Cognizant Technology Solutions Corp is betting on mergers and acquisitions (M&As) to build its digital business, which the company believes is still in a nascent stage.
“I believe we are in the early stages of digital and that covid-19 has accelerated digital adoption. Digital creates an enormous opportunity for Cognizant and we intend to capture this. We have complemented organic investments with a targeted M&A strategy focused 100% on digital,” said Brian Humphries, chief executive officer, Cognizant.
The Nasdaq-listed company has already made five digital-based acquisitions this year, all of which are primarily in the cloud computing space. “Cloud computing has changed the way IT is delivered across infrastructure applications and platforms,” Humphries said.
In February, it acquired Code Zero, provider of cloud-based billing solutions, and the French operations of EI-Technologies, a Paris-based independent Salesforce specialist. In March, it acquired Lev, a digital marketing consultancy that helps businesses modernize their marketing campaigns with data-driven insights.
In May, it acquired Collaborative Solutions, which is expected to add new finance and HR advisory and implementation services to its cloud offerings and, in June, it entered into a deal to acquire New Signature, an independent Microsoft public cloud transformation specialist.
Except EI-Technologies, the four other acquired companies are based in the US, Cognizant’s largest market, which contributed 75.8% to the overall revenue in 2019.
“Cognizant’s digital bookings grew almost 50% in the first half of the year fuelled by digital engineering, artificial intelligence and analytics, interactive and software-as-a-service,” Humphries said.
Analysts believe acquisitions are an efficient way to achieve fast growth in digital business. “When organic growth is complemented with acquisitions, it helps with faster time-to-market and also provides ready access to skills and clientele,” said a Mumbai-based IT analyst.
Although, overall revenues have been hit by covid, IT services firms’ digital business has been benefiting as clients transitioned to cloud-based tech and collaborative tools to enable the work-from-home model.
Cognizant’s digital revenue grew 14% year-on-year for the June quarter and represented 42% of its total revenues. This compares with Infosys Ltd’s digital revenue growth of 25.5% y-o-y in constant currency and a contribution of 44.5% to its total revenues.
Of late, Tata Consultancy Services (TCS) Ltd and Wipro Ltd have stopped reporting digital revenues separately.
