Francisco D’Souza, leader government of Cognizant. picture: AFP
Bengaluru: Vishal Sikka as opposed to Francisco D’Souza.
The yr 2016 will see the bosses of Infosys Ltd and Cognizant generation answers Corp. duel for supremacy.
At stake are billions of greenbacks in software program contracts and the bragging rights for the name ofthe world’s fastest developing major software program services provider.
much less than 21 months after taking up as the first non-founder chief executive of Infosys Ltd in August 2014, Sikka has marshalled his 35-12 months–vintage company to industry–leading growth and regain the bellwether tag from large rival Tata Consultancy offerings Ltd (TCS).
Sikka’s next goal: Cognizant, a corporation that’s based in the US however has most of its employees in India. under Francisco D’Souza, the son of an Indian diplomat, Cognizant has set a sizzling tempo. the sizeof the venture for Sikka is satisfactory illustrated by way of the reality that Infosys has managed todevelop quicker than Cognizant most effective on four occasions because 1996, while the usa firmstarted serving outdoor customers after being separated from Dun and Bradstreet.
with the aid of forecasting revenue boom of as a good deal as thirteen.8% within the yr to 31 March, itseems that Infosys is inside putting distance of Cognizant.
In assessment, Cognizant said it expects to grow sales among 10 and 14% in 2016 (Cognizant follows the calendar year). To be sure, Cognizant recorded 21% boom to quit 2015 with $12.forty two billion inrevenue.
Infosys stated dollar revenue growth of nine.1% (thirteen.3% in steady forex phrases) to $nine.fivebillion within the year ended 31 March.
The ultimate time Infosys grew faster than Cognizant changed into in 2002-03. And 2016-17 can be the 5thtime—and the primary after 13 years—when Infosys outpaces Cognizant.
based on the numbers available and the control observation from the two organizations, right here are3 reasons why Infosys may additionally beat Cognizant.
firstly, Cognizant does now not assume to report any increase within the January-March length while itbroadcasts its first sector earnings on Friday. this means that Cognizant, which at the stop of 31 Marchcould have $3.24 billion in sales, needs to do commercial enterprise of at the least $three.forty sevenbillion in each of the three quarters beforehand to give up this 12 months with $13.65 billion in revenue, a 10% upward push over the 12 months–ago period. this is a tall, if not not possible venture. matters are not rosy for Cognizant; the January-March length could be the 1/3 straight quarter whilst the agency’s sequential increase will lag at the back of Infosys.
Secondly, Cognizant does no longer expect robust call for for its offerings from banking and insurancefirms. Worryingly for traders, the management is unsure by way of when demand from its banking,monetary offerings and insurance (BFSI) clients will bounce back. In a double whammy, its healthcareclients too are conserving returned their tech spending as the enterprise is within the midst of a wave of consolidation. collectively, healthcare and BFSI account for about 70% of Cognizant’s revenue.
eventually, due to those reasons, some analysts like Keith Bachman of BMO Capital Markets- who in January had warned of a lower increase charge in 2016 for Cognizant, expect the enterprise to reduce itsboom forecast. “We agree with that CTSH (Cognizant) will once again guide estimates decrease for CY16, and we believe that the stock will move lower for this reason. similarly, we assume CTSH has lostnumerous offers to INFY (Infosys), that is affecting CY16 growth. consequently, we’re reducing our CY16revenue growth expectancies from 12% y/y to 10.5% y/y,” Bachman wrote in a note on 1 may.
it is vital to note here that Cognizant’s troubles come whilst Infosys aggressively chases new enterprisedeals and improves its potential to generate extra business from present customers with the aid of the usage of a take hold of of new projects, inclusive of the user-centric method of layout wondering andartificial intelligence and automation gear to higher its software writing and upkeep paintings services.
Mint puts the highlight on five matters as a way to be watched whilst Cognizant reviews its January-March consequences:
1. Will Cognizant reduce its sales forecast? BMO Capital Markets expects the Cognizant control toaccomplish that. If Cognizant does so, it will likely be in evaluation to final 12 months, while theemployer raised its guidance twice. Trimming the revenue increase forecast will mean that Teaneck, New Jersey-primarily based Cognizant expects in addition pain in the BFSI area and the agency does no longer anticipate its banking customers to outsourcing extra work within the final 9 months of the 12 months.
2. What is inaccurate with Cognizant’s banking and insurance clients: Cognizant first flagged this difficultyof banks conserving returned their tech spending, attributable to uncertainty about sustainedinternational increase, in January. when you consider that then, TCS has mentioned an impressivethree.2% sequential growth in steady foreign money phrases from BFSI customers in the January-Marchlength. Infosys did record a zero.3% sequential decline in BFSI section however that became due to a biginsurance employer outsourcing less work to the employer. On 15 April, after Infosys declared its profits, a senior executive advised this paper that this decline was a “one-off” component and the managementexpects wholesome demand from BFSI. because of this Cognizant has consumer–particular troubles. Itremains to be visible if Cognizant will concede this and description what steps it’s far taking to negate thisweakness from a section that brings 40% of enterprise’s total enterprise.
3. Are healthcare corporations once more outsourcing more work to Cognizant? In January, whenCognizant shared its October-December zone overall performance, control said that it has a “healthy deal pipeline” and anticipated greater paintings from its healthcare clients inside the coming months. because of this, Cognizant’s mind at the call for outlook from healthcare customers will be important.
four. Spending in digital space: earlier this yr, Rajeev Mehta, Cognizant’s CEO of IT offerings, told this newspaper that the business enterprise does now not see any softness in call for from clients trying tooutsource work in cloud computing or analytics. Cognizant does no longer release sales from those virtualregions separately. One manner to degree boom of Cognizant’s new services will be to look the boomwithin the consulting and generation commercial enterprise, which now account for 58% of its revenue,whilst the ultimate 42% enterprise comes from outsourcing paintings. at the end of 2013, Cognizant’srevenue split was approximately even.
five. control remark on buyouts: Cognizant’s final massive buyout of TriZetto Corp. for $2.7 billion turned into in 2014. It helped the agency add an incremental $640 million in revenue closing 12 months(Cognizant booked $80 million in sales from TriZetto in 2014). This new business actually helped Cognizant, which added $2.15 billion in new commercial enterprise in the January-December 2015 period—greaterthan India’s three largest software program companies, TCS, Infosys and Wipro Ltd, prepare. Now, Cognizant faces sluggish call for for its services from its current customers. control statement at theorganization’s urge for food for another massive buyout will assuage issues; spending cash to shop forboom can assist Cognizant cling directly to its enterprise–main boom in 2016.
