Embracing AI and emerging technologies Coforge rides the third wave
It is common knowledge that, for many noted business leaders across the world in the past three to four decades, the popular American futurist Alvin Toffler, who was active in the latter decades of the previous century, has been quite an inspirational figure. His work, and particularly his advocacy that in a rapidly changing 21st-century environment the ability to quickly unlearn and relearn will be the recipe for survival, has progressively gained credence for the accuracy it demonstrated in the crystal gazing of the 70s and 80s. Among his body of work, his book The Third Wave holds a special place for its emphasis on rapid transition and transformation in post-industrial societies across the world. Written in 1980, the title – or the term – has become a byword to denote next-generation transformations.
‘The Third Wave’ is, incidentally, a term that Sudhir Singh, CEO of the India-based multinational IT firm, is increasingly focusing on in recent candid conversations. Credited with early success in his pursuit to position Coforge as a prominent player in the Indian IT firmament, Singh’s third wave emphasis, however, is more micro in scope and domain-centric in nature. It focuses on how the technological and digital solutions business has evolved in recent decades. “The IT industry will be led by players who are aligned with emerging technologies like AI,” he underlines. And when he says this, he is also probably sharing the recipe for Coforge’s success in the past 8 years, which many believe has been quite amazing, with consistent good performance.
The wave theory
If we look at the entire IT landscape, this is clearly a period of extreme transformation as the digitisation process has picked up tremendous pace. Until recently, it would have been a serious error in judgement to say that the IT sector includes legacy players. But this is now the case. The increasing digitisation and the rapid-fire expansion of AI and other technological components seem to have caused considerable confusion, both among clients and solution providers, resulting in even the leading IT firms being unable to show the agility that was once their hallmark. It is no secret that the pace of the Indian IT industry has perceptibly slackened in recent years, for which various reasons are cited. The ongoing slowdown in US and European markets is believed to have resulted in a situation where IT companies’ clients have slashed their budgets. The changing expectations of the client, due to the fast-paced emergence of new technological elements, have also resulted in a transitional phase for IT companies. The threat of a new global tariff war (started by US President Trump) and the resulting business and economic uncertainties it could lead to, have further compounded the problem.
Amidst this scene of confusing signals, Singh and his team (though on a relatively smaller base than the market leaders) have managed to deliver a contrarian performance. Singh credits this to Coforge’s ability to better align with new-age technological challenges and offer appropriate and accurate solutions in an environment that may be classified as the ‘third wave spell’. According to him, the first wave, characterised by off-shoring and cost efficiency, occurred around 2000, and brought in a new breed of players (including Indian firms) who were able to scale up operations. The second phase came immediately after the financial crisis of 2008 and was entirely driven by digitalisation. In this phase, companies like Globant, EPAM and Endava became leaders. The Indian IT firms could not show much strength during the second wave. The third wave, which started about 3 years ago, is driven by emerging technologies, with AI as one of the driving forces.
From the perspective of Indian companies, the third wave is turning out to be somewhat challenging. “Some of the legacy players continue to talk about discretionary spend not going up. But the reality is the total technology spend is only increasing at an accelerating pace. For a legacy tech services provider to wait for what they thought was discretionary spend to come back and for growth to come back is the same playbook that happened in the past every time there’s disruption. The winners are already growing. The winners will continue to grow even more strongly. And this third wave is the one that we’ve been riding now,” he asserts.
Sterling performance
Singh, who does not come from a typical all-IT background and gained his business leadership acumen by selling consumer products for companies like Hindustan Unilever, is probably just trying to put his money where his mouth is when he advocates for the third wave theory. And he has more listeners now, considering the fact that Coforge, under his stewardship, has consolidated its position as a new-generation, India-rooted IT multinational and has continued with its impressive performance streak. The just-concluded fiscal year is yet another case in point.
The company ended the year with an impressive income growth of 31.5 per cent in dollar terms, notching up a figure of $1.45 billion. It has reported an EBITDA increase of 31 per cent, exceeding $200 million (refer to the graphics – financial performance). It was just 2 years ago that Coforge announced it had surpassed the $1 billion milestone in revenue (refer to our story: https://businessindia.co/magazine/corporate-report/coforge-achieves-a-milestone). And even though the business climate has not really improved for IT firms in general, Coforge has seen a commendable escalation in its earnings in recent years – as if it is moving full throttle ahead with the best-imagined tailwind support. Ask Sudhir if FY25 has been the best year in Coforge’s short history and he will tell you that, in terms of annual percentage growth, this is not exactly the best year, though it has concluded after providing additional ammunition for future growth. “I would say this was the second-best year in our last 8-year run. But given the great deal momentum, given the fact that we believe that the industry is going through the third wave of change and given that we are likely to emerge as one of the winners, some of our best years are still ahead of us,” he responds.
The biggest gain Coforge has made in FY25 relates to the host of sizeable and prestigious deals it has signed. The largest of these is the Sabre deal worth $1.56 billion in TCV – a strategic 13-year, engineering-driven collaboration between the two firms. Another large deal in the airline industry was with one of the largest US airlines, where Coforge will drive digital transformation and implement platforms for operational changes and efficiencies using its Quasar AI Platform. It bagged another major contract in Europe, where a global passenger transport and logistics company handed over its Digital Customer Experience Transformation responsibilities to Coforge, involving AI-led integrated case management and data solution architecture.
In the banking sector – one of its mainstay verticals – Coforge signed five large-scale deals, including one with a leading US bank entrusting it with digital transformation responsibilities enabled by AI and data engineering. Another major bank in Asia has contracted Coforge to manage its enterprise integration services enabled by APIs. One of the key banking contracts will also result in Coforge setting up a GCC (Global Capability Centre) for a leading US-based wealth management solutions provider.
With domain expertise in Commercial & Specialty Insurance, in FY25, the firm also made notable headway with a leading US-based Property & Casualty (P&C) Insurance carrier to transform its Commercial and Specialty insurance lines platform.
Momentum management
The financial figures from the past year have certainly elevated the company’s profile, and its stock has appreciated significantly in the marketplace. These days, there is hardly any discussionon on IT companies on stock market-centric business channels where Coforge is not mentioned. And this is hardly surprising, considering that the market cap of the company has grown from $400 million to nearly $6 billion in less than a decade. Among the new IT powerhouses rooted in India, Coforge – with an employee base of nearly 33,000 (around one-third added in the last 2 years) – is a leading name. Most recent research and outlook reports on the company from brokerage houses share a common thread: strong buy advisories reflect greater confidence in the company than ever before. “Coforge enters FY26 with its highest-ever order intake, and the large deal pipeline remains robust. Growth in FY25 has been broad-based across geographies, service lines, and industry verticals,” maintains a leading brokerage house report in its recent analysis.
With an order book in excess of $1.5 billion for the next fiscal, the company appears to be on a sound wicket and is now aiming to reach the $2 billion revenue figure in FY27. To achieve this, it is keen to broaden its scope of vertical specialisation. Currently, its business is led by banking and financial services (around 30 per cent), followed by insurance, travel, transportation and hospitality, and also government business. The nurturing of the fast-growing government business has only recently begun under Coforge’s management, though the company is still mainly focussed on securing Western contracts. “The government business we do elsewhere offers better margins,” he explains. In terms of geographical strength, the major markets are: Americas (54 per cent) and EMEA (34 per cent). This equation is likely to remain intact in the near to medium term, as recent contract wins have seen further proliferation of deals from stronghold regions like the Americas.
Reaching the $2 billion revenue figure by the end of FY27 would mean the company doubling its earnings within 4 years (the first billion was achieved in FY23). To make this happen, one of the key plans involves giving a big-ticket push to a new vertical – the healthcare segment. “I think from our vantage, we’ll continue to focus on emerging technologies. But we will start setting up newer industry verticals, which we’re already doing. Healthcare is a space that we feel very passionately about. It is a business we truly want to scale up over the next 2 years. It’s going to be one area of massive focus from our point of view,” Sudhir says.
The company, which has global delivery centres in half a dozen countries (including the US, UK and Australia), led by a major campus in Greater Noida, India, has already begun strengthening its healthcare vertical. Among the recent contracts it has signed, some clearly reflect Coforge’s aspirations to scale up this division. One of the largest public healthcare systems has handed over its digital transformation programme responsibilities to Coforge, which will integrate the CRM and contact centres powered by Pega and AWS at the backend. Coforge is one of the few Pega Global Elite Partners providing Pega implementation, delivery and testing services. In the race to the $2 billion milestone, the company is also aiming to improve its business presence in Asia. “We are increasingly finding that a significant amount of technology spend is moving towards Asia as well. Only 15 per cent of our revenue comes from Asia. The intent will be to make sure we keep strengthening our team here, particularly in a market like Japan,” he says. He, however, does not forget to reiterate the point that to achieve any target, being agile in terms of upgrading and adoption will be key. “When this wave was nowhere in existence, we publicly said our vision is to engage with emerging technologies. And it did not mean just AI. AI will also pass and quantum will come in and God knows what’s going to come after that,” he underlines. Probably there is a larger message here for players of all kinds in the fray.