Mumbai: US-based Cognizant Technology Solutions Corp. said on Thursday it has agreed to by the outsourcing arm of Swiss financial services firm UBS AG in Hyderabad for about $75 million (Rs344 crore) in cash. Lakshmi Narayanan, vice-chairman, Cognizant, talks about the contours of the deal. Edited excerpts:
Could you take us through how this acquisition helps you and give us a broad sense of what this acquisition is about?
Cognizant has a leadership position as far as the financial services industry is concerned. It has been offering consulting and IT (information technology) services to a broad range of customers in this segment, and this UBS ISC (UBS India Service Center Pvt. Ltd) center...has some specialized domain capability and service offering in the knowledge processing and business process outsourcing (BPO) area. That’s key to broadening the set of services that Cognizant can take to its customers. So to that extent, it is a very very strategic deal.
Some analysts raised concerns that this is predominantly more of a BPO and KPO (knowledge process outsourcing) play and may put pressure on your margins.
We don’t just sell BPO or IT services specifically to customers, but look at it as a comprehensive world of integrated services.
The captive centre has more than one-third of its capability in the high-end service areas. These include compliance reporting and regulatory requirements, which are in great demand these days.
Is there a right of first refusal that UBS and you could have signed? One that says that in any contract UBS is interested in, you get to bid for it or you have a right of first refusal?
No. UBS has been following this model where, although they have this captive capability, the captive facility also has to compete with some of the third-party vendors in order to get that business. So it is not something that is automatically transferred to the captive centre.