Cognizant wins $1 billion deal from US-based healthcare company
Bengaluru: Cognizant Technology Solutions Corp. recently bagged a big-ticket deal from a US-based healthcare company, at a time when clients are renegotiating their engagements with information technology (IT) service providers due to artificial intelligence (AI) tools and macroeconomic uncertainty.
In the early hours of Tuesday, Surya Gummadi, Cognizant's president for the Americas region, said the company had won a mega deal worth 'approximately a billion dollars" during a fireside chat with Jason Kupferberg, a senior analyst with Bank of America Merrill Lynch.
To be sure, Gummadi did not announce the client's name. Mint has learnt from people with knowledge of the matter, including at least two analysts, that Cognizant might have renewed its partnership with UnitedHealth Group (UHG).
'This (deal) has an element of renewal, an element of expansion and a new (component) as well. It has all three components," said Gummadi, adding that the deal was a transformation deal with an average span of five years.
The Cognizant veteran said the deal also has an AI component, where the IT services company is passing productivity gains to the client.
Also read | Cognizant eyes a place amongst world's four largest IT services firms
Should the client be UnitedHealth, a $1 billion contract translates to roughly $200 million in annual revenue for Cognizant, which counts UnitedHealth amongst its largest clients in the health sciences space. Cognizant has had a two-decade partnership with UnitedHealth. The health sciences vertical made up almost a third of its full-year revenue of $19.74 billion at the end of 2024 and is its biggest vertical.
Cognizant, based in Teaneck, New Jersey, is an Indian-heritage IT firm, as more than three-fourths of its employees are based in India.
UHG is among the largest healthcare companies in the US, providing healthcare plans to people. The company ended 2024 with $400 billion in revenue, almost 20 times the size of Cognizant.
Close ties
Notably, one of UnitedHealth's subsidiaries was hit by a ransomware attack last year that impacted more than 100,000 people. The company had to pay out $22 million to hackers to protect valuable patient data, said chief executive officer (CEO) Andrew Witty.
Incidentally, Cognizant CEO S. Ravi Kumar and UnitedHealth chief digital and technology officer Sandeep Dadlani were former colleagues at Infosys Ltd.
Kumar took over as Cognizant CEO in January 2023, whereas Dadlani joined as UnitedHealth's chief digital and technology officer in September 2022. Both worked together at Infosys between 2002 and 2017. Kumar and Dadlani both served as the Bengaluru-based company's presidents.
At least one analyst said the win was a step in the right direction. 'It's a sign of strong forward momentum for the firm," said Phil Fersht, CEO of HFS Research.
Also read | Captive concerns: Why Cognizant has called out the risk from GCCs
This renewal deal comes as a shot in the arm for Cognizant, which has struggled to grow, discounting its recent acquisitions of Belcan and Thirdera, in the last two years. Acquisitions made up almost half of its full-year revenue growth of 8.2% in constant currency terms.
For Cognizant, this is the second mega deal that the company signed in the last two months. Gummadi, in his chat with Bank of America, said the company had announced another deal fetching upwards of $500 million two weeks back. This is an unnamed client in the company's communication, media and telecommunications division, which makes up about 16.6% of the company's revenue.
Gummadi said Cognizant is saving money for clients by using AI tools, and this is being shared with those clients, who are in turn putting these savings and some of their own investments into new IT-related work, which is helping create more volume of business for Cognizant.
Cognizant declined to comment while an email sent to UHG went unanswered.
Scarce deals
'And by the way, both the mega deals that I spoke about, they were originated by us. They did not come from an RFP (request for proposal). They (the mega deals) originated from a solution with this construct," he said.
Cognizant's recent deal win comes amid a drought for the country's largest IT outsourcers, which have struggled to bag such large deals. Coforge Ltd was the only listed Indian IT outsourcer to win a deal greater than $1 billion in total contract value over the last year.
Also read | Cognizant fared better than peers, but concerns linger
In March, the country's seventh-largest IT services company signed a 13-year deal worth $1.56 billion with Sabre Corp., a Southlake, Texas-based travel technology company. As part of the deal, Coforge will handle Sabre's software product delivery and execute artificial intelligence-led tasks for it.
Mumbai-based Tata Consultancy Services Ltd was the last of the country's top five software service providers to land a mega deal. Last year, it signed a 15-year deal worth $2.5 billion with Aviva, a British insurance company.
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