Outsourcing company lures Swiss business to India

Leading Swiss companies are looking to India for their software. Cognizant

A small office on the edge of a Zurich industrial estate is an unlikely location for a company which aims to transform the way Swiss firms do business.

But it is from here that Cognizant is seeking to persuade some of the country’s biggest corporate names of the benefits of outsourcing work to India.

Krishna Nagashwaran has headed Cognizant’s Zurich office since it opened just over 18 months ago.

His task is to encourage chief executives in Switzerland to shift their information technology (IT) and software projects to the company’s facilities in India.

“[The outsourcing model] in Switzerland is some way behind more mature markets like the United States and Britain, but business is very much on the rise,” Nagashwaran told swissinfo.

Winning contracts

Cognizant, which employs 9,000 people in the Indian city of Chennai, has already won a multimillion-franc contract to develop a new internet bank for Credit Suisse.

The company refuses to divulge the names of other Swiss firms from which it has received contracts, saying only that it has succeeded in generating interest from some of the country’s leading financial services and insurance companies.

Cognizant’s European vice-president Kim Rajah said he was also setting his sights on the country’s pharmaceutical industry.

“A number of large pharmaceutical companies already do business with us, and clearly this is an area where Switzerland is very strong,” he said, adding that it would be a “safe assumption” that Basel-based drugs giants Novartis and Roche were either potential or current clients.

Looking abroad

According to a report published in March by Switzerland’s largest bank, UBS, nearly 50 per cent of 300 leading Swiss industrial firms have already transferred at least part of their manufacturing activities abroad.

But a separate study by St Gallen University found that many companies underestimated the disadvantages of outsourcing parts of their business abroad.

The authors of the report concluded that firms did not always weigh up the additional logistical costs as well as the difficulty of maintaining quality control when considering whether to award contracts to offshore companies.

The findings have not, however, put experts off from predicting that the business of outsourcing will grow at an annual rate of between 30 and 40 per cent over the next few years.

A recent survey by Swiss television’s consumer affairs programme, “Kassensturz”, found that such household names as Novartis, Swisscom, Swiss Federal Railways and the Swiss Post Office had all outsourced some of their IT activities to India.

Rajah said the small size of the labour market in Switzerland was one reason why more and more companies were shifting software development projects abroad.

“You have a number of world-class companies coupled with a scarcity of skills in certain key areas, so businesses are looking at how they might use offshore firms,” he said.

Jobs warning

The business of outsourcing has not been universally welcomed.

Trade unions warn that many Swiss-based software specialists will be left out of work, in the same way that thousands of jobs in countries like the US and Britain disappeared as companies transferred their call centres to India.

But some industry insiders believe that companies in Switzerland where French, German or Italian is spoken will shy away from outsourcing their activities.

“Outsourcing is not going to be attractive to some companies because… [in India] there is a lack of fluent speakers of Switzerland’s languages,” said Stefan Buess of Callnet, an association which represents the country’s call centre industry.

Though Cognizant itself has chosen not to enter the call centre business, Rajah warns that the language barrier in any outsourcing sector is unlikely to be a strong defence against low-cost competition from abroad.

“French- and German-speakers in some parts of the world are already providing call centre services in France and Germany.

“This might not have happened in Switzerland yet… but I would not suggest that complacency is a good course of action.”

swissinfo, Ramsey Zarifeh in Zurich

Key facts

Cognizant Technology Solutions was founded in 1994, has about 200 clients worldwide and expects to generate around $500 million (SFr628 million) in revenue in 2004.
The company generates around 50 per cent of its revenue from the financial services sector.
It has facilities in a number of Indian cities, including Bangalore, Chennai and Hyderabad.

In brief

According to a UBS survey, 46% of the more than 300 Swiss companies polled said they had already outsourced some of their activities abroad.

The report found that one in ten businesses was already generating more than 15% of its output outside Switzerland.