Even in the latest quarter, TCS and Cognizant's revenue growth was the same; TCS's profit growth was faster. While Cognizant's revenues have grown faster than HCL, it lags HCL in profit growth.
Ankur Rudra, IT analyst at brokerage firm Ambit Capital, said that Cognizant's relatively nimble organization structure and larger investments in sales and marketing must be credited for its fast growth. "It keeps its margins low and continues investing in sales - it did that even during the recession -- which has enabled it to build good client relationships and grow fast."
But margins can only be a partial explanation because companies like TCS and HCL that maintain higher margins have also been able to maintain industry leading growth.
An industry analyst who did not want to be named said the timing of Cognizant's growth over the last 2-3 years has added sheen to its strong financial performance. It came at a time when Infosys and Wipro were undergoing restructuring exercises that slowed their growth.
Cognizant has also benefited from its huge focus on the banking, financial services and insurance (BFSI) space, which accounts for over 40% of its revenues, unlike a Wipro that has only 26% of its revenues from the segment. Srishti Anand, IT sector analyst at Angel Broking, said that the IT sector growth in recent times has been led by spends from the BFSI vertical.
But some of these very factors could become its Achilles heel. The dependence on BFSI could become a liability if the sector slows down, and there are signs of that already in the global economy. Unlike its peers, Cognizant has no presence in product engineering services (PES) that now contributes significantly to the revenues of companies like Wipro and HCL.
No comments:
Post a Comment