The Hindu Business Line : Cognizant ahead of the pack in client wins

COMPARISONS among companies in the IT software industry on the client front throw up a mixed bag. Of those that Business Line looked at, Cognizant Technology Solutions has added clients faster in the last 12 months than it had lost. (See attached table.)

Satyam Computers and HCL Technologies actually lost lesser number clients in the last 12 months as compared to the previous twelve. HCL Tech also had a sizeable jump in number of clients added the last 12 months compared to the previous 12 months (HCL's year ends in June).

Significant client losses (i.e. clients who turn away after a quarter or two of working with a vendor) have become common in the last three years.

At the time of announcing its December quarter results, Wipro Technologies' Chairman, Mr Vivek Paul had said, "Clients try a vendor for a pilot project that may last a quarter and then go away. They also tend to come back later."

Interestingly, industry bigwigs that turned into one-billion-dollar companies each this March, Infosys and Wipro, have seen client losses grow faster than client additions, even though in absolute numbers, they added more clients than they lost. The likes of Mastek and iGate Global saw a slump in number of client additions as well as client losses in the last 12 months compared to the previous 12.

Cognizant has shown the fastest growth in active clients at the end of 12 months, followed by HCL Technologies. Cognizant had made a few acquisitions in the last two quarters, including customer relationship management (CRM) software firm ACES and SAP implementation partner Ygyan Consulting.

iGate Global has made several acquisitions in the last year including IT&T, Aqua Regia and eJiva.

Interestingly, both of these companies have let go off clients that came with the acquisition of another IT company. Asked if this did not defeat one of the purposes of an acquisition or a merger, Mr Phaneesh Murthy, CEO, iGate Global said, "We are letting go of clients whose work dilutes our brand and where there may be a mismatch between our aspirations and certain clients' goals. Acquisitions are for a variety of reasons - customers, expertise and time-to-market."

Cognizant's acquisition of Ygyan brought with it a preferred channel partner status with SAP in India. Says an industry source, "Acquisition targets may only have a handful of good clients and employees with skills that make the acquisition worthwhile. Since they are much smaller companies, they could also bring in the baggage of bodies being placed with clients. These clients expect little value-add and hence give little profit. Acquiring companies tend to let go of such clients."

In the case of preferred partners, implementation projects come to them on a priority basis. They also tend to get a sneak preview into products that are not yet in the market.

Only Mastek and iGate have seen a drop in number of active clients as at March 2004 compared to March 2003. Isn't this unhealthy, given that increasing revenues must typically be spread over an increasing number of clients to cut risk of dependence on fewer clients for revenues?

Mr Murthy disagrees that "increase in revenue is directly proportional to the number of new clients acquired. A lot depends on the quality of those clients - size of deal, longevity, and onsite-offshore proportion. We are looking to increase our average deal size and duration as this will give us greater revenue visibility."