How Cognizant cut Brexit impact, grew revenue

Francisco D'Souza, CEO of Cognizant Technology
Deleon Narcisse, research analyst at TBR, said that Cognizant continues to capture new deal wins through its digitally based, outcomes-driven business model, leading to growth in Q2 2016.

Cognizant has attracted clients with solutions that meld technology with business outcomes, driving revenue growth despite macroeconomic headwinds.

Despite negative economic pressures, including a one-time $40 million impact from the Brexit referendum, Cognizant recorded revenue growth of 9.2 percent  to $3.37 billion in Q2 2016, as the company’s ability to foster business outcomes through consulting-laden technology engagements attracts customers seeking end-to-end IT transformation. Profitability declined during the quarter, with the company recording an operating margin of 17.5 percent, a decline of 20 basis points from the year-ago period.

We attribute the decline in profitability to increased investments in infrastructure and headcount, evidenced by Cognizant’s hiring of 11,300 employees in Q2 2016 which drove up services delivery and solutions deployment costs. During the remainder of 2016, we anticipate Cognizant to drive growth across its Consulting & Technology Services business segment as the company continues to bake in advisory and consulting services within transformational initiatives such as Digital Works, allowing the company to build offerings that help customers drive business strategy through disruptive technologies, including social, mobile, analytics and cloud.

Cognizant continues to realize ROI from its investments in TriZetto and BusinessCloud solutions for healthcare and life sciences clients

In Q2 2016 Cognizant continued to leverage TriZetto and BusinessCloud assets as the basis for its digital transformation portfolio for Healthcare and Life Sciences clients. The company is executing on the go-to-market strategy it laid out nearly two years ago when it acquired TriZetto, using its industry-focused C&SI expertise to enable healthcare clients to derive greater business value from TriZetto’s core administration platforms.

By baking in C&SI services with TriZetto solutions, such as the QNXT cor’ administration platform, Cognizant can offer healthcare payers a digitally based member and records management system that maintains compatibility with changes in Medicaid requirements, leading to deal wins with customers such as with California-based Kern Health Systems (KHS) in July. Cognizant provided KHS with implementation and consulting services around QNXT, demonstrating its ability to leverage TriZetto IP to capture higher-value C&SI deals. We expect this will help Cognizant foster systems integration contracts with new healthcare logos in 3Q16.

As transformational technology adoption becomes a priority for healthcare providers and life sciences companies, Cognizant continues to benefit from its cloud capabilities. Through industry-specific SaaS frameworks such as SmartTrials, which features predictive analytics and clinical document management capabilities, Cognizant improves its ability to appeal to Healthcare and Life Sciences customers, exemplified by the SmartTrials deal win with Biogen secured in June.

By integrating advisory expertise with partner technologies, Cognizant takes a consulting-driven approach to differentiate from India-based peers

As India-based services competitors such as HCL Technologies and Wipro emphasize technology development and implementation to address enterprise challenges, Cognizant’s large base of consultants allows the company to incorporate consulting and advisory services across many of its engagements. This capability positions Cognizant to drive services and collaborative efforts with partners up the value chain for customers, leading to expanded wallet share within client accounts.

Cognizant’s partnership with cloud-platform provider Box, signed in April, exemplifies this approach. Cognizant will integrate consulting services as part of its joint deployment with Box to provide digital training and vertical consulting services for enterprises, helping customers adopt and utilize Box to address industry challenges. By attaching its consulting services to IP-driven cloud partners such as Box Cognizant expands the range of cloud-based enterprise content management solutions it can offer clients without investing in R&D to create its own platform , helping the company reduce costs and expand its client base simultaneously.

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