Tag: Cognizant

Internet of Things Opens Up Intriguing New Growth Opportunities for Service Providers | Sherpas in Blue Shirts

Code Halos: How the Digital Lives of People, Things, and Organizations are Changing the Rules of Business, by Cognizant’s Malcolm Frank, Paul Roehrig and Ben Pring, discusses the impact of the already huge and ever-increasing amounts of data surrounding individuals and our environment. The authors point out today many pieces of equipment or devices have the potential to generate data about themselves and we can collect, analyze and act on that information and transform the world around us. The implications for service providers are exciting.

The authors of Code Halos explain that equipment, processes and people will have so much information coming off of them that it will create a halo that surrounds them, containing an ongoing flow of information.

An example is a GE jet engine into which GE has put sensors that provide GE and its customers with ongoing diagnostics of an engine’s performance, location and conditions on which it’s operating. This information is collected and synthesized, allowing GE to move from a one-to-many maintenance schedule to an individualized path that treats all of its jet engines the same with customized maintenance. This allows GE to predict when an engine is going to fail so the company can act ahead of failure. Creating customized maintenance also dramatically improves the performance and cost to maintain the engines.

The same potential exists for most, if not all, pieces of equipment. Let’s take the common light bulb. Today we can put a sensor on the light bulb and treat that bulb as an independent entity. We can monitor its working conditions, its useful life, replace it when necessary and adjust the electricity coming to it for greater or lesser amount of light at certain times and conditions. So we can take the most mundane household appliance and create a code halo around it and transform its use, its cost to serve and its usefulness.

As the authors rightfully point out in the book, if we apply this to business processes, it opens up an unending series of opportunities to apply digital technologies and transform the world around us.

One of the meta effects of this phenomenon is that service providers can create completely new lines of service to transform their impact on their customers. Think of GE, which utilizes Genpact to gather and analyze the data to transform its maintenance of its jet engines.

In a services world where we have maturing markets for traditional outsourced application development services, the potential of these code halos is almost limitless. And the need for partnership with companies such as Genpact and Cognizant is significant.

This could create a whole new set of services and market growth opportunities in a maturing market space and become a significant bright spot for the services industry.

The Limits of Verticalization | Sherpas in Blue Shirts

Many service providers are busy organizing along vertical industries and going to market with vertical solutions. As the services industry matures, it’s very clear that customers want to do business with companies that understand their industry. However, many providers find that verticalization doesn’t give them the growth acceleration they anticipated. So there are limits to this strategy; just knowing about a customer’s industry is not enough. What’s missing?

Customers want providers to know more about their industry but also to know more about their business and how they operate. Providers that succeed in putting these two aspects together enjoy faster growth.

Cognizant is an example of how to be effective in this strategy. They have organized by industry and built industry expertise, but they also invest a great deal in understanding their clients and leaving the teams or key players in place for clients (particularly the in-country teams).

Customers express a lot of frustration to us. They don’t like providers’ churn. They have to train new people every six months, and the churn is debilitating. They want providers whose people get to know them, build relationships with them and understand who they are and how they work. Those kinds of relationships allow both parties to cut through the noise and get things done.

Despite what the customers are looking for, we see many providers responding in one dimension — the industry knowledge.

My advice to providers: don’t overlook how important relationships are. It doesn’t matter how clever you are or how much vertical knowledge you have. The relationship activates the opportunity.

Photo credit: Curtis Perry

Cognizant Shows New Signs of a Market Maturing | Sherpas in Blue Shirts

In its latest quarterly earnings report, Cognizant recently guided to slower growth than they achieved last year. Although it is usual for Cognizant to be conservative in its guidance, it is still notable that it is sanguine about repeating last year’s strong performance in what most regard as an improving economy. Cognizant has been the bellwether in terms of fast market growth and the envy of every service provider in the marketplace in its ability to consistently growth faster than the market. So why is Cognizant guiding down on this year’s growth?

Hard Truths

To be clear, Cognizant still expects to grow substantially faster than the rest of the industry and raised its guidance relative to past year. But with an economy expected to improve and discretionary spending on the rise why the recent indication of slower growth ahead?

It’s an important question. The answer: Cognizant always guides lower than it performs, and it knows that growth is becoming more difficult and more expensive in the maturing marketplace. This is especially true in its Horizon 1 offerings (application development and maintenance), which is core to Cognizant’s business.

Having said that, Cognizant is still well positioned for growth because of its Horizon 2 focus (BPO, IT infrastructure and consulting) and Horizon 3 offers in in cloud, mobile and next-gen solutions. Even so, Cognizant’s latest guidance to slower growth indicates it is guiding the market to a realistic perspective.

The Outlook

I believe this acts as a warning for the overall marketplace and supports Everest Group’s long-stated guidance for the last few years that the outsourcing space, especially the talent-based space, has moved into a more mature phase.

In a maturing marketplace, clients are more discriminating. They pressure service providers on price points. And they ask their providers to know more about the client’s industry and business. Those demands will likely result in slower growth and fiercer competition.

Photo credit: Cognizant Technology Solutions

Cognizant Prepares for Inevitable Shift in Immigration Law | Sherpas in Blue Shirts

Cognizant recently made two key announcements. One was that they are hiring 10,000 people in the United States. The other is that they are relocating their operations center from New Jersey to College Station, Texas.

Taken together, it’s evident that Cognizant is doubling down on its U.S. presence. It’s moving to low-cost locations and is expanding its presence.

We also know that Cognizant is likely to be one of the firms most impacted by immigration and H-1B visa reform. We believe these actions indicate that Cognizant is taking a preemptive strike to prepare itself for a day when it won’t be able to use H-1B visas as aggressively.

Although the potential immigration reform may not be directly driving Cognizant’s increased U.S. presence, the announced plans certainly lay the groundwork for Cognizant to address H-1B visa issues should negative immigration law be forthcoming over the next few years.

Photo credit: Cognizant Technology Solutions

Cognizant Finds the Secret to Growing a Services Business Faster | Sherpas in Blue Shirts

Service providers often ask Everest Group for advice on how to grow their business faster. We usually find that their starting-point perspective has a pitfall. They fall for the seduction of new logos.

The problem with this growth strategy is that it’s very difficult to win a brand new customer without “privilege.”  Privilege is not a well-understood concept, but basically it requires that your company has an existing relationship with a customer. Where this is not the case your company will have to prove that it is credible, different from competitors and special. Specialness is the depth of understanding that you have in the uniqueness of the customer, an industry or a function. Obviously it’s easier to build this within an existing client base.

In most service industries, companies can grow three to four times faster in their existing client base than they can by adding new clients. Why? Because they already have a relationship, and the customers understand that the provider is “special.”

The master of this strategy is Cognizant. They are great at enlarging the “mine.” To do this, they sell more to their existing stakeholder groups, creating new mines in that client base. They are very adept at befriending and really understanding CIOs, CTOs and department managers’ needs where they already serve a client.

The first thing they do is look for a new mine in an existing customer. They first service HR, accounting or another stakeholder group and learn how best to service them. Based on the depth of understanding of industry or function they get from serving that stakeholder group, they are more credible in the open marketplace than their competitors. By growing fast and broadly in their existing client base, they build a richness of how to service clients and what each client’s real issues are. And they build real stories that make them much more credible. It’s that experience and credibility that make them special.

Cognizant also organizes its business around this methodology. For example, they put more people into their customer accounts than many other providers. Why? It’s their growth strategy:

  • They have more people at the customer location to help outsell their competition.
  • When they go to start a new mine, they can move in people who already know the customer rather than bringing in people from the outside.
  • When they go to get a new logo outside their customer base, they are able to bring in people with direct experience. And they don’t violate the existing customer’s need for consistency because they have a surplus of people in the account. So the customer doesn’t lose key people; they lose one of three key people, not the one key person.

Our advice is that your company’s growth strategy should follow the Cognizant model. Deemphasize new logos and instead focus on growing business with existing accounts. As you build depth, experience and credibility from these experiences the new logos will be much easier. Besides being a proven strategy, the good news is that your cost of sales will be lower if you adopt this strategy.

Indian IT Companies Look for Start-ups to Drive Competitiveness | Sherpas in Blue Shirts

“At times, Indian IT service providers fall behind expectations in new and exciting technology areas that extend beyond the traditional outsourcing paradigm.”A large MNC buyer of IT outsourcing services

With traditional models of IT outsourcing facing increasing competitive pressures, Indian service providers are looking at a multitude of solutions to drive success and retain competitive advantage. Chief among these are emerging technology solutions from start-up firms. Service providers have realized that to compete and stay relevant in the changing paradigm they have to focus on developing niche and specialized products, boost efficiency, and develop IP. Primary traction themes include data analytics, big data, cloud computing, and enterprise mobility. Niche start-ups with innovative technology solutions help providers augment their existing service offerings.

Increasing Traction

This echoes the strategy often adopted by multinational technology firms including Cisco, Microsoft, Yahoo!, Intel, and SAP, which back a plethora of emerging firms. Indian providers are now looking to invest and form alliances with ventures in niche domain areas. This is a dramatic shift in the status quo, as Indian IT providers have historically paid minimal attention to start-ups due to their own lack of a proper ecosystem to facilitate such transactions and a fairly low-risk appetite. Yet, of late, they have increasingly set up funds and accelerators dedicated to tech start-up initiatives.



Notable Involvement in Start-ups


Has set up a US$100 million fund to invest in start-ups, besides spotting and funding internal innovation

OnMobile, Yantra Corp

Tech Mahindra

Has established a US$50 million fund exclusively for investments in global technology start-ups

Launched an initiative – i5 Startnet – to scout for firms in cloud, mobility, networking, and vertical-specific technologies


Created a team led by the Chief Strategy Officer to look for start-ups and next generation solutions



Actively picking up stakes in cloud and big data firms

Opera Solutions, Axeda


Formed its Innovation Labs and Co-Innovation Network (COIN) to bring together academic institutions, start-ups, venture funds, strategic alliance partners, multilateral organizations, and clients

iKen Solutions, Perfecto Mobile, Computational Research Laboratories


Set up an emerging business accelerator

Incubated 20 ideas over the past 18 months


Changing Ecosystem

Slowly, but steadily, the ecosystem is developing to encourage such start-ups. For instance, in June 2013, NASSCOM announced a program to fund and incubate 25 start-ups to be established by young Indian entrepreneurs. Additionally, it held an event that brought together promising technology start-ups and IT service providers including Infosys, TCS, Cognizant, Wipro, and MindTree. The gathering was an effort to provide young start-ups a platform to showcase their capabilities, connect with leading service providers, and generate investor interest.

Quid Pro Quo

Increasing competitive pressures and changing market dynamics have made Indian service providers truly value innovation, viewing it not just as a buzzword but rather a core operating lever to drive growth. Partnering with start-ups is an effective method of achieving innovative solutions without the allocation of time and resources they can ill-afford. And the mutually beneficial relationship between the two segments can lead to sustainable ecosystem in the long haul.

What’s Differentiating about TCS and Cognizant? | Sherpas in Blue Shirts

It’s earnings season for the outsourcing industry. So far, we’re seeing mixed results: modest growth in most companies (including Accenture, IBM, Infosys and Wipro ) and strong growth in a few. Notably, Cognizant and TCS are pulling away from the pack. Or as my old running coach would say, they are showing the competition a clean pair of heels.

But it’s not just the results of the recent quarter; this is the pattern for several quarters, and we’ve come to expect strong performance from both Cognizant and TCS. This is evident in organic growth in their existing accounts as well as in new client logos. On the surface, they look the same as everyone else in the industry in that they have very similar offer sets. But there are four notably different aspects about these two providers.

1. Early industry orientation

Cognizant and TCS are out-executing other service providers, because they have a much more mature industry orientation than their competitors. They were early to build an industry focus, and this had a significant impact. Where others such as Infosys and Wipro are still refining their industry orientations today, Cognizant and TCS are harvesting the benefits of in-depth relationships and relevance from having had an industry focus for several years.

While other providers are still building out their industry capabilities, Cognizant and TCS have fully formed industry units that are already perceived as more relevant and having the capabilities to be more impactful. With this differentiation, they have a big head start that is a wide gap not easy for for others to fill quickly.

2. Industry selection

Cognizant and TCS made wise decisions to focus on the largest industry verticals: financial services and healthcare. Both of these verticals are large and have been high-growth areas, experiencing a lot of substantial disruption, which results in a wealth of opportunities for market shifts.

In addition, these two industries tend to reward providers that specialize in them and punish those that don’t. They like to think of themselves as industries apart and prefer to buy from people who are dedicated to them more so than to other industries.

3. They invest more in their clients 

Although Cognizant and TCS take different approaches to client investment, both of these high-growth firms have more people on site at their clients than their peer competitors, and these resources are often in addition to the contractually guaranteed numbers. In other words, they have more people building client relationships, uncovering new opportunities and building a deeper understanding of how their clients’ businesses work. In a virtuous cycle, greater investments in client-side resources lead to greater intimacy, which in turn leads to more work, which in turn leads to greater client understanding and greater intimacy.

4. They listen effectively

Like the rest of the industry, Cognizant and TCS are still adjusting to the new market reality where business stakeholders play an increasingly stronger role than CIOs in driving new spend on technology. But both of these providers are taking a more humble sales approach for this market; instead of pushing offerings, they are listening to and engaging with business stakeholders about their emerging needs. They are performing better than their competitors in this regard. As a result, they can identify opportunities their competitors miss and, where they are in competition, appear far more credible and relevant.

The net result of the above four aspects is a very positive differentiation in the minds of their customers, so these providers often are the first choice of a customer when thinking of new work.

Like the clean heels of a fleet-of-foot racer, Cognizant and TCS’ adaptation to the new empowered business stakeholders’ approach to buying, together with their longstanding in-depth investment in industry capabilities, enables them to run straighter and encounter fewer obstructions in their market races.

The Changing Pecking Order and Emerging Irrelevance of the WITCH Group Term | Sherpas in Blue Shirts

As most in the global services industry know, the acronym WITCH stemmed from the fact that the large, India-based, offshore-centric service providers – Wipro, Infosys, TCS, Cognizant, and HCL Technologies – had quite similar delivery models, sales strategies, risk appetite, and growth trajectories, which essentially placed them in a single bucket.

However, Everest Group’s recently released annual assessment, “The Changing Pecking Order of the Indian IT Service Provider Landscape, revealed that the relevance of the collective term WITCH is fast diminishing as market conditions are forcing differentiation among these players.

Indeed, stark divergence among this group, as evidenced by Cognizant’s capture of the number two spot away from Infosys (see chart below), is clearly emerging.

WITCH ranking

Per the latest financial results released by these offshore majors (ending March 31, 2013), TCS and Cognizant continued to outgrow their peers on a yearly basis – both in terms of size and growth – by adding revenue that was higher than, or almost at par with, the cumulative incremental revenue of Infosys, Wipro, and HCL. Their clear vision and strategic bets, as compared to the prevailing internal confusion of the other WITCH players, is paying off.

What is leading to this segregation within the WITCH group?

  • TCS is continuing to excel on the back of its broad-based growth and aggressive penetration in the European market
  • Cognizant’s approach of keeping margins lower via a higher investment in sales and marketing spend is fetching  benefits
  • HCL is capitalizing well on the ongoing churn in the industry, and is exploiting the anti-incumbency against the traditional service providers. While this makes HCL’s growth narrow and focused largely on infrastructure services, it’s paying off for a short-term strategy
  • Infosys and Wipro are struggling with their internal, company-specific issues, (i.e., strategic confusion, weakening brand recognition, legal issues, and senior level exits).

The ultimate questions are:

  • Will the irrelevance of the collective WITCH term become more visible in the future? Will the different strategic gambles of each service provider lead to huge variances in their success rates?
  • Will the return of Infosys’ retired co-founder and former chairman Narayana Murthy help it make a comeback to the levels of TCS and Cognizant?
  • To what extent will the ongoing challenges of a few of the WITCH group players create opportunities for mid-sized players – such as Genpact, one of the key players in the FAO space, and Tech Mahindra (the combined entity) which has credible enterprise applications and infrastructure management offerings – to capitalize on their niche capabilities?

We expect to witness further changes over the next few years in the pecking order in the overall industry, and the formation of new groups cannot be ruled out. This is likely to be driven by inorganic growth, key strategic investments, service provider consolidation, and aggressive sales strategies.

For drill-down data and insights into pecking order changes in the Indian IT Service Provider Landscape by size, verticals, and geographies, please see Everest Group’s newly released viewpoint, “The Changing Pecking Order of the Indian IT Service Provider Landscape.”

Which WITCH? Switches in the Indian IT Majors’ Rankings Line-up | Sherpas in Blue Shirts

Although five years ago it was difficult to differentiate among the WITCH (Wipro, Infosys, TCS, Cognizant, and HCL) providers, Everest Group last year identified a variety of clearly emerging and meaningful distinctions in its May 2011 examination of the top five Indian IT providers.

Our just released second annual analysis, Report Card for the Indian IT Majors: Pecking Order Analysis of the “WITCH” Group, found that the top ranked provider in each of the dimensions we evaluated – financial performance, industry vertical performance, and geographic performance – remained the same, but the rankings among the five have shifted. While the rankings are not necessarily the most effective gauge of current capability or future success, the position shifts tell important, company-specific stories.

So which of the WITCHes is where in our 2012 (April 2011 through March 2012) analysis? Let’s take a quick look.

WITCH Leaderboard FY 2012

Financial Performance

TCS retained the top spot in terms of total revenue, exceeding US$10 billion for the 12 months ending March 31, 2012. It also widened the enterprise revenue gap with #2 Infosys by ~ US$1 billion, as compared to last year (the total gap is now over US$3 billion). Cognizant’s 29% revenue growth is significantly higher than that of the other Indian IT majors, and the company, which overtook Wipro on enterprise revenue rankings last year, seems to be on track to overtake Infosys to become the second largest WITCH major. On a quarterly run rate basis, this may happen as soon as the coming quarter.

Infosys continues to be the most profitable. Note: We don’t believe that being the most profitable translates to being the most successful. Sustainable growth and success is rooted in a prudent balance of short-term profitability and longer-term investment priorities.

Industry Vertical Performance

In BFSI, TCS retained its #1 ranking with more than US$4 billion in revenues, Cognizant overtook Infosys’ #2 place at the table, and HCL is showing good momentum. But it’s also important to note here that the Indian IT majors stack up differently in the BFSI sub-verticals. For example, TCS and Cognizant are the leaders in the insurance applications outsourcing space, while Wipro marginally edged out Infosys on recent insurance industry wins, growth, client quality, and investments in domain solutions and intellectual property.

Cognizant again topped the leader board in the healthcare and life sciences space with a practice that is nearly three times the size of second-placed Wipro’s. And although Infosys’ healthcare practice is fourth in terms of revenue (US$385 million), it is also the fastest growing among the WITCH group, with 42% year on year growth. TCS’ rapid growth rate in healthcare indicates that there may be a rank change with Wipro in coming quarters.

In energy and utilities, Wipro not only retained its #1 position but also significantly increased the gap between itself and #2 Infosys, in large part due to its acquisition of SAIC’s oil and gas services business in early 2011. Interestingly, we see TCS inching closer to Infosys in this space.

Geographic Performance

While TCS won the top spot in both North America and Europe, it’s an interesting mixed bag among the other WITCH players in the two regions. Cognizant has overtaken Infosys in North America, rising to the ranks of #2, and now only lags TCS’ North American revenue by $325 million. In Europe, all providers except Cognizant achieved higher growth than in North America, with Wipro and Infosys coming in second and third, respectively.

To read a detailed analysis of the what’s and why’s of our WITCH group rankings, please download the complimentary report at: Report Card for the Indian IT Majors: Pecking Order Analysis of the “WITCH” Group.

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