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Front view of Cognizant's Mangaluru facility.
Front view of Cognizant's Mangaluru facility.

Cognizant bets on digital biz with acquisitions in new markets

  • North America is Cognizant’s largest market, which contributes over 75% to the company’s total revenues
  • Cognizant focuses on four areas - data, digital engineering, cloud, and internet of things (IoT)

BENGALURU: Cognizant Technology Solutions Corp plans to strengthen its digital business with a string of strategic acquisitions that would allow the IT major to enter new geographies beyond North America.

Currently, North America is Cognizant’s largest market, which contributes more than 75% to the company’s total revenues.

“We continue to enhance our capabilities in digital via targeted mergers and acquisitions. We are also focusing on digital revenue growth from the geographic dimension as we plan to penetrate deeper into European and Asian markets," Pradeep Shilige, global head of delivery - Cognizant, said in an interview.

“Our goal is to double investments and capabilities in the chosen battleground areas that together represent end-to-end digital transformation for our clients," Shilige said.

Four digital battlegrounds where Cognizant focuses are data, digital engineering, cloud, and internet of things (IoT). The company’s revenue from digital continues to grow over 20% year-on-year and represented approximately 38% of the total revenue for the quarter ended December.

Since January 2019, Cognizant has acquired five companies so far, all of which have been in the digital space and mostly outside of North America. It acquired two Ireland-based firms during March-June--a financial software company Meritsoft to expand its software-as-a-service (SaaS) offerings and Zenith Technologies to strengthen its IoT capabilities and gain life sciences domain expertise. In October, it acquired London-based Contino to augment its digital engineering capabilities and expand its presence across the UK, US, and Australia through existing customers.

This year, it acquired US-based Code Zero and entered into exclusive negotiations to acquire the French operations of EI-Technologies, a Paris-based digital technology consulting firm. Both of these acquisitions are expected to complement Cognizant’s cloud portfolio.

“These acquisitions come on the back of six acquisitions we made in 2018, five of which ― Hedera Consulting, SaaSfocus, Advanced Technology Group, Softvision, and Mustache ― involved digital companies," Shilige said.

“Cognizant needs to focus more on acquisitions in the customer experience/design space, which will enable the company to get more front-end digital work with clients. Currently, they are grappling with their internal issues. While digital revenue is 38% of total revenue as of Q4, this is above most Indian IT firms, but well below the leader, Accenture," said Harit Shah, senior IT analyst, IndiaNivesh.

Cognizant is also investing in re-skilling its employees to prepare them for the digital era. “In 2019, we saw around 88% of our workforce participate in learning new skills. We are doubling our investment in Cognizant Academy in 2020, which will enable us to reskill and redeploy our associates towards our digital imperatives. We have a library of more than 50,000 self-paced courses to help our associates scale up in digital technologies," Shilige said.

“To accelerate our digital momentum, we believe we need to hire or reskill approximately 25,000 resources in 2020 alone, and we have started to operationalise this," Shilige added.

In the last few years, Cognizant has benefitted from the booming digital market, which has grown to $44 billion, almost double of $23 billion in mid-2016 . Cognizant’s annual revenue grew 266% over the last decade and 4.1% over 2018 to touch $16.8 billion in 2019.

“Our steady progress against key initiatives is increasingly evident in our commercial and financial performance. We enter 2020 with renewed vigour and optimism," Brian Humphries, chief executive officer, Cognizant said during the company’s full-year and Q4 earnings on 5 February.

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