s India’s top two technology services exporters — Tata Consultancy Services Ltd. and Infosys Ltd. — compete to be the face of India’s outsourcing industry, a seemingly lower profile competitor, Cognizant Technology Solutions Corp., is sneaking up on the two.
- Daniel Acker/Bloomberg News
- According to Cognizant CEO Francisco D’Souza, demand for outsourcing technology services remains strong, despite ongoing macroeconomic uncertainties.
Cognizant, which is based in the U.S. but has most of its operations in India and a largely Indian workforce, has pinched the slot for the country’s third largest software exporter by sales, replacing incumbent Wipro Ltd. in the pecking order. That means it’s now likely to position itself against Infosys.
Overtaking Wipro was an expected development given the guidance issued by the two firms for the April-to-June quarter, but the stellar numbers Cognizant reported late Tuesday — revenue of $1.48 billion compared with Wipro’s nearly $1.41 billion — confirmed it.
Its April-to-June revenue was only about $186 million short of Infosys’s $1.67 billion revenue for the same period. Revenues for TCS, India’s biggest outsourcing company by sales, were at $2.41 billion for that period.
We’ve previously called Cognizant the dark horse of Indian outsourcing. Although it’s listed in the U.S., on the Nasdaq, Cognizant competes directly with its India-listed peers for a share of the global outsourcing market.
It’s certainly picking up the pace.
Cognizant posted 8.3% revenue growth from the preceding quarter. That compared very favorably with sequential growth of 7.4% for TCS, 4.3% for Infosys and just 0.5% for Wipro’s IT business.
The firm has a cheery outlook too, unlike India’s No. 2 software exporter Infosys. In a conference call with investors and analysts on Tuesday, Cognizant CEO Francisco D’Souza said demand for outsourcing technology services remains strong, despite ongoing macroeconomic uncertainties.
Cognizant has forecast at least 32% growth in revenue in 2011 to $6.06 billion. The company follows a January to December financial year; Indian firms follow an April 1 to March 31 financial year. Analysts estimates Infosys revenue at $6.34 billion from January to December 2011.
Cognizant and TCS have consistently maintained that the challenging macroeconomic environment throws new business opportunities to Indian outsourcing companies. Infosys meanwhile has voiced greater concern about macroeconomic uncertainties, as has Wipro. Both firms, which have posted results for April-to-June that have disappointed analysts, are also suffering the pains of management restructuring earlier this year.
“In our view, the current demand environment is strong, but the top four India-listed IT companies differ materially with respect to their ability to capture growth opportunities,” Credit Suisse said in a note.
Executives at Infosys weren’t immediately available for a comment. The new CEO of Wipro’s IT business, T.K. Kurien, has previously dismissed the significance of the pecking order in comments to Dow Jones Newswires. Wipro has also previously attributed the slow pace of growth at its outsourcing arm to its limited exposure to certain key markets–especially the financial services segment.
Cognizant received about $613 million, or 41% of its revenue for the quarter from the banking and financial services segment–the fastest growing industry segment in IT services. That was better than Infosys’ $592 million in revenues Infosys got from the financial business in the June quarter, with Wipro trailing further behind at $376 million. TCS is well ahead of the other three, with over $1 billion in revenue from banking and financial services.
