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					Anchor Customer Model for Strategic Business Growth

Siddhartha Mukherjee
Vice President and Head, Kolkata Operations

Agenda
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Competitive landscape and the SME Challenge Why is an anchor customer model appropriate in today’s context? Where to find an anchor customer?

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What are the attributes to look for in an anchor customer?
How to establish an anchor customer?

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The Cognizant success story, leveraging an anchor customer
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Offshoring is Getting Highly Competitive

Source: Gartner
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The SME Challenge
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Strategic Challenge
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Which business to enter and how to enter

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Financial Challenge
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Infusion of equity and funds by VCs, Institutions and Angels

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Operational Challenge
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Recruitment and retention of the best resources

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Marketing and Branding Challenge
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Unlike in the US, the culture of recognizing SMEs does not exist in India [Cognizant is Forbes’ Best Small Company in America and BusinessWeek’s Hottest Growth Company]

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In this context…
How the Top 10 Have Changed in Last 5 Years
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In absolute revenue terms the Top 5 IT services companies continue to be TCS, Infosys, Wipro, Satyam and HCL Technologies Interestingly, the next 10 have seen significant changes, these would include Cognizant, i-Flex, Mahindra British Telecom, Hughes Software [now Flextronics], Hexaware and Digital: the common theme
among all these companies is that they have grown using an anchor customer, in most cases the parent organization

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More interestingly, we are seeing a repeat of it in BPO with already

the Top 2 being GECIS and WNS, both having grown using an anchor
customer
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To meet the challenges, an anchor customer is appropriate
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Today, an increasing number of customers [product vendors and enterprise customers alike] are looking at multiple models than ever before
• BOT • Joint Venture

• Strategic Investment
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Benefits
• Ability to pay competitive wages and attract and retain talent • Consistency in cash flow because of the long-term nature of business • Ability to focus on delivery excellence, domain depth and process quality

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Attributes to Look for in an Anchor Customer

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Commitment from senior management for offshoring Good revenue and turnover

Long-term commitment in terms of business

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Ability to take the risk and have the right mindset

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Aggressive technology adoption and high outsourcing happening in the US/Europe or in India Large part of less critical activities done in-house with a good spread of activities Owners/champions/c ustodians of this venture within the organization

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How to Establish an Anchor Customer?
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Flexible business model, with emphasis on building partnership
• Pricing • Always over deliver • Control • Operational freedom • Transparency in dealings • Proactive R&D

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The Cognizant Success Story

Built a strong quality foundation (got assessed every 2 years)

Built a strong relationship management team onsite and a delivery team offshore

Grown above industry average every year and won several accolades

Went public on Nasdaq in 1998 and is among the handful of companies doing predictably well

Looked at external customers in 1996 and today we have close to 100 large customers

Started with an anchor customer The Dun & Bradstreet Corporation and serviced its group companies
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Things that we did right…
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Started building slowly and established a track record and infrastructure first Always under committed and over delivered Built a very strong delivery capability and process focus Had lot of business opportunities, but did not grab them all; built excellent references first Never underestimated selling to the captive customer base, although a part of the extended family, as they always had other

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options

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Things that we did right…
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Had tremendous focus
• Geographies we operate in (US to start with and Europe later) • Solution offerings (business application outsourcing and did not get into
products, engineering services, enabled services)

• Specialized in select verticals, and built one vertical at a time • Very high people orientation • Customer domains that we understood very well • Knowledge management • Customer value addition (it is not just cost that matters)

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Things that we did right…
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Managed change effectively
• Corporate level (D&B to Cognizant to IMS Health) without it impacting the top line or bottom line, or people motivation levels • Delivery capability to a marketing-cum-delivery capability (earlier even our business cards and letter heads got printed in the US) • Solution offering level (year 2000 to client-server to e-business to wireless) • Privately held company to publicly traded entity • Pricing models (T&M, Fixed-bid, Success-based pricing)

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Things that we did right…
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Today, eleven years down the line
• Revenue mix is almost equal across financial services, insurance, information-defined services, manufacturing and retail thereby de-risking us from slumps in a vertical • Still US accounts for 85 percent of our revenue and we feel that the opportunity there is still potentially higher than others • Our headcount is 17,000 strong (to be 22,500 by calendar 2005) and is the only IT services company globally to be listed on the NASDAQ 100 Index

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www.cognizant.com

Thank You


				
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