Pods and localization drive Cognizant in Europe

It has been a year of upheaval for Cognizant.

Like its peers, the IT services vendor has had to contend with the strongest economic headwinds for more than a decade. But it has also had to deal with the impact of a high-profile ransomware attack, while at the same time, CEO Brian Humphries – who arrived from Vodafone last year – has been re-establishing a leadership team and strategy to take the business forwards.

One key aspect of the Cognizant strategy in 2020 is globalization, with the company still dependent on North America for three-quarters of its revenue. We recently heard from Manoj Mehta, who now runs Cognizant’s business outside of North America, having previously overseen the continental European operation for close to 15 years. He stated that Cognizant’s European business, which employs 20,000 staff, will be front and center of its international push.

Cognizant’s performance in the region has held up relatively well. Despite a tricky second quarter, Cognizant’s European revenue in the first six months of this year was up 3.9% (at constant currency) to $1.5bn, with the UK up 2.2% and continental Europe up 5.2%. The company has benefited from limited exposure to those industries hit the hardest by the pandemic, such as aviation and hospitality, with demand in financial services (40% of European revenue) and telecoms remaining robust.

So what can European businesses expect from Cognizant? Mehta said that it is now focusing on a smaller number of Global 2,000 accounts, and helping them “chart out their digital journeys.” This can include helping them modernize their legacy landscapes. However, Mehta states that the company is more interested in those vendor consolidation outsourcing deals where Cognizant has a license to transform through automation. But where Cognizant really comes to life is on projects that see it use technology to solve critical business problems. Recent examples include helping a Dutch insurer build a digital bank from scratch and helping the UK’s Network Rail build a predictive maintenance model for all of its assets.

Mehta further states that the company’s bookings are growing at a double-digit rate in Europe, with the continent ahead of the UK. He said that many accounts in sectors such as transportation lagging on digital transformation have had their eyes opened by the pandemic and are now looking to move at speed through deeper supplier partnerships. While the growth topics are largely the same as pre-COVID, Mehta points to a shift in focus in IoT where smart buildings have become a more dynamic topic as clients look at how it can support health and safety workplace initiatives.

Another key element of Cognizant’s strategy in Europe is localization, with 60% of its headcount native to the countries in which it operates. The company’s M&A strategy has helped in this regard, with the purchase of France’s EI-Technologies adding 300 employees with a strong focus on Salesforce, and the UK’s Contino adding 350 DevOps and cloud-native development specialists. The acquisitions of US-based New Signature and Collaborative Solutions have also added some European skills in Microsoft Azure and Workday, respectively.

But perhaps the company’s most interesting move was its takeover of Romania’s SoftVision, a digital and software engineering specialist. Mehta said that the target company now forms the core of its nearshore delivery wing across Eastern Europe (also including Hungary and Poland), which he expects to scale up to a 5,000-strong talent pool. While GDPR and a renewed interest in managing risk in global sourcing are drivers for nearshore delivery, Mehta highlights the “pods” approach of SoftVision as a differentiator. This is an agile-based delivery framework tailored to each client, which connects different groups (or “Guilds”) across Cognizant so that a single team owns the delivery of a product. The framework is underpinned by the “Game of Pods” platform, which gamifies the development process, and encourages talent development through rewarding target achievement and best practice.

One of Cognizant’s recent challenges in Europe has been the turnover in its leadership ranks, and the company has recently appointed a couple of experienced hands to run two of its key regions. Former Fujitsu and T-Systems executive Rolf Werner has been installed as Head of Germany, while Anne-Sofie Risasen, formerly of Capgemini and Evry, has taken on responsibility for the Nordic region.


PAC’s View

Cognizant has weathered the market storm this year relatively well, and there remains a lot of headroom for growth in its European business. The greater focus on localization and the expansion of its nearshore story will resonate well with clients in continental Europe. Hopefully, the new leadership appointments will quell the recent churn among the top ranks.

While the company focuses its efforts on a tighter group of larger accounts, it still needs to ramp up its marketing and branding efforts to get on the radar of both technology and business stakeholders – particularly in countries such as France and Germany. The company also has work to do in developing its partner ecosystem in the region. There is more that it can be doing with the likes of Salesforce, Workday and the hyperscalers, particularly in joining the dots between platforms and the specific business challenges of its core industry sectors.

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