Higher investments, rural affluence results in exponential corporate growth
23 March 2006
Chennai: There is a clear correlation between investments and growth rates, whether for the economy or for a company. The higher the investments, the higher will be the growth, said president & CEO, Cognizant Technology Solutions India Private Limited (CTS), N Lakshmi Narayanan while delivering the keynote address at the Growth Summit 2006 organised by the Confederation of Indian Industry (CII) Southern Region.
He said the Indian economy grew at 6 per cent four years ago when the savings rate was around 23 per cent and the investment rate 25 per cent. However, when the savings rate went up to 30 per cent in the last two years, investments went up to 32 per cent and the GDP grew by 8 per cent.
Outlining the strategies followed by CTS, Narayanan said, in the 90s, software companies were enjoying a margin of 30 per cent. "We thought such margins are not sustainable for long and decided to peg it at 20 per cent. In addition we ploughed back the profits into the business as investments would lead to business growth."
According to him, CTS consciously did not spread itself too thin but stayed focused on the opportunities in the US during the initial years. "Slowly we moved to other markets like Europe." On the people front, CTS hired local talent for marketing while the back end work - software development- was done in India. "A differentiated business model delivers exponential growth," he added.
Another people related issue is handling them during the growth of the company. ''In 2003-04, we decided to put structures that struck a balance between systems and entrepreneurial talent. However, we empowered the middle level management to a great extent. The average age of employees is around 25 and it is going down. The current generation could be termed as the `gaming generation'. The unique aspect of this generation is that they are great team players and do not have any individual hero. They collaborate to complete a task." According to him, CTS' attrition rate is around 15 per cent, which is lower than the industry rate.
However, the most important thing is to view everything from the customer's perception and tune all systems -internal and external - accordingly. In addition, CTS measures the satisfaction levels of all the stakeholders like its employees (whether they would recommend their friends to work for CTS), investors (whether they would recommend investment in the company), customers and others to arrive at the net promoter's score.