HFS Highlight: Cognizant acquires ESG Mobility to strengthen its digital automotive engineering capability

In March 2021, Cognizant agreed to acquire Germany-based ESG Mobility, a digital automotive engineering R&D provider for connected, autonomous, and electric vehicles. ESG Mobility is a wholly-owned subsidiary of ESG Elektroniksystem – and Logistik, a privately-held technology consultancy for the design, integration, and operation of complex, security-related electronic and IT systems. ESG is unique because it is purely a digital ER&D provider focused on software architecture, design, and implementation. The acquisition will extend Cognizant’s capabilities in digital automotive engineering R&D, including smart, connected mobility. The rationale is to combine ESG’s deep in-market expertise with Cognizant’s global delivery capability to drive complete platform solutions for automotive clients over a multi-year time horizon. This acquisition is Cognizant’s fourth acquisition in 2021, expanding its capabilities in key digital focus areas such as cloud, data and artificial intelligence, digital engineering, and Internet of Things (IoT).

“Our priority is providing clients with the capabilities they need to compete as modern digital businesses, and ESG Mobility is a natural complement to our existing connected mobility offerings and global delivery model.”

Malcolm Frank, President of Digital Business and Technology, Cognizant

Service providers are revving their engines to compete in the CASE race

The automotive industry is going through significant disruption, as described by the acronym CASE (Connected, Autonomous, Shared, Electrified). CASE refers to new areas of technological advances in the automotive sector. Connected, autonomous, shared, electric (CASE) is driving the future of the car industry. Cognizant has been steadily building capabilities in the connected car segment. For example, Cognizant provided a digital solution to MG Motor India to create an omnichannel digital customer experience for India’s First ‘Connected Internet Car.’ The ESG acquisition will provide Cognizant with a broad automotive engineering capability and compete against the other IT and engineering players like Capgemini, HCL, LTTS, KPIT, DXC, etc.  Some of these competitors (primarily the service providers with engineering services background) are also exploring this space with both organic and inorganic investments such as:

• In January 2021, TCS launched the Autoscape^TM solution suite to accelerate the initiatives and innovation in the areas of autonomous and connected vehicles for automotive players (auto OEMs, suppliers, fleet owners, and start-ups), Mobility Providers, and Off-road equipment manufacturers
• In April 2020, Accenture acquired ESR Labs that develops embedded software for leading German car brands and suppliers

• In April 2020, Luxoft (a DXC Technology Company) acquired CMORE Automotive. The acquisition will expand Luxoft’s capabilities in data-driven development, testing, and validation of Autonomous Drive/Advanced Driver Assistance Systems
• In April 2020, TOYOTA Connected and NTT DATA announced collaboration on Mobility Service Business

Cognizant will gain access to both talent and client portfolio through this acquisition

We have been exploring how Cognizant executes a focused acquisition strategy for expanding its capabilities in key digital focus areas such as cloud, data and artificial intelligence, digital engineering, and the Internet of Things (IoT). Under Brian Humphries, Cognizant has already acquired firms worth $1.5 billion (approx.) in the past 12 months across these areas.

The ESG Mobility provides services across automotive software. Post-acquisition Cognizant and ESG Mobility together will provide engineering services to eight of the world’s top 10 automotive original equipment manufacturers (OEM).  ESG Mobility has 30 years of experience in realizing smart, digital products and their operational use, focusing on the mobility industry, delivering 5000+ projects overall. In addition, ESG Mobility acquisition will add approximately 1,000 engineering R&D specialists in the automotive innovation hubs of Germany, the US, and China, becoming part of Cognizant’s Internet of Things (IoT) and Engineering Services Practice.

“We have built a world-class team of engineering R&D and technology consultants who deeply understand our automotive clients in Germany and around the world. By joining Cognizant, we can provide a higher quality of service, build more innovative products and support a broader range of digital initiatives for our current and future customers. We look forward to using our vast automotive industry experience to create a more connected, mobile world.”

Jörg Ohlsen, Chief Executive Officer, ESG Mobility 

The Bottom line: ESG Mobility acquisition will position Cognizant as a digital engineering go-to partner for automotive clients

CASE (Connected, Autonomous, Shared, Electrified) is the automotive industry’s future, and the leading OEMs and tier-1 suppliers are investing in this. Cognizant has a strong relationship with some of the leading automotive players to expand the engagement scope through the broader offerings inherited from this acquisition. It can also target to expand the engagement scope of the existing client portfolio of ESG Mobility by providing digital solutions primarily from an IT services point of view.