Bloomberg on Cognizant

Bloomberg had a nice article on Cognizant Technology Solutions (CTSH):

On the penthouse floor of an office building in Midtown Manhattan, Cognizant has furnished a suite of rooms with hardwood floors and vintage furniture that wouldn’t look out of place in East Egg. Dotting the walls are framed photos of Elvis Costello, Charles Darwin, Martha Graham, and Pablo Picasso, and the office’s two terraces have views of the East River and the Chrysler Building. It’s a long way from the meeting rooms at Cognizant’s headquarters in Teaneck, N.J., and even farther from the cubicles that fill the company’s offices in India, where three-quarters of its 220,000 employees work.

The Manhattan setup is part of Cognizant’s effort to remake itself as a technology consultant instead of a cheap data-processing workhorse. In India, wages are rising and competition for labor is growing, so hiring tens of thousands of employees each year is no longer a guaranteed way to expand the business. In the U.S., congressional efforts to reduce the number of temporary visas outsourcing companies receive each year would further complicate Cognizant’s traditional business model. And worldwide, corporate clients that once relied on outsourcers to manage big SAP and Oracle databases have begun shifting the work to cloud services that require less hands-on management. New demand for the traditional outsourcing work “has ground to a halt,” says Bloomberg Intelligence analyst Anurag Rana. “IT budgets at best are flat to slightly up.”

And so Cognizant is working to create an image of quality over quantity. The company has 5,500 consultants, up from fewer than 1,000 in 2010, pitching strategic advice on IT, mergers, and customer service to clients such as the New England Health Exchange Network and Singaporean retailer NTUC FairPrice. The company is still adding workers to its outsourcing business but says it plans to slow hiring. “Five years ago it was more, ‘Tell us what to do, and we’ll do it well,’ ” says Cognizant President Gordon Coburn. “Today, we’re sitting at the table helping to generate ideas on how you can improve your processes.”

So far, Cognizant, which was spun off from credit reporter Dun & Bradstreet in the 1990s, has focused on advising clients concerned that digital upstarts could take away their customers. “Our clients are asking the question, ‘Will I be Ubered?’ ” says Malcolm Frank, executive vice president for strategy and marketing. Thanks to the investments Cognizant has made in consulting, he says, the company’s become a good judge of which businesses are at risk.

Cognizant, which posted $10.3 billion in revenue last year, is still small compared with consulting heavyweights Accenture ($30 billion) and IBM’s services division ($51 billion). But Cognizant’s shift toward consulting appears to be paying off: Profit is expected to approach $2 billion next year, up from $1.7 billion this year, $1.4 billion in 2014, and $884 million in 2011, according to data compiled by Bloomberg.

Posted by on December 7th, 2015 at 3:18 pm


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