IT cos: See, who got most clients

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Cognizant’s record in client acquisitions has been significantly higher than that of its peers, TCS, Infosys and Wipro, both in absolute numbers as well as in the overall percentage of new clients added.

HCL Technology, which has a smaller base as compared to its rivals, is also adding more clients than TCS, Infy and Wipro in percentage terms. According to a Religare research report, though HCL has slowed in recent quarters, it has been recording relatively much faster client acquisition rates over the last two years.

Cognizant saw a 21% increase in its active client base to 712 in 2010, from 589 in 2009. HCL’s grew 9%, from 399 to 434 clients.
On the other hand, Infosys’s active clients grew 7.75% to 612 clients, Wipro’s grew 7% to 880 clients and TCS’s grew 4.5% to 917 clients.

Hari Rajagopalachari, executive director for consulting at PricewaterhouseCoopers , said that Cognizant’s greater international presence as compared to its peers is helping it win more clients. Around a quarter of Cognizant’s employees, including CEO Francisco D’Souza, are based outside India, close to the company’s main clients. In contrast, the other service providers have less than 10% employees outside of India.
Srishti Anand, IT sector analyst at Angel Broking, said that HCL’s client acquisition has gathered pace since the acquisition of German enterprise solutions provider Axon Consulting. “This has enabled the company to broaden offerings and access clients even in Continental Europe, an area largely untouched by most Indian IT companies,” she added. The enterprise application services business now contributes around 22% of HCL’s revenues, up from 12.5% before the acquisition in 2008.

According to Abhishek Shindadwar, IT sector analyst at ICICI Securities, the healthcare vertical is a key differential between Cognizant and its peers. Cognizant’s focused healthcare vertical is helping it acquire more clients in this fast growing vertical. “The company derives around $1 billion of revenues from the healthcare vertical where it has built deep domain expertise,” said Shindadwar.
In contrast, Infosys does not even report healthcare as a separate vertical. Wipro, which gets less than 10% of its revenues from healthcare, is now planning a greater healthcare focus.
Some of Cognizant’s prominent deals included those to deliver finance and accounting services to Volvo Car Corp, end-to-end , integrated applications and infrastructure management services to Marks & Spencer, and end-to-end IT services to pharma firm Eli Lilly.

HCL won contracts from OP Pohjola, the largest financial services group in Finland, for implementation and support and maintenance of a claims management solution; from Purdue Pharma to deliver IT infrastructure services; from the New Zealand government to develop technology infrastructure for the country’s prison system; and from Singapore Exchange for IT infrastructure outsourcing.

According to a Motilal Oswal report, HCL ramped up its marketing spends by a significant 110 basis points over the past five quarters. This enabled HCL to increase its active client base by 16.4% during the period. TCS, Infosys and Wipro, in contrast, like to maintain better margins and re-invest a relatively lower fraction of their savings into their businesses.
Cognizant also keeps its operating margins relatively lower , in the 19-20 % range, and reinvests substantially into marketing and sales as well as its employees. “This reinvestment in our client-focused activities has helped us to take a broader range of services to our existing customers, while adding a good number of new logos,” said R Chandrasekaran , MD of global delivery in Cognizant.

Analysts say that Cognizant and HCL, particularly the former, have also seen a good growth in revenues per client. Growing revenue per client reflects good client mining abilities . However, on this count, Infosys is the leader with the highest revenue per client at $10.4 million last quarter, as compared to $8 million per client for HCL.

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