Cognizant Expects To Grow At 20% While NASSCOM Expects 11%

The National Association of Software and Services Companies (NASSCOM) recently released its analysis on the Indian IT-BPM sector’s outlook for FY13 wherein it has stated that FY13 has been a year marked by significantly varied trends and that the industry is expected to meet the lower end of its growth guidance of 11-14 per cent and at least achieve double-digit growth.

The quarterly results of FY13 have been indicative of lower growth as compared to previous years. A subdued global macro economic environment has been responsible for spending cuts and delayed decision making, lowering growth figures. Meanwhile, the margins have been under pressure due to cost savings and government-mandated changes. At the same time, changing trends caused by social, mobile, analytics and cloud technologies have been getting organisations to readjust their strategy and portfolio.

Big Indian-listed companies like TCS, Infosys, Wipro and HCL Tech, which have been the indicators of the sector’s performance, have been posting lower growth figures, giving out muted guidance or have been struggling to reorganise in accordance with the secular changes in the industry. Amidst this scenario, Cognizant has been outperforming these companies by leaps and bounds.

A consulting-driven strategy that focuses on investments across horizons combined with emphasis on driving productivity for clients through an aggressive move to variable pricing models or managed services has been working well for Cognizant. The company has been growing at a tremendous CAGR of 30.12 per cent over the last four years. Even with the sub-par NASSCOM guidance of the lower end of 11-14 per cent, Cognizant expects to grow at 19.91 per cent in CY12.

The average sequential revenue and net profit growth rate clocked by TCS, Infosys, Wipro and HCL Tech for Q2FY13 has been 3.63 per cent and 3.91 per cent respectively. Meanwhile, Cognizant has posted a revenue growth of 5.37 per cent and net profit growth of 9.91 per cent over the same period. In the recently announced Q3CY12 results of Cognizant, the company saw robust growth coming in from the verticals of financial services and manufacturing, retail and logistics which grew sequentially by 7 per cent and 10.58 per cent respectively. However, the healthcare vertical, which contributes up to a little more than 25 per cent of the total business, declined by 0.24 per cent, which was largely offset by growth from the other segments.

This robust financial performance was coupled with a healthy order pipeline and improved employee metrics. The number of active clients for Cognizant increased from 815 in Q2CY12 to 821 in Q3CY12. The number of strategic clients with the potential to generate at least USD 5 million to 50 million or more in annual revenues at maturity also increased from 202 to 208 over the same period.

Overall, growth for Cognizant has come in as a result of the expansion of service offerings, meeting rapidly growing demand for complex large-scale outsourcing solutions, increased customer penetration and a well-fit strategy that focuses on high-growth areas. For witnessing prolonged growth, companies would have to concentrate on emerging areas with equal focus on pricing which has to synchronize with the current market situation.