SWOT Analysis - Cognizant

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Modified SWOT Analysis for Cognizant

Cognizant has experienced sustained growth over the last five years in terms of revenue and operating income. In addition, the company has invested extensively in the training of its employees. Therefore, they are more skilled and motivated.

STRENGTHS OF COGNIZANT TECHNOLOGY SOLUTIONS

Sustained Growth

  • The company has experienced sustained growth over the last five years in terms of revenue and operating income.
  • The company's revenue grew from $10.3 billion in 2014 to $16.1 billion in 2018. This translates to an annual growth rate of 13%.
  • In addition to revenue, the company seems to enjoy a balanced allocation of capital, which resulted in $1.6 billion in capital return through dividends and share repurchases in 2018.
  • Cognizant also has a strong balance sheet having reported $4.5 billion in cash and short-term investments in 2018.

Skilled Labor Force

  • Cognizant Technology Solutions has invested extensively in the training of its employees. As a result, employees are more skilled and motivated.
  • The company had around 281,600 employees at the end of 2018, with approximately 50,000 in North America, 18,300 in Europe, 194,700 in India, and 213,300 in various other locations worldwide.
  • The work force is well diversified geographically, racially, culturally, and academically. Hence, the company taps from a large pool of ideas and methodologies in doing things.

Diversified Business Operations

  • Cognizant has spread out its business, which also spreads out costs and ensures that the company has several channels of revenue.
  • The company's operations are segmented into Cognizant Digital Business, Cognizant Digital Operations, Cognizant Digital Systems & Technology, Cognizant Consulting, Global Technology Office, and Cognizant Accelerator.

Distribution and Reach

  • Cognizant Technology Solutions has a large number of outlets, supported by a strong distribution network that makes sure that its products are available easily to numerous customers in a timely manner.
  • The company utilizes a global delivery model with delivery centers worldwide to provide a full range of service to customers.
  • The global delivery model includes four distinct delivery methods, with most customer engagements utilizing several or all of these delivery methods.
  • The delivery model includes employees located in customers’ sites, local or in-country delivery centers, regional delivery centers, and offshore delivery centers.

Geographical Advantage

  • Cognizant Technology Solutions is well spread out geographically, a trend that gives it a cost advantage in serving its customers and allows it to easily explore additional markets.

WEAKNESSES OF COGNIZANT TECHNOLOGY SOLUTIONS

  • The company's business is largely concentrated in North American markets hence its potential to venture into other markets may be limited.
  • Most of the technology companies are retaining or hiring top tech talents. With the growing completion in the sector, the company stands to lose its top talents to competitors.
  • The company may experience management problems due to its big size. The company has a total of 281,600 spread out in various continents. In addition, its services are spread out. This presents challenges in management and coordination.
  • Cognizant Technology Solutions faces intense and evolving competition. The market is highly competitive and subject to abrupt changes.
  • In addition to large, global competitors, the company also faces competition from numerous smaller, local competitors in many geographic markets that may have more experience with operations in these markets, have well-established relationships with Cognizant's desired customers, or be able to provide services and solutions at lower costs.
  • A large number of Cognizant's workforce is located in the United States, the United Kingdom, European Union, and other jurisdictions.
  • Hence, they largely rely on visas to work in those areas which may affect the company's ability to compete and provide services to customers in these jurisdictions. This could also adversely affect its business, results of operations, and financial condition.

OPPORTUNITIES OF COGNIZANT TECHNOLOGY SOLUTIONS

  • Cognizant still has enough room for expansion in other vertical and geographical markets, especially European markets.
  • There has been an overall increase in internet users around the world. This presents an opportunity for Cognizant Technology Solutions to expand its presence online.
  • The company stands to benefit from the emergency of Cloud and Enterprise mobility which can push the demand for IT services across the globe.
  • Cognizant enjoys much stronger big data capabilities than its peers in the IT services sector which gives a competitive advantage.

THREATS OF COGNIZANT TECHNOLOGY SOLUTIONS

  • With its operations spread out around the globe, Cognizant's results of operations could be adversely affected by economic and political conditions globally and particularly in the markets where its customers and operations are concentrated.
  • The company's business and results of operation may be adversely affected if they fail to attract, train, and retain skilled professionals, including highly skilled technical personnel to satisfy customer demand as well as senior management to lead the business globally.
  • The company needs to work on both its organic and inorganic growth through acquisitions otherwise it may not be able to achieve its targeted growth rates.
  • Cognizant's failure to meet specified service levels required by certain contracts may result in its contracts being less profitable, potential liability for penalties or damages or reputation harm.
  • The company may face legal, reputation, and financial risks if it fails to protect its customers and/or Cognizant's data from security breaches or cyberattacks.
  • The company may be adversely affected if ant-outsourcing policies as well as negative perceptions associated with offshore outsourcing are adopted. This could affect the company's ability to effectively serve its customers and adversely affect its business, results of operations, and financial condition.
  • The company is subject to numerous evolving legal and regulatory requirements in many jurisdictions in which it operates. Violations of or unfavorable changes in such requirements could harm its business.
  • Cognizant's business is subject to considerable potential exposure to litigation and legal claims and could be affected if it incurs legal liability.

MAJOR COMPETITORS

HOW COMPETITORS THREATEN COGNIZANT'S GROWTH

  • Cognizant risks losing its market share to competitors if it continually fails to develop and implement services and solutions that anticipate and respond to rapid and continuing changes in technology to serve the evolving needs of customers.
  • The company also risks losing third-party alliance partners who supply it with necessary components to the services and solutions it offers its customers. As a result, it might lose its ability to provide service and solutions that fulfill customer demands.
Sources
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Quotes
  • "Distribution and Reach: Cognizant Technology Solutions has a large number of outlets in almost every state, supported by a strong distribution network that makes sure that its products are available easily to a large number of customers in a timely manner."