Cognizant Technology Solutions Corp is betting on mergers & acquisitions (M&A) as a strategy to build its digital business, which the company believes is 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, CEO, Cognizant.
The Nasdaq-listed company has made five digital-based acquisitions so far 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. Later, in March, it acquired Lev, a digital marketing consultancy that helps businesses modernize their marketing campaigns with data-driven insights.
Except EI Technologies, the rest 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 & analytics, interactive and software-as-a-service (SaaS),” 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,” a Mumbai-based IT analyst said.
Clients’ requirement of digital technologies to stay competitive in a post-covid world “aligns directly with our strategy to win in digital, including cloud, AI and analytics, digital engineering and IoT,” Humphries said in a post-earnings call.
Cognizant’s digital business grew 14% y-o-y for the quarter ended June and accounted for 42% of the 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 total revenues. Of late, Tata Consultancy Services (TCS) Ltd and Wipro Ltd have stopped reporting digital revenues separately.
This article was first published on livemint.com.