HFS Highlight: Cognizant continues to strengthen its digital engineering capability with Magenic Technologies acquisition

In January 2021, Cognizant has agreed to acquire Magenic Technologies, a custom software development services company in the US Magenic is Cognizant’s third acquisition in 2021, expanding its capability across key strategic focus areas including digital engineering, data and artificial intelligence, cloud, and IoT among others. The acquisition will expand Cognizant’s software product engineering resource strength, adding 475 employees in the US across seven locations and 350+ employees in Manila, Philippines.

Magenic Technologies will merge with Cognizant acquired Softvisions, strengthening the expertise of its global software development capabilities. Magenic will join Softvision’s broader global network of existing studios in Argentina, Australia, Canada, India, Mexico, and Romania.

Digital engineering is a key strategic focus area for Cognizant

Cognizant is accelerating its capabilities in the areas of data, artificial intelligence, digital engineering, cloud, and Internet of Things through target acquisitions. Under Brian Humphries, Cognizant has already acquired firms worth $1.5 billion (approx.) in the past 12 months across these areas. The Magenic Technologies acquisition will strengthen Cognizant’s expertise across agile software and cloud development, DevOps, experience design, and advisory services. It will also strengthen Cognizant Softvision’s offering across the domain of financial services, professional services, insurance, pharmaceutical, and manufacturing.

COVID-19 has accelerated the overall digital adoption of enterprises across industries. As enterprises are breaking traditional boundaries to disrupt and serve the market, they need assistance and guidance from the technology partners to enable new operating and business models. Thus this acquisition will equip Cognizant to cater to client business needs and solve technical challenges.

“Magenic has exceptional software development and cloud modernization teams that will enhance our global engineering talent network and expertise. We continue to invest in digital engineering, a key priority as clients move from traditional application development to custom software to provide compelling customer experiences and differentiated productivity solutions,”

Malcolm Frank, President, Digital Business and Technology, Cognizant

Digital engineering and software product engineering is the new areas of interest as focus on product innovation, smart product, customer experience, and connected systems increases among others. In recent times, Cognizant already has started to augment its capability through niche acquisitions. In September 2020, Cognizant acquired Tin Roof, a custom software and digital product development services company. A month later, it acquired Bright Wolf, a provider of IoT solutions and services. Bright Wolf’s expertise is in the areas of asset performance management, predictive maintenance, and yield optimization among others, and post this acquisition Cognizant planned to establish its newest IoT innovation lab in the Raleigh-Durham, N.C., Research Triangle, with the Bright Wolf team as its core.

Other service providers are also expanding their footprint through niche acquisitions

Cognizant’s competitors are also quite active in this space in recent times. In September 2020, Infosys acquired Kaleidoscope Innovation to expand its software product engineering expertise across the US. To expand its digital footprint, Tech Mahindra acquired Momenton and Tenzing Ltd to bolster capabilities in Financial Services in ANZ.

The overall engineering sector is still recovering from the COVID-19 havoc. Some of the engineering sectors (aerospace, heavy manufacturing, etc.) are still recovering whereas sectors like automotive are slowly turning towards growth. We believe that the global engineering spend will touch the previous level in next 2-3 quarters. So, Cognizant can focus on long-term play rather than an immediate return to leverage this acquisition. Cognizant can start focusing on industry/use-case specific solutions development and identifying business opportunities (targeting clients for cross-selling and upsell) for maximizing value realization through the acquisition.   

The Bottom Line: Cognizant can become both a digital and engineering partner to its clients through this acquisition  

The acquisition will augment Cognizant’s overall digital and engineering delivery footprint, consulting capability, and solutions portfolio across domains. Cognizant is already a key digital partner (primarily from the IT side) to its clients and with the acquisitions of Tin Roof, Bright Wolf, and Magenic Technologies, it becomes a stronger digital engineering and software product engineering player also. So, Cognizant extends its ability to be a one-stop services partner for its clients providing both IT and engineering services.