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While outsourcing becomes a hot topic on the election circuit this year, New Jersey-based
Cognizant Technology Solutions(CTSH - Get Report) is making big business of it. The firm is one of the biggest providers of outsourced IT services, ranging from software development to computer network maintenance. This $20 billion firm's unique model should help it to continue to capture the dollars that U.S. companies can't afford to spend here at home.
Cognizant is like a number of other outsourcing firms based in India - the company has a workforce with advanced technology expertise who demand less money than their developed country counterparts. But CTSH's big coup was deciding to base themselves here in the U.S., where they can avoid the cultural conflicts that purely Indian firms sometimes run into. That's also helped to fuel a more lucrative U.S.-based consulting business that acts as a complement to the outsourced work that its teams do. The combination has helped to fuel net margins that consistently come in above 14%.
As the economy continues to convalesce, companies looking for places to cut costs are honing in on cost centers like IT departments. That should help keep Cognizant's impressive growth on pace for the next few years. A debt-free balance sheet with more than $2.4 billion in cash on hand doesn't hurt either.