Cognizant turns first IT firm to call out business risk from GCCs

Cognizant Technology Solutions Corp.'s annual report describes global captive centers (GCC) operated by its clients as a potential risk, making the Nasdaq-listed company the first large IT firm to cite the GCC shadow over outsourcing.

- Jas Bardia

Though a Cognizant spokesperson said the New Jersey-based firm's position has since "evolved," the development raises the question of whether more IT services firms would acknowledge the rising competition from these in-house technology centers.

Technology analysts have previously pointed to the risk from GCCs, though IT companies themselves have dismissed it so far.

"Additionally, we face competition from clients' in-house technology resources, such as GCCs, which may provide a lower cost alternative to our services," said Cognizant's annual report released on Friday.

"We compete for employees not only with other companies in our industry, but also with companies in other industries, such as software services, engineering services and financial services companies, as well as our clients' GCCs," the report said.

Cognizant has three-fourths of its employees in India.

Cognizant and homegrown IT services firms provide services, including application development and maintenance, to some of the world's largest companies, including Apple and Walmart.

However, as technology becomes central to companies, most Fortune 500 companies have moved to set up their captive centers in the country.

Put simply, IT services no longer compete among themselves, but also with their clients for business.

When contacted, a Cognizant spokesperson said, "We evolved in our GCC position from when this specific proxy language was initially drafted... GCCs have been identified as a growth priority."