The Hindu Business Line : Cognizant tapping emerging markets

Bangalore, Aug. 7 Cognizant Technology Solutions, rattled by the downturn in the US economy, is expanding rapidly in emerging markets such as China and India as it looks for succour, but the move may take a while to provide a balm for the information-technology services provider.

“Investments being made in those geographies will start showing results two to three years from now,” Chief Executive, Mr Francisco D’Souza, said in an interview with Reuters.

While competitors such as Tata Consultancy Services and Infosys Technologies have made strides in galloping economies like China and India, Cognizant lags far behind with only 1.5 per cent of its revenue coming from Asia.

The company, which gets the bulk of its revenue from the US, drew 20 per cent of its second-quarter revenue from Europe. .

But as the malaise in the US spreads to the other side of the Atlantic, and concerns mount about the company’s ability to sustain its strong growth rate in Europe, Cognizant is testing other shores.

“We continue to focus on the markets in Asia and we have also started, in a preliminary way, to look at some of the markets in Latin America and West Asia,” CEO Mr D’Souza, who has been with the company since its inception in 1994, told Reuters.

Almost three quarters of the company’s 59,000 employees are based in India, providing low-cost software development services primarily to US companies.

Shares of the company, which cut its 2008 outlook last week, have lost close to 30 per cent of their value in the last 52 months.

Beyond financials

IT infrastructure services, business process outsourcing and Knowledge Process Outsourcing are areas with potential for tremendous growth in a relatively short period of time, Mr D’Souza said.

In 2006, Cognizant bought infrastructure and professional services firm AimNet Solutions to set up its IT Infrastructure Management business. For the second quarter, IT Infrastructure accounted for 5 per cent of revenue. “I expect this segment to continue to grow ahead of our company’s average growth for some time to come,” Mr D’Souza, , said.

Concerns to continue

The financial services segment, which serves customers like Citigroup, CompuCredit and Netherlands’ Rabobank, posted 7-per cent sequential growth in the second quarter and accounted for half of overall revenue.

But Mr D’Souza expects concerns about the segment to prevail for the rest of the year because of the increasing turmoil in the industry. Cognizant also expects slower growth in its health insurance business for the rest of the year as one of its top-five clients has decided to scale back spending significantly.

The healthcare segment, which contributed 20 per cent to second-quarter revenue, provides services for clients in the health-insurance and life sciences sector including Aetna Inc and Molina Healthcare.

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