Outsourcing: Vivek Chopra of Computer Sciences Corp. (Part 2)

By guest author Tony Scott

CSC’s Entry into Commercial Outsourcing

Tony: CSC wasn’t really deep in the commercial space at that time, were they?

Vivek: That’s right. My first question to CSC when they approached me was: “Why CSC?” I was settled at IBM, and I had no desire to leave there. But the more I got to meet CSC and their senior management team over a period of three or four months, the more I recognized that this was a company that was in the federal government marketplace dealing with large infrastructure projects, and they had the willingness, desire, and resources to make a mark in the commercial marketplace.

So one thing led to another, and the first thing I recognized was that CSC was a company that recognized that they had a fundamental problem. They didn’t understand the commercial market as well as some of their competitors, such as IBM and Accenture, which I believe are more pure plays than Wipro, TCS, and Infosys. They were looking at India very strategically, but recognized that they were late to the Indian market. They wanted me to help them grow the India market and their India business. I joined them with that intent, and six months later we had created a strong presence in the infrastructure marketplace. We don’t have the same brand in applications, even though we do a ton of applications.

Tony: Wasn’t most of the application work that CSC had done custom-built, single-purpose applications for the government?

Vivek: It was custom-built for the government. We had the great skills and experience in applications, maintenance, development, and modernization, but were doing it for largely infrastructure accounts. CSC did try a couple of times to establish a presence for themselves in the application space but never got it to a point where they could say that they had same level of brand awareness and respect as they had in the federal government or in the infrastructure space. I was given the charter about six months back to start up the global application organization. This new organization looks at applications across CSC, irrespective of whether it’s Europe, the Americas, or India. India will be a strategic part because unlike infrastructure, applications can be driven using the 80/20 model: 80% off-shore, 20% on-site.

That’s the process that is underway. As of the first of April, we have a global application organization with three or three and a half billion dollars in revenue and 35,000 people across the globe.

Coming back to some other questions you had, if I look back at myself from an IBM perspective and from a Wipro perspective, I was with an organization that was in a state of infancy or immaturity in terms of services, and I helped to scale the organization. I believe CSC acquired an organization called Covansys about two years ago; it was looking at India largely as a source of labor arbitrage. Acquiring Covansys put a deep stake in the ground, and now the objective is to use that stake to leverage India and some of the other world sourcing locations.

Tony: What do you mean by “world sourcing”?

Vivek: We call them world sourcing locations, not low-cost centers. There are centers in Prague and Budapest. We have a couple in China, we have one in Vietnam, and we use them as a base for driving growth in the application and remote infrastructure market.

Tony: How has your strategy worked for CSC during this downturn? It seems the company jumped into the fray at a very tough time.

Vivek: The past year has been probably the worst the industry has seen. Spending was cut; customers were scaling back and consolidating vendors. But with the market picking up, we are hoping that CSC will be able to differentiate itself from the rest.  What I anticipate happening from an outsourcing perspective is that there has been a two-year window where spending has been constrained significantly; people have not spent money.

But now people are saying, “We have a bunch of stuff we need to do, why don’t I do it with them?” So they are looking first for the labor arbitrage play. “Give me more for less,” they say. They want price reductions and look at costs very seriously. They think, “I am not going to look at the value proposition because I need to get something done; I need it to be high quality but low price.”

So to an extent the labor arbitrage play is still strong despite the fact over the past few years people have started looking up the value chain and saying: “India is strategic, and what I do from the outsourcing perspective is strategic.” However, cost recently became the important thing because budgets got tight and people wouldn’t spend capital. They were saying: “Make the costs variable and just bill me what you have, but do it a price that is significantly more competitive than what I paid you in the past year.”

This segment is part 2 in the series : Outsourcing: Vivek Chopra of Computer Sciences Corp.
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