic expectations from the job also lead to employeeslooking for a change. An individual must not look for a change

due to small issues. One needs time to make his presence feel at

the organization and must try his level best to stick to it for a

good amount of time and ignore petty issues.


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Handling attrition?

Earlier the retention was the sole responsibility of HR Department andat themost the department heads will be accountable for the retentiono f

t a l e n t . I n c o m p a n i e s t h e w h e e l s h a v e c h a n g e da n d m u l t i dimensional approach needs to be adopted. More ofconcerted effortsonly would help to retain the talent. Everyone has tocontribute to holdthe employees little longer period. All the leading companies aretryingseveral methods to retain the talent and few of those innovativeHRpractices are:

Providing stimulating work environment:

I n t e r m s o f s t a t e d w o r k p r e s s u r e , o n l y 1 7 % h a v e

c l a i m e d l i g h t pressure. This may point to a reasonably high-pressureenvironment in conventional terms, not realized as most respondentshave no other industry experience. The atmosphere at the workplacehowever, was generally positive. Almost half worked more than 45 hours per week.

Free transport and free food:

Majority of the breaks were for meals and there were no significantproblems faced in taking the breaks.

Almost 2/3rd employees travel more than 10 kms to workeveryday. This is a huge st rain on qual i ty t ime ava i lable withthe family and ostensibly results in stress in numerous wayscompared with other industries. The root cause is that most BPOsare located outside the city as government lands have beenallocated to the MNCs at better rates there.

Although taxi / bus services are provided by most employers, as many as30% workers t ravel crammed (more than 5 persons to a

taxi ) .Whats more, 79% waste more than 30 minutes of theirproductive lives everyday waiting for commute. Interestingly, lower salaryworkers get no such benefits.

Good rewards and recognition programmes:


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As many as 56% admit ted to being asked to work over t ime.44%refused the question implying that conditions are created such that all

probably are coerced into working overtime. The oppressive part wasf u r t h e r t h a t a s h i g h a s 4 1 % c l a i m e d t o n o t h a v i n g b e e n

p a i d f o r overtime.

Recreat ion c lubs, Canteens, Entertain programmes ,

funactivities with in the work area:Many companies have canteens though the quality of food is not great.

Good pay and benefits:

A huge 58% of starters are dissatisfied with their promised packages vis--

vis delivered salary.

Other practices include:

Promotions and salary increase on a regular basis.- Better learning opportunities,Encourage enroll for distance learning programmes.- Regular holiday packages,gifts, outings etc.All the above activities are being undertaken to a greater extent orlittle more in all large Companies. Surprisingly the attrition rate is notcoming down in any of the companies, but it is going up and it mayincrease in the coming days. This is a time to introspect as to what is lackingin the approach. One thing is missing is attention to individual needs.Employees have varied expectations and it is becoming difficult t ou n d e r s t a n d t h e m a n d b y t h e t i m e y o u m a k e a na t t e m p t t o understand the expectation changes and it is still becomingdifficult to meet the customized demands or expectations. To quote anexample, if a friend leaves, another close friend will also leave and

he will lure

another 3-5 persons. Moving for higher education and marriage are the major reasonsfor attrition. To tackle these will be impossible with any type of strategiesand approaches. The HR personnel have become silent spectators and starthunting for new personnel to replace. The broader approach is to bringsanctity in the recruitment process like demand the relieving letter from


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the previous company, have non-hire agreements with the companies inthe particular area. It is not e a s y t o b r i n g t h e e n t i r ec o m p a n y u n d e r a f o r u m . N a s s c o m h a s attempted to bring outcertain guidelines on the matter and the impact is not felt yet. The MNC culture,high salary level and benefits offered by them are the only two major aspectof attrition and no one can halt them doing so.


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Benefits Of Attrition

If all employees stay in the same organization for a very long time,most of them will be at the top of their pay scale which will result in

excessive manpower costs. When certain employees leave, whose continuation of service would

have negatively impacted productivity and profitability of the

company, the company is benefited.

New employees bring new ideas, approaches, abilities & attitudeswhich can keep the organization from becoming stagnant.

There are also some people in the organization who have a negativeand demoralizing influence on the work culture and team spirit. This,

in the long-term, is detrimental to organizational health.

Desirable attrition also includes termination of employees with whomthe organization does not want to continue a relationship. It benefits

the organization in the following ways:

It removes bottleneck in the progress of the company o It createsspace for the entry of new talents . It assists in evolving high

performance teams .

There are people who are not able to balance their performance as perexpectations, lack potential for future or need disciplinary action.

Furthermore, as the rewards are limited, business pressures do not

allow the management to over-reward the performers, but when

undesirable employees leave the company, the good employees can be

given the share that they deserve.

Some companies believe attrition in any form is bad for anorganization for it means that a wrong choice was made at the

beginning while recruiting. Even good attrition indicates loss as

recruitment is a time consuming and costly affair. The only positive

point is that the realization has initiated action that will lead to cutting

loss.


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Introduction To Company

Cognizant Technology Solutions Corporation is an American

multinational information technology, consulting and business processoutsourcing company. It is headquartered in Teaneck, New Jersey, UnitedStates, North America. Cognizant is included in the NASDAQ-100 and theS&P 500 indices.

Originally founded as an in-house technology unit of Dun & Bradstreet in1994, with headquarters in Chennai, India, Cognizant started servingexternal clients in 1996. In 1997, the headquarters were moved fromChennai to Teaneck, New Jersey. Cognizant's IPO was launched in 1998,

after a series of corporate splits and restructures of its parent companies, thefirst Indian software services firm to be listed on the Nasdaq During the dotcom bust, it grew by accepting the application maintenance work that the

bigger players were unwilling to perform. Gradually, it ventured intoapplication development, complex systems integration and consulting work.

Cognizant saw a period of fast growth during the 2000s, becoming a Fortune500 company in 2011.In 2011, the Fortune magazine named it as the world'sthird most admired IT services company after Accenture and IBM.

History

The company that is now called Cognizant has its roots in The Dun &Bradstreet Corporation, a joint venture between Dun & Bradstreet (76%) andSatyam Computers (24%). Srini Raju was the CEO of this companyestablished in 1994. Kumar Mahadeva played a major role in convincingD&B to invest $2 million in the joint venture. He was born in Sri Lanka,where his father led his nation's civil service. Mahadeva traveled to Englandfor his studies, earning a master's degree in electrical engineering fromCambridge in1973. Originally called DBSS, the unit was established as an

in-house technology unit, and focused on implementing large-scale ITprojects for D&B businesses. In 1996, the company started pursuingcustomers beyond the D&B fold.

In 1996, Dun & Bradstreet (D&B) spun off several of its subsidiariesincluding Erisco, IMS International, Nielsen Media Research, PilotSoftware, Strategic Technologies and DBSS, to form a new company called
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Cognizant Corporation. Three months later, in 1997, DBSS was renamed asCognizant Technology Solutions. In July 1997, D&B bought Satyam's 24%stake in DBSS for $3.4 million. Headquarters were moved to the UnitedStates, and in March 1998, Kumar Mahadeva was named CEO. Operating asa division of the Cognizant Corporation, the company mainly focused onY2K-related projects and web development.

In 1998, the parent company Cognizant Corporation was split into twocompanies:IMS Healthand Nielsen Media Research. After this

restructuring,Cognizant Technology Solutions became a public subsidiary of IMS Health.In June 1998, IMS Health partially spun off the company, conducting aninitial public offering of the Cognizant stock. The company raised $34

million, less than what the IMS Health underwriters had hoped for. Themoney was earmarked for debt payments and upgrading of the company'soffices.

Kumar Mahadeva decided to reduce the company's dependence on Y2Kprojects: by Q1 1999, 26% of company's revenues came from Y2K projects,compared with 49% in early 1998. Believing that the $16.6 billion ERPsoftware market was saturated, Mahadeva decided to refrain from large-

scale ERP implementation projects. Instead, he focused on applicationsmanagement, which accounted for 37% of Cognizant's revenue in Q1 1999.Cognizant's revenues in 2002 were $229 million, and the company had zerodebt with $100 million in the bank. During the dotcom bust, the companygrew by taking on the maintenance projects that larger IT servicescompanies did not want.

In 2003, IMS Health sold its entire 56% stake in Cognizant, which instituteda poison pill provision to prevent hostile takeover attempts. KumarMahadeva resigned as the CEO in 2003, and was replaced by Lakshmi

Narayanan. Gradually, the company's services portfolio expanded across theIT services landscape and into business process outsourcing (BPO) and

business consulting. Lakshmi Narayanan was succeeded by the Kenya-bornFrancisco D'Souza in 2006. Cognizant experienced a period of fast growthduring the 2000s, as reflected by its appearance inFortunemagazine's "100
http://en.wikipedia.org/wiki/IMS_Healthhttp://en.wikipedia.org/wiki/IMS_Healthhttp://en.wikipedia.org/wiki/IMS_Healthhttp://en.wikipedia.org/wiki/Initial_public_offeringhttp://en.wikipedia.org/wiki/Initial_public_offeringhttp://en.wikipedia.org/wiki/Enterprise_resource_planninghttp://en.wikipedia.org/wiki/Enterprise_resource_planninghttp://en.wikipedia.org/wiki/Dot-com_bubblehttp://en.wikipedia.org/wiki/Dot-com_bubblehttp://en.wikipedia.org/wiki/Poison_pillhttp://en.wikipedia.org/wiki/Poison_pillhttp://en.wikipedia.org/wiki/Hostile_takeoverhttp://en.wikipedia.org/wiki/Hostile_takeoverhttp://en.wikipedia.org/wiki/Lakshmi_Narayananhttp://en.wikipedia.org/wiki/Lakshmi_Narayananhttp://en.wikipedia.org/wiki/Lakshmi_Narayananhttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Management_consultinghttp://en.wikipedia.org/wiki/Management_consultinghttp://en.wikipedia.org/wiki/Francisco_D%27Souzahttp://en.wikipedia.org/wiki/Francisco_D%27Souzahttp://en.wikipedia.org/wiki/Fortune_(magazine)http://en.wikipedia.org/wiki/Fortune_(magazine)http://en.wikipedia.org/wiki/Fortune_(magazine)http://en.wikipedia.org/wiki/Fortune_(magazine)http://en.wikipedia.org/wiki/Francisco_D%27Souzahttp://en.wikipedia.org/wiki/Management_consultinghttp://en.wikipedia.org/wiki/Business_process_outsourcinghttp://en.wikipedia.org/wiki/Lakshmi_Narayananhttp://en.wikipedia.org/wiki/Lakshmi_Narayananhttp://en.wikipedia.org/wiki/Hostile_takeoverhttp://en.wikipedia.org/wiki/Poison_pillhttp://en.wikipedia.org/wiki/Dot-com_bubblehttp://en.wikipedia.org/wiki/Enterprise_resource_planninghttp://en.wikipedia.org/wiki/Initial_public_offeringhttp://en.wikipedia.org/wiki/IMS_Health


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Fastest-Growing Companies" list for ten consecutive years from 2003 to2012.

Today, the companys goals are nearly the same as when it was founded.

Cognizant strives to be the leading provider of e-business and application

development projects while taking full responsibility for its clients software

systems.

Cognizants business is organized and managed around four vertically-

oriented business segments:

Financial Service

Banking Focuses on traditional retail and commercial banks, as well as

diversified financial enterprises. The company assists its banking clients in

many areas, such as consumer lending, risk management, investment

management, and retail banking. o Insurance Assists the needs of casualtyand property insurers, life insurers, and insurance brokers. The company

assists its insurance customers in many areas, such as business acquisition,

claims processing, management reporting, and regulatory compliance.

Healthcare

Healthcare Works with a variety of leading healthcare organizations. The

company provides services to healthcare companies in many areas, such as

sales & underwriting systems, plan administration, billing, claimsprocessing, and pharmacy benefit management. o Life Sciences Works with

many of the worlds leading pharmaceutical companies operating in the Life

Sciences industry and provides solutions to the challenges of their evolving

market. Some of this challenges include issues surrounding consolidation,

data integration, safety, and regulations.


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Manufacturing, Retail, and Logistics

Manufacturing and Logistics Helps companies improve operational

efficiencies, enhance responsiveness, and deal more directly with trade

partners to ultimately provide greater value to their end customers. Thecompany provides supply chain management solutions to these companies as

well as optimization solutions. o Retail and Hospitality Serves a wide variety

of retailers and distributors, including specialty premium retailers,

supermarkets, and large discounters. The company also serves the entire

travel and hospitality industries including airlines, hotels, and restaurants.

Some of the serves provided to these companies by Cognizant include:

supply chain management, warehouse management, and logistics

management.

Other

Communications Serves leading communications services providers. The

company provides many services to these companies, such as network

management services, conformance testing, product lifecycle management,

and product implementation. o Information, Media, and Entertainment

Serves the worlds leading media and entertainment companies. The

company provides many services to these companies, such as Digital Rights

Management(DRM), content management, workflow automation, and

advertising management. o High Technology Serves Independent Software

Vendors (ISVs) and Online Service Providers


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PRODUCTS AND SERVICES OVERVIEW

The companys solutions include IT Consulting, application development

and integration, application management, and re-engineering services.

IT Consulting Cognizants consulting division, Cognizant Business

Consulting, helps clients to receive greater value and ensures that their IT

requirements are met. The companys consulting offerings are based on tried

and proven strategies. At CTSH, employees analyze the existing

environment, indentify possible areas for optimization or improvement, and

create complete roads maps that ultimately lead to productivity improvement

and cost savings for clients.

-engineering

Cognizant uses various internet technologies to define customer

requirements, create designs and specifications, and ultimately test and

integrate software across multiple platforms. Applications development

services are provided using what the company calls its full life-cycle

application development approach. Essentially, this means that the company

assumes total responsibility and accountability for the analysis, design, and

implementation of clients systems from start to finish.

Cognizants fastest growing areas. The company provides independent

verification and validation services that are focused entirely on supporting

clients software testing needs. There are four main offerings in this area:

Independent Functional Testing, Test Automation, Test Process Consulting,

and Performance Testing.

S.W.O.T. ANALYSIS

Strengths

international operations. These operations have accounted for


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approximately 21% of total revenues. The company plans to continue

expanding across the globe.

which shows that it can grow effectively without outside influence.Cognizant seems rather conservative because it carries no long term debt but

carries a high ROE that might justify leverage.

an increase in demand for its services. This is supported by the companys

explosive revenue growth in recent years.

Weaknesses

problem and is dedicated to expanding its international and domestic

presence.

Opportunities

portunities

internationally, especially in China, for providers of IT consulting and other

services to expand.

around the World. However, there are tons of smaller firms that serve small

business and households. Mergers and Acquisitions offer an opportunity for

firms in the IT Consulting and Other Services industry to gain access to

these smaller market segments.

government spending on this industrys services has been increasing.

Typically, governments require IT Consultants to help protect against cyberattacks on government servers.

Threats

industry. Recent reports have indicated that the sector in which CTSH is


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operating is likely to face increasing competition in offshore outsourcing.

wages of Indian employees and also the gradual appreciation of the rupee.

companies in all sectors and industries. Although the demand environment

in the United States in recovering, it is still at historically low levels. This is

most evident in the financial services sector. Because the financial services

sector represents a large customer, it can greatly affect revenues for the IT

Consulting and Services industry

recent trend of decreasing

profitability in the IT Services and Consulting industry that could worsen

going into the future.

PORTERS 5 FORCES ANALYSIS

Supplier Power High The IT Consulting and Other Services industry is

highly competitive. It requires various inputs including hardware,

employees, software tools, and other devices. Moreover, it is necessary that

employees have a high level of technical knowledge and expertise.

Barriers to Entry Low Barriers to entry are low in the IT Consulting and

Other Services industry. One main reason that IT consulting has low

barriers to entry is because the industry is labor driven. As a result, with

knowledge of IT systems, anybody is hypothetically able to establish a

business.

Buyer Power High Overall, buyer power is moderate in this industry.

Contracts with customers, typically large companies, are secured after a

formal bid process. Consequently, these customers exhibit greater buyer

power. Threat of SubstitutesModerate Overall there is a moderate threat

from substitutes in this industry. There are many companies offering a

diverse range of consulting and other services that are comparable to that

offered by Cognizant.

Degree of RivalryHigh There is a great deal of competition among firms

operating in the IT Consulting and Other Services Industry. Some of


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Cognizants competitors include companies with much greater resources,

such as Computer Sciences Corporation.

Documents

Project Attrition