Cognizant - History

The man behind the founding of Cognizant was Wijeyaraj (Kumar) Mahadeva, the company's current chairman and CEO. He was born in Sri Lanka, where his father was the head of the country's civil service. Mahadeva traveled abroad for his education, earning a master's degree in electrical engineering from the University of Cambridge in 1973. He then worked as a researcher at the British Broadcasting Corporation for three years before coming to the United States to continue his education at Harvard Business School, where he caught the eye of the consulting firm McKinsey & Co. He joined McKinsey in 1978 and over the next seven years was instrumental in building up the firm's technology practice. Looking back on his days as a consultant, Mahadeva told Investor's Business Daily in 2002, "I learned a lot at McKinsey, with its focus on client relationships and setting high standards for recruitment and staff development." According to McKinsey colleague Rajat Dupta, "Kumar was an absolute star who could deftly think through problems and articulate solutions." In 1985 Mahadeva accepted a position with AT&T Corp., a client adjusting to the court-ordered breakup that resulted in the divestiture of local telephone service and the creation of the seven "Baby Bells." AT&T, eager for new opportunities, was looking to take on IBM in the computer field. But Mahadeva soon grew disenchanted with the corporate politics that prevailed at AT&T and after four years left to take a job with Dun & Bradstreet Corporation (D&B), tabbed to head its entry into Asia. According to Investor's Business Daily, "Demand was weak for the business research firm's service in the Asia Pacific region. Mahadeva, however, used the time there to watch and learn. What did he find? Low-cost software factories in India, where developers wrote computer code at a fraction of the cost in America. He recognized an opportunity. ... The timing was ideal. Concerns were mounting at D&B about how to solve the pending Y2K computer crisis. At the same time, costs were coming way down for satellite bandwidth, making shared computer networks more cost-effective." He was able in 1994 to convince D&B to invest $2 million in a joint venture with Satyam, an Indian software outsourcing operation, which held a 24 percent interest in the start-up. The business was called Dun & Bradstreet Satyam Software, Cognizant's forefather.

At first, the Indian subsidiary focused on large-scale full lifecycle software projects for such D&B businesses as AC Nielsen Co. and IMS Health. In November 1996 D&B spun off the unit along with Erisco, Inc.; IMS International Inc.; Nielsen Media Research; Pilot Software, Inc.; Sales Technologies, Inc.; and other assets to form a company named Cognizant Corporation. This move was part of a major restructuring of the parent corporation, which split into three major divisions: Dun & Bradstreet, AC Nielsen Consumer Products, and Cognizant Corporation. Three months later, Dun & Bradstreet Satyam changed its name to Cognizant Technology Solutions and began to function as a division of the newly formed Cognizant Corporation. It would now look to service companies outside of the D&B family, offering Y2K solutions as well as web page development. In July 1997 the subsidiary became wholly owned when the parent corporation bought Satyam's minority interest for $3.4 million. Because Cognizant lacked a reputation outside of D&B, it had some difficulty in attracting clients. Mahadeva fell back on his McKinsey experience and concentrated on customer satisfaction and the building of long-term relationships. Major signings for Y2K solutions included Northwest Airlines and Aetna Life Insurance Co. of Canada.

Mahadeva also proved to be adept at keeping Cognizant ahead of trends. Early in 1998, at a time when the Y2K business accounted for almost half of the company's revenues, he began to pull back Cognizant's exposure to the practice so that by the first quarter of 1999 Y2K work represented just 26 percent of revenues. According to a 1999 Forbes profile, "Sensing that another consulting obsession was about to peak, Mahadeva kept clear of the $16.6 billion enterprise resource planning (ERP) software business--installing monolithic software packages that manage companies' backoffice functions. While other consultants were raking in fat fees, Mahadeva steered Cognizant toward the more pedestrian chores of maintaining corporate software systems--fixing kinks in the code or extending the life of existing applications by adding new functions." Moreover, applications management was a business that would "be around for as long as companies use computers."

The parent company, Cognizant Corporation, underwent some structural changes in early 1998, dividing into two separate public companies as a way to help each unit maximize growth. Certain assets, including Cognizant Technology Solutions, were spun off to form IMS Health Incorporated. Cognizant Corporation and its remaining entities were renamed Nielsen Media Research. Several months later, in June 1998, IMS partially spun off Cognizant Technology Solutions and conducted an initial public offering (IPO) of stock. The timing proved to be less than ideal, as market conditions were poor for IPOs. As a result, Cognizant was only able to sell shares at $10, instead of the $11 to $13 the company and its underwriters had hoped it would fetch. The money was earmarked to pay off debt and finance the upgrading of offices in India, but in the end most of it was simply banked.

Mahadeva was named Cognizant's chairman and CEO in March 1998. He continued to display a creative and forward-looking mindset. According to a profile in the Economic Times, "Another business model innovation the company came up with as early as 1998, when peers aligned themselves along geographies or technologies, Cognizant aligned itself along verticals. The results of early verticalisation is seen in the robust growth in each of the verticals that Cognizant focuses on--financial services, banking, insurance, healthcare, retail, manufacturing and logistics, and media and publishing. ... The final distinction in strategy is in its listing destination. While its peers got listed in the geography they sourced from--that is India, Cognizant got listed in the geography they serviced, namely the US."