Rapid rise for digital players
The last few years have seen a tremendous surge in demand for products and services of Internet and digital-based companies like Amazon (AMZN), Netflix (NFLX), Google (GOOG), and Facebook (FB). Traditional firms across industries are realizing the importance of the shift towards digital transformation.
Cognizant’s (CTSH) client bases include enterprises from the financial services, healthcare, insurance, and manufacturing sectors. These clients are now looking to leverage Cognizant’s digital transformation expertise and target high growth areas such as artificial intelligence, IoT (Internet of Things), analytics, robotics, hybrid cloud, and cybersecurity to enhance the customer experience and improve performance.
During Cognizant’s 4Q17 earnings call, CEO Francisco D’Souza stated, “This blending of industrial with digital promises to dramatically improve the way the world’s industries serve our needs and improve our lives. Digital technologies have become so integral to remaking business models and core processes that no enterprise can ignore them and still remain competitive.”
Rise in digital transformation expenditure
Digital transformation now accounts for a significant amount of global enterprise IT spending. According to market research firm IDC, digital transformation spending is expected to rise 16.8% YoY (year-over-year) from $1.1 trillion in 2017 to $1.3 trillion in 2018.
Cognizant aims to build a strong position in the digital industrial economy. The United States is expected to drive digital market spending in 2018 with an expenditure of $437 billion, followed by Asia-Pacific at $412 billion. This push towards digital transformation is also expected to drive revenue for peer companies such as Accenture (ACN), Infosys (INFY), and Wipro (WIT) in fiscal 2018 and beyond.