Cognizant Technology Solutions CorpReuters
US-based Cognizant Technology Solutions has reportedly earned more incremental revenue than the top three Indian IT companies — Tata Consultancy Services Ltd (TCS), Infosys Ltd and Wipro Ltd — together, in 2015.
Cognizant is expected to report $2.15 billion in incremental revenues for the calendar year 2015. The income is higher than the $1.96 billion earned by the three largest domestic IT firms put together.
While India’s largest IT firm Tata Consultancy Services (TCS) saw incremental revenue of $1.18 billion last year, Infosys and Wipro earned $570 million and $211.5 million, respectively.
The gap between Cognizant and the Indian IT firms in acquiring new business is expected to widen going forward as “more commoditised outsourcing deals” consist of digital technologies, according to some experts.
The increase in incremental income for Cognizant was partly led by the acquisition of TriZetto Corp. for $2.7 billion in 2014. Indian IT firms also spent huge amounts on acquisitions last year, but did not see much addition to revenue growth from such buyouts. Infosys and Wipro had spent nearly $800 million to acquire six companies in 2015.
“By my estimates, TriZetto commanded annual revenue of about $720 million, and Cognizant booked about $80 million in revenue from TriZetto in 2014 and an incremental $640 million in 2015. This means about $640 million of Cognizant’s revenue addition in calendar year 2015 is stemming from the TriZetto acquisition or inorganic revenue growth,” Mint quoted Rod Bourgeois, founder of DeepDive Equity Research — a US-based equity researcher, as saying.
Another reason for the gap is slowing growth of domestic IT majors. While Cognizant continued to post encouraging growth rates in the past few years, Indian companies have witnessed their growth slowing to six-year lows.
Cognizant’s 21% growth last year is far above that of 7.8% and 6.6% growth recorded by TCS and Infosys respectively. While Indian IT companies have “struggled” to improve their business from clients in the banking and finance vertical, Cognizant has been “able” to increase its business from the segment.
“Banks are the largest technology spenders and so BFSI (banking, financial services and insurance) is the largest industry for all IT companies. Banks are again emerging as the largest buyers of new technologies as they look to transform their operations. Indian tech firms have lagged until now in garnering a big share of this new tech spend, and so growth is slowing,” said a Mumbai-based analyst at a domestic brokerage firm on condition of anonymity.