Third-ranked, US headquartered but India-centric offshore services player, Cognizant, scraped in with its Q4 numbers by a whisker, ending the year pretty much bang on guidance, with revenues 33% higher at $6.1b. There must have been a few sweaty palms in downtown Teaneck, New Jersey until all the numbers were in, as Cognizant’s European business fell short of expectations – but a boost in North America saved the quarter (and therefore the year) – one assumes with a modicum of whip-cracking.
And it is indeed Europe that remains Cognizant’s Achilles heel. The problem is that in Europe (especially on the Continent) Cognizant shines best on project work rather than traditional ‘outsourcing’ (i.e. application management). This is because there’s no job losses involved, which as we all know is problematic across the Channel. However, discretionary spend has been badly hit in Europe, especially in Cognizant’s top verticals (BFSI, Life Sciences) so clients are moving more towards the cost-reducing outsourcing model, which is where its competitors do so much better. Listening to Cognizant's (newly reshuffled) management just now, it seems they simply do not have an answer for this, other than hoping it will all get better again sometime – but not this year, though.
As a result, management's guidance for 2012 seems a little muted – but having said that, the outlook for 23% top line growth is hardly shabby, when you bear in mind that they have assumed Europe will be basically flat for them in 2012 - but, I would warrant, not for their competitors!
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