Indian IT firms increase their Canadian presence

IT services firm Cognizant last week joined other firms with Indian operations that have opened offices in Canada to handle nearshore work for North American clients, despite concerns by some that the rising Canadian dollar may

hurt business.

Headquartered in Teaneck, N.J., Cognizant, which has development facilities in India, opened its eighteenth location with its new Toronto centre.

Cognizant is optimistic about the Canadian growth of “”a very healthy pipeline”” of clients particularly among financial services firms, said Gordon Coburn, executive vice-president and CFO. Its North American clients now total 200.

Cognizant was lured to Canada by domestic companies’ increasing openness to both offshore and nearshore services, said Coburn. He said some of his U.S. clients who have outsourced work to India prefer to earmark part of their contracts to Canada.

Similarly, he said he’s witnessed an emerging trend in which local Canadian clients who may traditionally have done work in-house or contracted it out to a Canadian services firm want to do a portion of the work in India.

As most of the “”premium offshore players”” from India have already entered Canada — companies such as Infosys, Wipro and Satyam — Coburn anticipated an increase in Canadian firms turning to outsourcing and a rise in IT spending by Canadian companies already contracting out work.

Yet, as the Canadian dollar has jumped sharply over the last several weeks, it’s become a “”double-edged sword”” for Cognizant’s business, admitted Coburn.

“”Using Canada as a nearshore opportunity for U.S. clients, obviously the increasing Canadian dollar reduces the benefit of going to Canada. But we’ve found (that for Canadian clients), that’s more than offset by the savings of going to India.””

Last month, however, San Ramon, California-based outsourcing advisory firm, neoIT, told InformationWeek the fast rise of the Canadian dollar had erased the cost advantages of U.S. companies outsourcing work to Canada, and American firms will likely shift work to cheaper labour in India.

“”Clients are coming here not because they’re just getting a price advantage,”” countered Mukesh Gupta, director of strategic relations at Tata Consultancy Services in Ottawa. His firm, whose Asian headquarters are in Mumbai, India, has been offering IT services in Canada for six years and has four offices across the country.

“”Competency will be the key. How do we build capacity into that pipeline, so that we are able to provide value-added services?”” Gupta questioned. “”We also bring a discipline of technology and add with this our domain expertise,”” or its primary industry experience in banking and financial services firm, to every new marketplace that it tackles.

The attraction of Canada, which ranks second as an outsourcing hub after India, includes proximity to, and a cultural similarity with, the States, a “”high-powered innovation agenda within the Canadian technology and business space”” underpinned by a long history of research and development, and a tremendous pool of skilled workers, he explained.

Next year, TCS will open a centre of excellence in Mississauga, Ont., that will showcase to clients the company’s industry expertise and tools and technologies, added Gupta. A Canadian training centre for employees is also in the “”drafting stage”” and will operate in much the same way as one that debuted within the last six months in Boston for American staff.

TCS is serving more than 20 customers throughout Canada, which accounts for five per cent of both the firm’s fiscal year 2003-04 global revenues of US$1.56 billion and its workforce. Customers include the Canadian Depository for Securities Ltd. and TeleGlobe.

Gupta said TCS’s mandate is to hire at least 15 per cent of its workforce from the local population of its global centres. Over the next year, he said, TCS will add 100 staff members, mainly to its Toronto office.

Cognizant, whose global revenues total US$581 million, aims for a balance of “”local hires as well as Indian nationals,”” Coburn said. He added the percentage of domestic recruiting is rising. Although Cognizant hasn’t worked out the portion of local hires to staff its Canadian office, next year it plans to hire 700 Americans in its U.S. offices. This year, 350 Americans were among its staff stateside.

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