In the noisy and hyper-competitive IT services market, it pays to be clear. However, being clear to the market doesn’t seem to be on Brian Humphries to-do list. In previous analysis, we examined how Cognizant’s leadership change earlier in the year could have been an issue because the new CEO went on a parade of internal rationalizations and cost-cutting. And yet—despite an internal savings drive, the firm just acquired Zenith Technologies, an innovator in life sciences, which bodes well for the many pharma and life sciences firms already on Cognizant’s books for IT services. Existing Cognizant clients must make use of this new capability to transform their manufacturing practices with advanced IoT solutions.

The deal at a glance: Cross-selling Zenith’s capabilities into existing clients could be a match made in heaven for both firms

Details of the deal are limited at the moment, save that Cognizant expects it to close for an undisclosed amount in Q3 of this year. And while both firms are giddily talking up the natural synergies and growth they can expect, it’s only when we dig into the detail that we can see where the real value lies: Cognizant’s existing client base.

Zenith Technologies has grown rapidly and built an enviable position in a hyper-competitive market; it has brought top logos into the fold, including GlaxoSmithKline and Pfizer. The firm recently announced ambitious growth plans, particularly in China, touting growth rates that could make the world’s second-largest life sciences market hit $220 billion by 2022. To meet this growth, Zenith plans to double its operations over the next three years. The firm clearly understands that to play in the space, it’s really about scale, which its new owner Cognizant can provide.

What Cognizant can also provide is a back door into some of its biggest clients in the pharmaceutical and life sciences space, many of which the firm has been working with for several years across IT services and BPO (business process outsourcing). To provide an idea of scale, Cognizant’s healthcare segment, which includes pharma, biotech, and medical device companies, generates almost 30% of Cognizant’s $15 billion annual revenue. According to Cognizant, it’s client list includes all of the top 30 pharmaceutical companies and nine of the top firms in biotech. Building Zenith’s capabilities into just some of these engagements could be highly lucrative for both firms.

For Cognizant, this is less about life sciences and more about a strategic shift to IoT – using Zenith’s experience from personal medical devices to pharmaceutical manufacturing processes

Undoubtedly, the acquisition of an innovator in life sciences makes this seem like a highly verticalized growth strategy, which is fair, but it marks a strategic shift for Cognizant as the firm shores up its delivery credentials with IoT that it can easily transfer across industries once it scales up delivery centers. In many of the executive quotes spilling out after the announcement, this is clearly meant this as a play aimed at disrupting not only the advanced manufacturing of the life sciences industry but also manufacturing.

Zenith has a track record of delivery for life sciences across medications, medical devices, and vaccines, but the future roadmap sketched out by CEO Joe Haugh extends the benefits of the tie-up more broadly to “tighter integration of manufacturing processes and systems, the efficient harnessing of information and analytics across the manufacturing value chain, and the adoption of IoT technologies delivering manufacturing 4.0.” Clearly, the roadmap extends beyond Zenith’s normal stomping grounds.

Cognizant, and its clients, also stand to benefit from a decent global network of Zenith delivery centers dotted in major manufacturing economies including Germany, the US, India, and China, although with around 1,000 Zenith Technologies employees dotted across the globe they may easily be swallowed by Cognizant, which has a checkered past when it comes to extracting full value from its M&A.

The Bottom Line: Zenith’s capabilities could transform Cognizant’s capabilities, and the firm’s clients should push them to bring the new tech into their engagements.

It’s always tough to get excited about an acquisition, particularly when we’ve seen so many go south over the last few years. But Zenith brings with it considerable capabilities that could add significant value to Cognizant’s delivery capability and client base. The initial responsibility must fall to enterprise leaders using the firm. They must push Cognizant to bring in Zenith’s capabilities to transform their engagements and evolve IoT projects.