Cognizant: The Future of Work or the Present Forever?


HfS Research attended Cognizant’s annual analyst meeting earlier this week. And while we attend many of these sessions over the course of the year, Cognizant is at present the darling of the IT offshore services and outsourcing industry for its consistent and impressive growth and positive levels of customer satisfaction, so we thought we’d share some impressions with our readers.

Cognizant's "Future" Quandary: more of the same?

Cognizant is driving its momentum through a framework it calls The Future of Work, a compelling, if undifferentiated, model that integrates thinking about emerging technologies, social media, globalization and the millennial worker. We believe it is the last category that has a shot at actually becoming a winner for the company—everyone else is also talking about the other three, so that’s just really become a race to execute.

However, given that talent makes or breaks this business, and given that the vast majority of Cognizant’s 100,000+ employees are – and will – continue to be millennials, this is a really smart area of focus. If (and this is a big if) it can lend its young-worker expertise to clients, it becomes even more compelling. We don’t see any outsourcing provider with this level of focus and commitment to this topic. Many will talk about it, but with Cognizant the issue feels real, and there are funds and resources committed to it. It will be interesting to see if the same messaging and programs work with Indian millennials as they do Western ones—even if this is the most global generation yet. Work cultures and attitudes can vary greatly across regions and HfS Research sees these differences as real impediments to implement this strategy globally.

Don’t expect any big changes from Frank and his team. It is fairly clear that the answer to the question “What next?” is “More of the Same.” This may not be a bad thing, especially for Cognizant stockholders and employees—they’ve had a good run and would like to see it extended. But we are analysts, not investors, and we crave the bold, the disruptive, the innovative. We’d like to see Cognizant take its enviable industry position and really shake things up, stand the whole offshore business on its head. With $2 billion sitting quietly in the bank, it could make some interesting acquisitions, or even commit to buying up a bigger slice of the BPO market. However, all of the large offshore players have a lot of cash sitting around, and all are reluctant to use it – especially where deals involve stock-dilution.  Moreover, with several of their potential acquisition targets merging together (for example Genpact/Headstrong and EXL/OPI), the number of affordable attractive acquisition candidates is diminishing.

What Cognizant does have, is the genuine trust of many of its customers and is in a great position to engage clients in its innovations, beta-projects and break-throughs.

Some additional thoughts after some very productive time with Cognizant’s senior executives:

A lot of focus was on industry-specific solutions and platforms that at times made it sound like Cognizant could become a software company. Every provider struggles with that change and cognizant is no different. While everyone was disciplined in saying that services would be the focus, a few let it slip out that they would not object to a licensing model. And Frank himself made a point of continuing to seek “non-linear” revenues. One way to do that is to sell software.

Brand matters at Cognizant. There is a conscious investment and a high level of professional branding muscle being  dedicated to building the brand. HfS sees this a strong long-term investment, but expects the brand that emerges to remain conservative—we’d love to see someone, anyone, in this industry be bold with their brand.

Cognizant is comfortable with its lower margins and correlates them directly to growth. The transparency is refreshing, but one wonders whether investors will continue to reward this strategy when growth inevitably slows down, or when a competitor decides to imitate the strategy.

The company says it paid the highest bonuses in the industry last year. Its clients should be pleased that Cognizant is making an effort to keep employees happy.

The company is sponsoring moves into adjacent white spaces in each of the primary verticals it serves. We’re not sure this will pay off in big ways, since the market is limited and there are contractual limitations in most deals that prevent them from taking knowledge gained at one client and re-selling it to another. These moves don’t feel big enough to make an impact company-wide, but we’ll reserve judgment for a year or so to see how many of these actually take hold and become profitable offerings.

Cognizant needs a much more aggressive BPO strategy to further its business process ambitions. Cognizant seeks to position itself as a Business Process solutions company, a big move from an ADM shop (albeit a very good one), where is can blend together analytics insights and business process process depth, underpinned by IT platforms. It’s obvious they have a lot of work to do. They must grow their BPO business, currently a small fraction of the total, and they must gain many more clients where they are delivering bundled services that include the application, their IP, and the business process, at a minimum. We have deliberated for some time that an acquisition would accelerate this process for the firm, potentially allowing them to leapfrog their competitors. However, with such a strong IT culture and a management team currently lacking a BPO DNA, you do wonder if this is the true direction for a company that has built its foundations on offshore IT work with large US enterprises.  IT services competitors such as Accenture, Capgemini and IBM all have BPO at the forefront of their global offerings with multi billion-dollar business units.  That is some difference.

HfS Takeaways

While the concepts in the Future of Work are not new, they are difficult to execute and Cognizant seems to be putting its money where its mouth is, even though it is doing so in smaller bites than we would like to see. If indeed Cognizant becomes the first to truly execute against all four major ideas in the framework, especially if it can successfully address the millennial worker internally and externally, it will earn many more years of a leadership position. The client examples the company provided of the framework in action seemed like a bit of a reach, but in fairness, at least they are taking their ideas to clients and trying to make something happen beyond the regular old delivery. Cognizant admits it will take time for all four concepts to stick in the same environment, another refreshing bit of transparency. If, instead, the framework fizzles into the pool of discarded marketing ploys and they can’t “sell” it internally and externally, you can expect to see very little movement in how and what they do. For the time being, that could be a good thing, but one has to wonder whether the company is too enamored with its success now, and that is making it too conservative and too vested in preserving the status quo.

Posted in : Business Process Outsourcing (BPO), Cloud Computing, Financial Services Sourcing Strategies, Healthcare and Outsourcing, HR Strategy, IT Outsourcing / IT Services, kpo-analytics, SaaS, PaaS, IaaS and BPaaS, Social Networking, Sourcing Best Practises



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  1. Cognizant has always believed in tuck-in acquisitions; UBS not withstanding. This is one company that is completely client driven and has nothing to do with trends. It will invest where the client tells it to; even overinvest. Leave the trend setting to the Genpacts of the world.

  2. […] Cognizant: The Future of Work or the Present Forever? […]

  3. […] as EXL’s recent acquisition of OPI, Genpact with Headstrong, Accenture with Ariba services, Cognizant with CoreLogic and Capgemini with VWA). Given the greater stickiness of relationships on the BPO […]

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