Outsourcer Cognizant Posts Strong Revenue Growth

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Outsourcer Cognizant Technology Solutions Tuesday reported strong growth in revenue and profits in the quarter ended June 30, as customers have started spending again on IT services.

Cognizant in Teaneck, New Jersey, has 74 percent of its staff in India and competes with Indian outsourcers such as Tata Consultancy Services (TCS) and Infosys Technologies, which have also reported a pick up in the outsourcing market.

Cognizant's US$1.1 billion revenue for the quarter was 42 percent higher than the same quarter last year. Profits grew 22 percent to $172 million as the company invested in new services offerings, and new markets.

Clients under-invested in technology during the recession, and a lot of the delayed projects are now picking up, said Francisco D'Souza, president and CEO of Cognizant. Clients are investing again in discretionary programs, he added.

Regulatory changes in some markets such as health care have also translated into higher demand for IT, D'Souza said.

The company has forecast that third quarter 2010 revenue is anticipated to be at least $1.2 billion. Revenue for fiscal year 2010 is forecast to be at least $4.46 billion, which would be 36 percent higher than last year.

Growth for the company came across a number of industry segments and geographies, including Europe which is facing a debt crisis, D'Souza said.

Revenue from Europe grew by 44 percent in the quarter in comparison to the same quarter last year, although most of the growth came from the U.K. The company's application development business grew 52 percent, while application maintenance business grew 34 percent.

Revenue growth by industry vertical was the highest in retail, manufacturing and logistics, D'Souza said. Revenue growth in this segment was 53 percent in the quarter. Revenue from the financial services sector was up 42 percent.

Cognizant added 3,000 staff in the quarter taking the total at the end of the quarter to 88,660. Utilization of staff offshore was 73 percent while utilization on site was higher at 93 percent. Such utilization levels are not sustainable, and the company plans to add more staff both in India and the U.S., D'Souza said.

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