Outsourcer Cognizant benefits from outsourcing rebound

Cognizant posted strong revenue and profit growth for the fourth quarter

Outsourcer Cognizant Technology Solutions has reported strong revenue and profit growth for the quarter and year ended Dec. 31, reflecting an overall buoyancy in the market for offshore services.

Cognizant, like Indian competitors Tata Consultancy Services, Wipro, and Infosys Technologies, has a majority of its services staff in India. The company is, however, headquartered in Teaneck, New Jersey.

The company has been outperforming its Indian competitors in recent quarters because of its strategy to invest more in sales and marketing, and creating more client-facing jobs onshore near its customers, said Sudin Apte, principal analyst and CEO of Offshore Insights, a research and advisory firm in Pune, India.

The delivery of services from India is not a significant differentiator any more, as key outsourcers are already delivering services from the country, Apte said. Cognizant differentiated itself from Indian competitors by investing more in understanding the customers’ needs, and responding to them effectively, he said.

Cognizant’s revenue for the fourth quarter of 2010 totalled $US1.31 billion, up 45.2 per cent from $902.7 million in the fourth quarter of 2009. Net profit for the quarter grew by 43 per cent to $206 million.

Revenue for the full year increased by 40 per cent to $4.6 billion, while profit rose 37 per cent to $733 million. The company has forecast that revenue for 2011 will be at least $5.79 billion, up at least 26 per cent compared to 2010.

India’s outsourcing industry has witnessed a rebound in growth, according to the National Association of Software and Service Companies (Nasscom), an Indian trade body.

The country’s exports from IT and BPO (business process outsourcing) services will grow by 18.7 per cent to $59 billion in the fiscal year ending March 31, Nasscom said.

In anticipation of demand, Indian outsourcers are hiring more staff. Cognizant said on Monday that it will invest more than $500 million through the end of 2014 to add 8 million square feet of its own facilities in India, which will have the capacity to house over 55,000 employees. The company will also use leased facility to meet its future staffing requirements.

The company added 8,300 new staff in the fourth quarter, taking the total number of staff at the end of the year to about 104,000. About 75 per cent of the staff are based in India.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

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