Cognizant goes slow on BPO

By SiliconIndia   |   Tuesday, 30 September 2003, 07:00 Hrs
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MUMBAI: The US-based software services company, Cognizant Technologies, is going slow on its BPO initiative in the country, according to Economic Times, a business daily in India.

Earlier, the company had chalked out an aggressive strategy based on acquisition for ramping up its BPO business.

Though the company is still looking at acquisitions, it now wants to hold minority stakes in existing companies to reduce its risk and exposure. “Cognizant is serious about its BPO initiative as it is customer-driven and not speculative. We have some pilots going on with our clients and are looking at a number of investments in the BPO area,” says N Lakshmi Narayanan, president and COO, Cognizant.

“But we are approaching the call centre business opportunity cautiously, because we are not convinced it is a good, long-term profitable business. However, we want to be in the BPO game as many of our clients are interested in it. So we are looking at the option of making a minority investment in a company which will allow us to play in that game and steer it or change it towards higher value-added BPO activities that can generate higher margins before acquiring it outright. You will probably see a two-step process,” Mr Narayanan said.

Cognizant’s existing software service business is growing at a rapid pace and the company seems to be keen on consolidating it. Moreover, the top management time seems to be taken up by the rapid pace of growth in the software business.

Company officials say Cognizant is trying to focus on the higher value-added, more administrative segments of the BPO market — claims processing, revenue accounting, card processing, mortgage or loans processing, payroll and personnel administration, and billing — where the business processes to a client’s operation is as critical as application management.

Though there are venture-funded companies in these areas, they do not have the critical size. Only companies which have critical size in the areas that Cognizant is interested in, are captive units of GE and other MNCs. Cognizant wants to focus on the verticals — such as financial services, banking, insurance, healthcare and retail even in its BPO business.

To start with, greater focus will be on financial services and healthcare.

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