Investor’s Business Daily: Cognizant has the Right Stuff to Lead the Pack of Tier-One Outsourcers

Francisco D'Souza, CEO, Cognizant

“Some tier-one outsourcers, chief among them Cognizant Technology Solutions, are doing far better than others,” writes Investor’s Business Daily (IBD) in a report titled, “Cognizant has the right stuff to lead the pack.” IBD says that Cognizant has been growing more than 30% annually the last few years, beating peers.

“Cognizant is well-positioned to grow much faster than its peers,” says analyst Moshe Katri of Cowen & Co. He cites strong sales growth in North America and Cognizant’s focus on areas less penetrated in terms of offshore adoption, such as health care, retail and manufacturing. Even on the more mature financial services side, Cognizant targets less-penetrated areas such as insurance and commercial banking rather than investment banking, he says.

Commenting on Cognizant moving up the value chain by offering higher-end consulting services, analyst Glenn Greene of Oppenheimer & Co. notes that Cognizant, which has been building out a consulting practice over the last five years, is increasingly competing with Accenture.

Besides its industry-leading growth rate, IBD notes, Cognizant differentiates itself from competitors in several ways. For one thing, Cognizant’s health care practice gives it a clear competitive advantage, says analyst Joseph Foresi of Janney Montgomery Scott. “Not every outsourcer has a large exposure there. They do. And it grew 35% year-over-year last year,” he says.

Another key differentiator: Cognizant purposely keeps margins lower than peers, at 19% to 20%. It reinvests any excess over that mark back into the business. The aim is to “drive faster revenue growth whereas a lot of its peers are more focused on having the highest margins in the industry,” says Glenn Greene of Oppenheimer & Co.

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