Expects revenues from the region to grow faster in 3 years

Despite the Eurozone crisis, Cognizant Technology Solutions feels revenue from the region will grow faster than the company average in the next two to three years.

In 2011, Cognizant's revenue from Europe crossed $1 billion, a 28 per cent growth over the previous year.

The US-based software company with a strong offshore presence in India is strengthening its operations in Europe.

Having established a strong presence in the UK, the Netherlands and Switzerland, Cognizant is turning its focus to large markets such as Germany and France – these two countries have not yet caught up with the outsourcing wave.

“To be honest, we are behind our competitors in France and Germany. However, we are aggressively marketing in the two countries. The Galilieo acquisition boosted our presence in France. We will continue to look for such investments. We will invest in the two countries to catch up with our competitors,” said its Chief Financial Officer, Ms Karen McLoughlin.

“In Europe, we are continuing to seeing some volatility. However, in the long-term [two to three years], it is very attractive market for us. We expect revenue from Europe to grow faster than the company average,” she said.

14 new clients

In the December quarter alone, Cognizant generated 14 new clients in Europe. It has over today 4,300 professionals in the continent servicing clients such as Telefonica, AstraZeneca, Volvo Car Corporation, Norway Post and Financial Services Authority.

Ms McLoughlin said this year there will not be a big change in spending pattern among European customers. However, customers are willing to change their business model. This will be a big driver for growth. Historically, a large portion of revenue came from discretionary spending – this refers to technology programmes and applications that are desirable but not critical for businesses to carry on. However, customers are now spending on new services such as application development and maintenance, outsourcing, business process outsourcing and infrastructure management services, she said.

European customers take longer time to take decisions. For instance, if they want to outsource their application management services that may have an impact on their workforce, they need to have first conversation with local labour unions. They have strict rules that they need to adhere to.

There is a shortage of talent and the labour force is aging fast. Customers planning a big growth are planning to change their business model. For example, it is easy for customers it provides work on application development, which is incremental work and does not have any impact on their workforce. However, in the long-term because of the talent shortage, customers will not only outsource application development but also maintenance. Today, this is a small percentage of work that is being outsourced in Europe than North America or the UK. “We think that it will begin to evolve in Europe,” she said.

In fact, three of the last four acquisitions that Cognizant did gave a strong footprint for the company in Europe. Strategy is to look at acquisitions to strengthen European presence though much of the growth will be organic, she said.


(This article was published on March 28, 2012)
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