Strong Demand for Digital Transformation Drives Cognizant’s Narrow Moat

Cognizant is one of the leading IT services providers in the world, with products focusing on software development, including application development and maintenance, systems integration, and process automation. Revenue primarily comes from North America while the workforce is largely based in India. While Cognizant may not have the same scale in traditional consulting that peers like Accenture possess, the company provides a relatively robust suite of offerings across the IT services value chain. Cognizant was one of the first major IT services players to model its business on outsourcing labor costs to the Indian market, and while that labor arbitrage gap has closed a bit compared with the early days, we still view the business as moaty, benefiting from significant switching costs and intangible assets based in its technical expertise.