Cognizant to beat Infosys in revenue addition for the first time

Cognizant Technology Solution has guided to add more incremental revenues in the twelve months ending March 2009, than what Infosys Technologies, India's second largest IT exporter, said it would add, at a time when many assumptions about the software sector are being challenged.

Cognizant started thirteen years after Infosys, and was a mere $400 million company when Infosys crossed its billion dollar mark. Even at the end March 2009, Cognizant will be a good $1.8 billion smaller than Infosys in terms of revenue.

However, going by incremental revenues, another key measure of performance, and the guidance estimates given by the companies, Cognizant would have added more. Cognizant has guided to add $ 589.7 million for the twelve months ended March 2009, against Infosys' $536 million. Neither company made significant, revenue boosting acquisitions in the last one year.

While Cognizant has outgrown the Indian IT companies in percentage terms for many years now, this will be the first time when Cognizant takes Infosys head on in absolute incremental dollars.

Analysts say Cognizant's in sales and marketing is helping the Nasdaq-listed company stand in good stead even in tough times.

"Cognizant has followed this policy of maintaining operating margins at 20% and the rest would be re invested in sales. It has followed this sort of strategy since 2001-2002, which is helping the company grow business even in the current environment," said R Srivathsan, an analyst with Spark Capital.

In a recent report by Edelweiss research, the following reason were cited for Cognizant's higher growth clip among its industry peers- re investing excess margins in business, differentiated approach in relationship management, integration of back end with front end right from the beginning and its focus on depth in each vertical rather than breadth.

"Depth serves Cognizant well in this environment as despite having a 46% revenue exposure to the Banking, financial services and insurance (BFSI) segment, and an 80% exposure to the US," said the analysts in the report.

For the year 2008-09, Cognizant grew revenues by 32%, surging ahead Nasscom's estimate of 16-17% for the industry.