Healthcare: Inside the larger duel behind the Infosys-Cognizant court battle

It all began last August, when Cognizant subsidiary TriZetto filed a lawsuit against Infosys in the US District Court for the Northern District of Texas, a federal court, accusing the Bengaluru-headquartered company of theft of trade secrets related to its healthcare insurance software. Cognizant had acquired the company about a decade earlier for $2.7 billion in its largest buyout ever. At the time Infosys was also reportedly eyeing TriZetto.

Infosys denied the allegations. Instead, on 9 January, it filed a counterclaim against the Nasdaq-listed Cognizant in the same court. In a rare instance of a company turning against a former executive, it accused Cognizant CEO Ravi Kumar, who was the president of Infosys in his previous role, of misusing sensitive information and indulging in anti-competitive practices. Infosys alleged that Kumar had deliberately delayed the rollout of Helix, its product rivalling Cognizant’s healthcare solution, as he was in talks to join the Teaneck, New Jersey-headquartered company.

Infosys alleged that Kumar had deliberately delayed the rollout of Helix, its product rivalling Cognizant’s healthcare solution, as he was in talks to join the Teaneck, New Jersey-headquartered company.

Aside from Kumar, the Indian company alleged that Cognizant’s anti-competitive scheme also included the targeted recruitment of other key senior executives responsible for Helix, including Shveta Arora and Ravi Kiran Kuchibhotla, incentivizing them to delay the development of the product. Arora, Infosys’ former global consulting head, is now in a similar role at Cognizant.

In its submission, Infosys said: “Kumar had championed Infosys Helix from his senior position at Infosys. But Kumar’s optimism and excitement for the Infosys Helix product suddenly changed in Spring 2022. He began to pull back support of Infosys Helix, declining requests for needed resources, which delayed the completion of Infosys Helix by at least 18 months."

Kumar quit Infosys in October 2022 and took over as its rival’s CEO in January 2023.

While the slugfest may appear to be a case of two companies fighting over very specific issues, at its heart is something much bigger: the healthcare sector and all the business that comes with it.

“Healthcare has been the fastest growing vertical since the pandemic. It is one of the top priority verticals for most large service providers as they have seen slower growth in their BFSI segment," said Chunky Satija, vice president, Everest Group.

In particular, the US has become a key battleground for IT services companies jostling for space in the sector—the country spends about 17% of its GDP, or $5 trillion, on healthcare. And the contenders are all vying with each other to land large, transformational deals.

The healthcare sector thus holds a massive opportunity that promises to give the balance sheets of Indian IT companies, long dependent on the banking, financial services and insurance (BFSI) sector for business, a shot in the arm.

The Cognizant-Infosys court duel should be viewed in this backdrop. Its outcome has the potential to shape the contours of the overall IT services business in the years to come.

Why healthcare matters

With $29 billion in revenue, Tata Consulting Services (TCS) sits atop the pecking order of the $260 billion IT services sector. Infosys is a distant No. 2, at $18.5 billion. Include the $19.7 billion New Jersey-headquartered Cognizant, and Infosys slips to No. 3. Over the last decade it has managed to narrow the gap with Cognizant, but the two are still separated by a billion dollars or so.

Most companies report the healthcare business under the ‘healthcare and life sciences’ vertical. The former refers to hospital management, delivery of health services and insurance, while life sciences includes pharmaceuticals (drugs), as well as biotech and medical devices. For simplicity, in this article, healthcare refers to the entire business vertical.

According to research firm Everest Group, the market size for technology services in the healthcare sector was $145-150 billion in FY24, with 54% coming from healthcare and 46% from life sciences.

Cognizant is the runaway leader in the healthcare segment, which accounts for a third of its revenue. To put that in context, Cognizant’s healthcare business in 2023-24, was bigger than that of Infosys, TCS, and Wipro combined.

In its quarterly numbers shared on 6 February, healthcare emerged as Cognizant’s biggest business for the fifth straight quarter. In fact, much of its growth in 2024 came from the vertical.

In contrast, healthcare contributes just around 7% of Infosys’ overall business. For TCS, it accounts for a little over 10% of its $29 billion revenue.

For HCL Tech, another top-tier company, healthcare is the third largest business and accounts for around 16% ($2 billion) of its revenue. The company offers solutions to insurance firms, hospitals, pharma companies and medical device companies. “We are also developing GenAI-driven IT support to enhance service quality and customer experience," said Shrikanth Shetty, chief growth officer, Americas, Life Sciences and Healthcare industries, HCLTech.

Queries sent to Cognizant and Infosys remain unanswered.

All the Indian companies are now looking to increase the size of the healthcare slice in their overall pie.

Mid-tier and smaller IT firms are also looking to get in on the action. Persistent Systems doubled its revenue from around $500 million to over $1.1 billion on the back of health services. “We work with major scientific instruments and diagnostics companies to help scientists research diseases and develop new therapies faster," said Ganesh Nathella, senior vice president and general manager, Healthcare and Life Sciences Business, Persistent Systems. However, he declined to share client names.

Even Coforge, formerly NIIT Technologies, is eyeing future growth from this service line.

Early mover

But the Indian companies will struggle to catch up with Cognizant, which had made the most of a headstart it got in the business.

Cognizant had been set up in 1994 as the in-house technology unit of business intelligence firm Dun & Bradstreet. In 1996 it was spun off as a separate entity along with IMS International, a large provider of healthcare information services in the US.

While Indian IT services players focused more on BFSI, Cognizant built on its early start and later bought out TriZetto in 2015 to strengthen its healthcare portfolio. Since that buyout a decade ago, Cognizant has doubled its healthcare business from $3 billion to $6 billion.

In between, it bought out at least half a dozen healthcare companies, including Bolder Healthcare Solutions, a provider of revenue cycle management solutions to hospitals, in 2019, and TMG Health, a business process solutions provider, in 2017.

Interestingly, Wipro bought a health plan and payer management company, Infocrossing, for $600 million in 2007, but it could not scale up its healthcare practice significantly.

Infosys, meanwhile, has been building its Helix platform to make deeper inroads into the segment.

The world’s biggest market

Most of the healthcare business for IT services companies comes from the US market. “The US is by far the largest market for healthcare. Unlike Europe and even Japan, where healthcare is publicly funded, in the US, it is provided by the private sector," explained Satija. “Privatization creates more competition and leads to more IT spending to create competitive differentiation."

The Affordable Care Act (ACA), informally called Obamacare, which came into force in 2014, is also leading to higher spending on digital services. The law calls for healthcare delivery systems reforms that will reduce administrative costs and improve quality by using more technology. US President Donald Trump, who tried to kill the law in his previous term, has called for an overhaul of the ACA but is yet to spell out details.

“IT services companies have built critical scale to build upon the healthcare vertical. And it’s fairly attractive now for three reasons: the business is recession-proof—irrespective of what happens, people fall sick. Second, the US, which is the largest market, spends 17% of its GDP on healthcare. And third, it’s a highly inefficient sector," said Ramkumar Ramamoorthy, partner, Catalincs and former CMD of Cognizant India.

For every $1 spent on healthcare, up to 40 cents are spent managing care or administrative costs. Hospital chains, pharma companies, medical devices manufacturers and insurance firms are looking at technology to reduce this overhead.

Globally, IT services companies have become critical partners in the sector today as more technology is being used across the value chain. Moreover, digital wearables, implantables, telemedicine, and remote monitoring systems are technology enabled, increasing the role of software engineers in improving patient care.

According to Ramamoorthy, the top 25 health insurance providers (in the US and beyond), pharma companies, biotech and medical devices companies all work with third-party IT services companies in India. These include AstraZeneca, Eli Lilly, Roche, Johnson & Johnson, GSK, Aetna, Cigna, United Healthcare, Anthem, Amgen, Siemens, Medtronic and Thermo Fisher. Many of them have their own captive centres.

In September 2024, Pfizer set up a captive unit in Mumbai for healthcare-related analytics tasks. According to a recent Nasscom-Zinnov report, 38 pharmaceutical Global Capability Centres (GCCs) have been set up in India and employ around 80,000 people. These include centres set up by Bayer, AstraZeneca and United Healthcare.

Shortening time-to-market

Even drug development and new vaccine development depend on technology to improve outcomes and reduce time-to-market as was seen during the pandemic, when healthcare and technology collaborated closely.

The turning point came with the demand for faster covid vaccine rollouts, customized treatment options, and a scramble for immunity-boosting and other healthcare products.

For example, American biotech company Moderna’s covid vaccine, developed using the mRNA approach, was largely a technology-driven effort. Every phase, from R&D, drug discovery, clinical trials, manufacturing and even commercial operations used technology.

“From vaccine discovery to sales and marketing, it all happened in 12-24 months. At every stage of the value chain they deployed nextgen tech," said Ramamoorthy. “This was an important turning point as traditionally, it used to take 10 years to develop a drug and five years to commercialize it. Now, using technology, pharma companies are reimagining the entire process."

While the sector has witnessed a lot of structural shifts, there may be a limit on how much business Indian companies can attract immediately, particularly because of long-standing relationships between healthcare and technology companies.

For example, the IBM-Pfizer relationship is over three decades old. Pfizer has also been working with Oracle for many years. Similarly, AstraZeneca has had sourcing pacts with IBM and Oracle for decades.

“Largely, what Indian IT services firms are winning is basically healthcare and life sciences outsourcing deals from tier two companies," said Gaurav Vasu, CEO of UnearthInsight, a Bengaluru-based market intelligence firm. While the business is recession-proof and offers growth opportunities, it is also very sticky.

“Historically, Indian IT services firms have had limited success in healthcare as deal cycles and partnerships do not change very often. The other challenge is that Indian companies lack strong platforms or products in this space. But there is a window of opportunity with AI-led disruptions in healthcare, as well," Vasu added.

For Cognizant, healthcare has become bigger than BFSI. But for the others, while healthcare will become bigger, it is unlikely to eclipse BFSI.

“Technology spending in BFSI is more than twice that of healthcare. BFSI maturity is also much higher among Indian providers than in any other vertical," said Ramamoorthy. “In the long run, however, healthcare could potentially become the second-largest vertical or even get neck-to-neck with BFSI."