Cognizant’s healthcare division is poised to surpass its BFSI sector for the first time in its 25-year history, reflecting the company’s prowess in healthcare technology. While BFSI traditionally dominated, Cognizant’s healthcare revenue is closing in, driven by rising healthcare IT investments. Amidst financial sector challenges, healthcare’s strength emerges, marking a broader trend observed in the industry. Cognizant’s strategic healthcare focus, strong partnerships, and acquisitions have positioned it as a healthcare services leader, appealing to the modernization needs of the sector.
In an unprecedented development within Cognizant’s 25-year tenure as a listed company, its healthcare sector is poised to outperform its BFSI (Banking, Financial Services, and Insurance) division during the September quarter. This could mark a significant milestone as it would be the first instance of any vertical surpassing BFSI among the leading Indian-heritage IT service firms. For prominent players like TCS, Infosys, HCLTech, and Wipro, BFSI has traditionally been the cornerstone of their operations.
Cognizant’s BFSI revenue reached $1.46 billion in the June quarter, closely followed by its healthcare sector at $1.40 billion. The BFSI segment constitutes 31% of Cognizant’s total revenue, while healthcare accounts for 29%. Given the prolonged weaknesses seen in the BFSI domain for most IT service providers and the rising investment in healthcare IT, the upcoming quarter might witness healthcare emerging as Cognizant’s leading vertical. A similar trend has been observed with Accenture, where its health and public service segment surpassed financial services in the quarter ending May, a shift that hadn’t occurred for several quarters.
Cognizant maintains a competitive advantage in the healthcare technology industry, to the extent that its revenue from this segment exceeds the collective revenue from the same segment for its three primary competitors – TCS, Infosys, and Wipro. In the June quarter, TCS reported $759 million in healthcare revenue, Infosys generated $333 million, and Wipro secured $339 million. While Cognizant’s financial services revenue witnessed a 5% decline in the same quarter, its health sciences revenue experienced a 2% growth, propelled by the demand for integrated software solutions from healthcare clients.
During a recent earnings call, Cognizant’s CFO Jan Siegmund acknowledged the persistent challenges in the financial services sector while highlighting the relative strength exhibited in healthcare. He attributed this resilience to the company’s robust market position within the healthcare domain.
Industry expert Phil Fersht, CEO of HfS Research, emphasized that Cognizant’s healthcare and life sciences business stands as a prominent asset for the company, especially in a period when the US healthcare sector represents a burgeoning arena for IT service expansion. In contrast, financial services, particularly in the US and Europe, have grappled with interest rate hikes and struggles among regional banks, making it unsurprising that healthcare and life sciences would become Cognizant’s primary focus.
Cognizant’s clientele in the healthcare sector includes esteemed names like Aetna, United Healthcare, Pfizer, Merck, Anthem, and EmblemHealth. The company’s involvement spans payers, providers, and pharmacies, encompassing enhancements in processes, clinical trial management, regulatory compliance solutions, and revenue cycle management for healthcare institutions.
Notably, Cognizant recently solidified its partnership with biopharmaceutical firm Gilead Sciences through an agreement valued at over $800 million across five years. In this collaboration, Cognizant will oversee Gilead’s global IT infrastructure, platforms, applications, and advanced analytics, steering initiatives aimed at expediting Gilead’s digital transformation.
Hansa Iyengar, a senior principal analyst at London-based Omdia, commended Cognizant’s strategic moves over the past years that have propelled it to a dominant position in the healthcare services arena. The integration of TriZetto through acquisition has been a pivotal factor in this success story. Furthermore, Cognizant’s partnership with Microsoft to offer the TriZetto platform as a SaaS solution on Azure, leveraging Microsoft Cloud for Healthcare to meet regulatory and security requirements, is a strategic move, particularly as the healthcare industry strives to modernize legacy systems and enhance operational efficiencies.
