Cognizant enjoys continued economic growth on outsourcing demand

Despite market instability, the N.J. company reports increased revenues and profits as it competes with Indian firms

Cognizant Technology Solutions reported on Tuesday growth in revenue and profits for the quarter ended June 30, as demand grows for offshore outsourcing.

The Teaneck, N.J., outsourcer has most of its operations in India, including over 75 percent of its staff, and competes with Indian outsourcers like Tata Consultancy Services, Infosys, and Wipro.

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Revenue for the quarter was $1.5 billion, up by 34.4 percent from the same quarter last year. Net profit at $209 million was 20.8 percent higher than last year.

The company added 7,100 staff in the quarter.

Although economic uncertainty has increased, it has not affected Cognizant's business, as customers are looking for trusted partners that can help them reduce costs and become more competitive, said Francisco D'Souza, president and CEO, in a conference call.

The company forecast that its fiscal 2011 revenue will be at least $6.06 billion, up by 32 percent compared to last year. Third-quarter 2011 revenue is anticipated to be around $1.57 billion.

The company is benefiting from a gain in share as customers look for innovation from their suppliers, said Gordon Coburn, Cognizant's chief financial and operating officer.

Outsourcing slumped in the second quarter by 18 percent to $16.4 billion on account of weak demand in the Americas and an overall drop in the number of large contracts awarded, according to sourcing data and advisory firm TPI.

India-centric service providers have, however, been increasing their share of the market, Siddharth Pai, partner and managing director of TPI India, said in July. A large number of the contracts that go to Indian providers are of a value lower than $25 million, which is a market that TPI does not include in its data, he added.

Application development and maintenance is still the dominant component of Cognizant's revenue, but the company is also looking at opportunities in consultancy and business process outsourcing targeted at specific industries.

In line with this strategy, Cognizant said last month it had entered into a definitive agreement to acquire the Indian services operations of CoreLogic, an information services and analytics company focused on the mortgage market.

The financial services industry accounted for 41 percent of total revenue. Revenue from this industry grew by 30 percent in the quarter, Coburn said. Some of the investments were in mobile and cloud computing. Revenue from the health care industry grew 37 percent to account for 26 percent of revenue in the quarter, he added.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

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