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.
