Outsourcer Cognizant benefits from a surge in offshoring

The company posted strong revenue and profit growth in the first quarter

Outsourcer Cognizant Technology Solutions has reported strong revenue and profit growth for the quarter ended March 31, as customers moved work offshore to low-cost locations to maximize benefits from their IT budgets.

Cognizant, which has its headquarters in Teaneck, New Jersey, has most of its staff and services delivery from India, like its Indian competitors Tata Consultancy Services, Wipro, Infosys Technologies and HCL Technologies.

The company said on Tuesday that revenue grew to US$1.37 billion in the quarter, up by 43 percent from the same quarter last year. Net profits were $208.3 million, up by 37.5 percent year-on-year.

The company's growth reflects the uneven economic recovery around the world, said Francisco D'Souza, president and CEO of Cognizant, during an investor call. Growth was highest in North America, but more muted in Europe, Asia, and Latin America, he added.

The financial services market accounted for about 42 percent of the company's total revenue in the quarter. Revenue from this segment grew by 43 percent in the quarter from the same quarter last year. Revenue from the health-care segment, which accounted for 25.4 percent of the company's revenue in the quarter, was up 38 percent year-on-year.

Besides its main business in application development and management, Cognizant has signed contracts in new areas, including managed business services deals that combine traditional IT services with business process outsourcing, D'Souza said.

The company has forecast that revenue for the year will be at least US$5.9 billion up at least 29 percent compared to 2010. The company has increased its guidance as it is seeing healthy demand in North America and expects growth to return in other markets, D'Souza said.

Cognizant added 7,200 staff in the quarter, taking the total to 111,000 at the end of the quarter. The company said its top priority is to attract and retain quality staff, a challenge it shares with other outsourcers with Indian operations. Problems of staff attrition and increasing wages have returned to India after the increase in offshore outsourcing.

Cognizant plans wage increases of 12 percent to 14 percent this quarter, said Gordon Coburn, the company's chief financial and operating officer.

The company said it continues with its strategy of maintaining its non-GAAP (generally accepted accounting principles) operating margins within a targeted range of 19 percent to 20 percent, while making investments in new service and delivery capabilities and talent. The margins were slightly higher than the target in the quarter positioning the company well for the proposed wage increases in the current quarter, D'Souza said.

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

Join the newsletter!

Error: Please check your email address.
Rocket to Success - Your 10 Tips for Smarter ERP System Selection

Tags business issuesservicesoffshoringoutsourcingCognizant Technology Solutionsfinancial results

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

John Ribeiro

IDG News Service
Show Comments

Cool Tech

SanDisk MicroSDXC™ for Nintendo® Switch™

Learn more >

Breitling Superocean Heritage Chronographe 44

Learn more >

Toys for Boys

Family Friendly

Panasonic 4K UHD Blu-Ray Player and Full HD Recorder with Netflix - UBT1GL-K

Learn more >

Stocking Stuffer

Razer DeathAdder Expert Ergonomic Gaming Mouse

Learn more >

Christmas Gift Guide

Click for more ›

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Walid Mikhael

Brother QL-820NWB Professional Label Printer

It’s easy to set up, it’s compact and quiet when printing and to top if off, the print quality is excellent. This is hands down the best printer I’ve used for printing labels.

Ben Ramsden

Sharp PN-40TC1 Huddle Board

Brainstorming, innovation, problem solving, and negotiation have all become much more productive and valuable if people can easily collaborate in real time with minimal friction.

Sarah Ieroianni

Brother QL-820NWB Professional Label Printer

The print quality also does not disappoint, it’s clear, bold, doesn’t smudge and the text is perfectly sized.

Ratchada Dunn

Sharp PN-40TC1 Huddle Board

The Huddle Board’s built in program; Sharp Touch Viewing software allows us to easily manipulate and edit our documents (jpegs and PDFs) all at the same time on the dashboard.

George Khoury

Sharp PN-40TC1 Huddle Board

The biggest perks for me would be that it comes with easy to use and comprehensive programs that make the collaboration process a whole lot more intuitive and organic

David Coyle

Brother PocketJet PJ-773 A4 Portable Thermal Printer

I rate the printer as a 5 out of 5 stars as it has been able to fit seamlessly into my busy and mobile lifestyle.

Featured Content

Product Launch Showcase

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?