Cognizant to build IT shops in India

The 9,000-strong IT services company announced the move on Monday and said it also expects to add more than 4,000 employees next year, with about two-thirds of the new hires to be located in India.

The Teaneck, N.J.-based company plans to begin building the facilities in the Indian cities of Pune (formerly spelled Poona), Chennai (formerly known as Madras) and Bangalore next year. The buildings are expected to have a total floor space of more than 600,000 square feet.

"Clients are ramping up their large-scale offshore programs, including application development and maintenance projects," Cognizant CEO Lakshmi Narayanan said in a statement. "Our anticipated high growth rate in revenue and headcount provides an opportunity for us to build and own additional facilities."

Cognizant expects to spend about $40 million over the next two years on its new construction program. Once fully occupied, the additional facilities are expected to generate annual operating expense savings of roughly $10 million, compared with the expanded use of leased facilities, Cognizant said.

Many technology firms are sending work to low-wage locations overseas. Recently, America Online revealed that it is laying the groundwork to hire software engineers in Bangalore. Other companies investing in offshore efforts include Yahoo, Google and Oracle.

IT services firms such as Cognizant compete against India-based outfits such as Infosys Technologies and Wipro Technologies. United States-based IT services companies, in turn, are ramping up offshore operations themselves.

For example, Electronic Data Systems plans to expand the number of employees in its lower-cost "Best Shore" facilities from 8,500 to 14,300 by the end of the 2004. Best Shore sites provide application services and business process outsourcing in countries such as Brazil, Ireland and India. At the same time, EDS plans to trim 5,200 of its roughly 135,000 employees by the end of 2004, with most of the cuts coming in the United States and Europe.

Cognizant has about two-thirds of its employees in India, with the other third based in the United States and Europe, said Larry Gordon, the company's vice president for corporate marketing. Gordon said the company expects this ratio to remain roughly the same in its hiring next year.

Market research firm IDC recently estimated that by 2007, 23 percent of all IT services jobs will be offshore, up from 5 percent this year. The figures refer to IT work done for United States-based companies.

The export of tech work has come under fire, however. Amid substantial job cuts in the U.S. tech sector, IT worker advocates have protested the practice. And observers raise questions about the effectiveness of overseas arrangements, given challenges such as cultural differences. After receiving customer complaints, Dell recently stopped sending U.S. technical support calls for two of its corporate computer lines to a Bangalore call center.