Coforge emulates Cognizant, Infosys in on-site consulting push to fuel growth

Mint

6 days ago

Coforge Ltd, formerly NIIT Technologies, is taking a leaf out of Cognizant Technology Solutions Corp and Infosys Ltd's proven business strategy, as the information technology (IT) services company looks to emerge as a larger industry player in the coming years.
Coforge, the country's seventh-largest information technology (IT) services company, is now placing business consultants at client locations to mine more business from its largest customers, analysts said. The Noida-based company's decision to place consultants with clients comes at a time when non-essential tech spending has dwindled.
'Companies have to be proactive in shaping opportunities with clients. Coforge distinguishes itself through its solutions team, composed not of traditional delivery personnel but of business experts with consulting backgrounds, often embedded at client locations," said Kotak Institutional Equities analysts Kawaljeet Saluja, Sathishkumar S, and Vamshi Krishna in a note dated 26 June.
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'These teams conduct iterative workshops to deeply understand the client's business challenges, existing tools, and operational processes before crafting tailored solutions. This approach enables Coforge to drive proactive large deals rather than waiting for RFPs (request for proposals)," said the Kotak analysts from their discussions with Coforge's management.
However, this is not new. IT outsourcers have previously hired top business consultants to identify new work in their clients' businesses that could lead to incremental revenue. Both Cognizant and Infosys had embarked on a similar practice about two decades ago when they started their consulting practice.
At one point, Cognizant was among the biggest recruiters from business schools. According to a July 2014 report by the Economic Times, the Nasdaq-listed company had one MBA graduate for every 20-25 tech professionals. It hired over 500 MBA graduates in 2014 across business schools in India, North America, Europe and APAC and over 200 such professionals in the preceding three years.
Peer Infosys had also embarked on a similar venture when it launched its own consulting business.
'We have taken a somewhat unconventional approach to build our consulting capabilities. Having witnessed numerous failed mergers and acquisitions in the industry, we are instead assembling a dream team of top consultants from all the major firms," said S Gopalakrishnan, who was then the chairperson of Infosys Consulting, in a press release dated 8 April 2004.
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Both Cognizant and Infosys hired business consultants, because both worked with domain experts who helped them win contracts beyond traditional IT servicing. This was also the beginning of the social, mobile, analytics, consulting, and internet of things (SMACI) revolutions when new technologies were emerging.
This helped Cognizant more than anyone else.
Under former chief executive Francisco D'Souza, the software services company outperformed its peers to clock a revenue of $14.81 billion in 2017 from just about $1.42 billion in 2006.
Significant challenge
Coforge aims to top $2 billion in revenue by FY27, though its efforts to secure more client business face a significant challenge in competing with the top five IT firms.
TCS, Infosys, HCLTech, Wipro, and Tech Mahindra are the country's top five IT firms by revenue.
In its response to Mint's queries, Coforge said it had set up its Consulting and Solutioning division nearly eight years back.
'We were also one of the first to invest material dollars in building exceptional industry functional expertise in very select sub-segments, including Speciality Insurance, Capital Markets Buy-side and Airlines. That group of functional consultants, hired eight years back, has grown materially and continues to have a significant percentage located onsite," said Coforge in a response to Mint's email on 5 July.
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According to the company, the Consulting and Solutioning team includes members with business backgrounds in North America and Europe.
However, hiring and deploying these professionals has not been easy as these are MBA graduates and business consultants who come with hefty paycheques. The company's profitability has been under pressure and has been declining since FY22 to 13% at the end of last fiscal.
A second analyst said that an integrated consulting practice was handy in improving the IT outsourcer's relations with the client.
'An integrated consulting practice helps IT companies in three key ways—graduate from a vendor to a trusted partner, advising the client on their growth journey every step of the way; shape deals rather than merely participate in RFPs (request for proposals), and in many cases, sole-source these deals by getting ahead of the curve," said Ramkumar Ramamoorthy, partner at Catalincs, a tech advisory firm.
He said that the consulting practice helps IT outsourcers nurture the long-term strategies of the client, which indirectly helps grow relationships from 'tens-of-million-dollars to hundreds-of-million dollars."
Aided by acquisition
Coforge ended FY25 with $1.47 billion in revenue, up 31.2% on a yearly basis. Much of it was on the back of Cigniti, the Hyderabad-based engineering services company that it bought last May, in its biggest acquisition.
The company's move to mine clients comes as two of its peers are actively hunting deals through such efforts, according to a Mint report on 11 June.
Cognizant's Americas president, Surya Gummadi, said his company bagged two large deals through its mining efforts, fetching upwards of $500 million in revenue. He added that both deals came after Cognizant passed on artificial intelligence (AI)-led productivity gains to clients, leading to additional investments in IT work.
'Both the mega deals that I spoke about, they were originated by us, they did not come from an RFP," said Gummadi, adding that 'the ideas originated from us." Cognizant ended last year with $19.74 billion in revenue, up 1.98% year-on-year.
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Smaller peer Zensar Technologies Ltd's management expressed a similar view, where chief executive Manish Tandon said the pipeline of large deals the company created was better than the pipeline that came from the clients' side.
Ramamoorthy said that this was the perfect time to increase consulting investments.
'Consulting capability comes in very handy especially when businesses are buffeted by structural shifts in technology and business. What we are witnessing today is a perfect time to double down on investments in consulting to address challenges arising from rapid technology change, geo-political instability, enhanced tariffs and regulations, and changing customer behaviour," said Ramamoorthy.
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