Cognizant wins a large PES contract at AVEVA
ERDservices.org rarely reports about Cognizant, the NJ-headquartered but India-centric IT services giant in the space of ER&D services. Despite its size (2018 revenues of USD 16.1bn) and high-growth, Cognizant is little-visible in the ER&D space and is not a major player in this industry.
Nevertheless, Cognizant announced a multi-year multi-year contract (PES) with UK-based PLM and manufacturing systems AVEVA. The company will provide a wide range of product engineering services, across the different products of AVEVA, e.g., simulation, design, construction, commissioning, planning, operations management, monitoring and control, and performance optimization.
Cognizant won, back in 2009, one significant five-year PES contracts with Invensys, initially from Invensys Operations Management, the unit that grouped several product service lines (process systems, Wonderware, and Eurotherm). The contract involved the transfer of 400 employees in Hyderabad. As part of the initial contract, Cognizant was involved in existing product maintenance and minor enhancements, while testing services for new developments.
Five months, Cognizant expanded the contract with another five-year contract from Invensys Rail. Another 120 employees in Hyderabad transferred to Cognizant. With this new contract, Cognizant expanded from existing product maintenance to new product development around railway automation and control systems.
Since the initial Invensys contract, Invensys has been through two waves of consolidation, with its acquisition by French electrical systems Schneider Electric in 2013, and in its merger into Schneider Electric Software. In 2018, Schneider Electric merged
Cognizant has worked for AVEVA for the years. Cognizant had won a PES contract from Invensys Operations Management, which was acquired by Schneider Electric Sofware in 2013. Schneider Electric merger its software unit with AVEVA in 2018, retaining a 60% stake in the combined operations. The resulting AVEVA is a company with GBP 650m- GBP 700m (~USD 875m) in revenues. Not quite the largest ISV in the world, but decently-sized, compared to Dassault Systemes (USD 3.9bn in revenues)
We are guessing the new contract will bring to Cognizant annual revenues of USD 50m – USD 80m. This is a significant deal and shows the type of contract size that IT services vendors can gain in their software product development activities. We think that the frontiers between software product development and embedded systems development are very porous. Large IT services vendors certainly have the financial strength to fund their development into ER&D services, and make acquisitions. Accenture and HCL Tech have been active. We would be surprised if other IT service vendors did not follow the same strategy.