Cigniti Technologies Ltd Management Discussions.

Management Discussion and Analysis


Cigniti Technologies is a global leader in independent quality engineering and software testing services.

Over the last 20 years Cigniti has helped several enterprises, including multiple Fortune 500 and Global 2000 companies, in their digital transformation journey by offering specialized testing services. We have presence in 21 countries with offices in US, Canada, India, UK, Australia, UAE and South Africa.

Cigniti accelerates the digital transformation of enterprises by leveraging its AI-based IP led quality engineering platform - BlueSwan™.

World Economy

The global economy has been going through a slowdown over the past few years. As per the World Economic Outlook released by IMF in January 2020, the Global growth is projected to rise from an estimated 2.9 percent in 2019 to 3.3 percent in 2020 and 3.4 percent for 2021—a downward revision of 0.1 percentage point for 2019 and 2020 and 0.2 for 2021. However, the latest reports amidst the pandemic (COVID-19) crisis suggest that the world economy might see a downward trend for 2020 compared to previous years.

Indian Economy

The UN Economic and Social Survey of Asia and the Pacific (ESCAP) 2020: Towards sustainable economies said that COVID-19 is having far-reaching economic and social consequences for India, with strong crossborder spillover effects through trade, tourism and financial linkages.

According to the latest IMF report, India would see a huge dip in terms of GDP growth for 2020 but will bounce back in 2021. Indian GDP growth is expected to fall to 1.9% in 2020 from 4.2 in 2019.

Indian IT-BPM Sector

The National Association of Software and Services Companies (NASSCOM) in its TECHADE 2020 report, mentioned that the IT-BPM sectors revenue grew 7.7% year-on-year to $191 bn in FY2020 compared to $177 bn in FY19. The exports grew by 8.1% to $147 bn. The digital revenue share is between 26-28% for FY20.

Post COVID, several analysts have cautioned that there will be a decrease in the IT spend by enterprises. However, there are few industries such as Healthcare, Education, Communications, and others that are seeing a positive impact, which may continue in the long term as well.

Select IT Services Subsegments Forecast Forecast Trend in 2020 Forecast Trend 2021-2024 CIO Spend Perspective: Run/Grow/ Transform
Overall IT Services Market Immediate moderate decline Moderate growth N/A
Business Consulting Immediate severe decline Moderate growth Grow
Risk Management Immediate mild growth Moderate growth Grow
Technology Consulting Immediate severe decline Moderate growth Transform
Implementation Immediate severe decline Moderate growth Transform
Application Managed Services Delayed severe decline Moderate growth Run
Hardware Support Delayed severe decline Slight decline Run
Infrastructure as a Service (IaaS) Immediate strong growth Strong growth Run
Infrastructure Managed Services Delayed severe decline Moderate growth Run
Traditional Business Process Outsourcing (BPO) Delayed severe decline Mild growth Run
Business Process as a Service (BPaaS) Delayed slight decline Strong growth Run

Emerging Technologies post COVID

The change in the consumer behaviour combined with elimination of human to human touch will lead to evolution of new technologies.

After this crisis, the need for unprecedented coordination, planning, and execution adeptness from governments, corporates and citizens to manoeuvre technology will emerge as the fundamental bedrock in orienting the outcomes towards greater good at lesser cost.

Retail, banking, finance, education, healthcare, virtual meetings - the world is going to witness more and more online transactions. Enterprises will not be left with choice anymore and have to digitalize everything internal and external. This leads to assurance of online and secured transactions.

Zero-touch technology

Zero-touch technologies such as contactless payments and RFID scanning can prove significant in controlling the touch-required activities across Retail and Supply Chain & Logistics sectors.

Artificial Intelligence (AI)

All this will be powered by AI and backed by new technologies. Post COVID, AI will be the pivot for every business to grow. There is going to be a huge demand to get real-time insights and analytics and AI will prove critical for gathering and analysing this information. However, the teams should be able to act decisively in terms of the changes that need to be made to the projects. Cignitis result-oriented, comprehensive, AI-driven Quality Engineering services assure high- quality customer experience @ high-speed. Cignitis practical approach with AI-powered continuous testing platforms provide a strongly differentiated value add to our clients.

Security is critical

Security of systems has become the top priority for organizations as they try to identify and mitigate the vulnerabilities that may crop up with the requirement to work from home.

Focus on User Experience (UX)

User interface is the face of an application, which should be presentable, appealing, aesthetic, and intuitive. Moving everything to digital will result in more UX testing opportunities.


IoT, Artificial Intelligence, Robotics, Smart Devices, and Machine Learning are the major market disruptors today. With so many new and fresh technologies in vogue, the need for software development and testing has increased in leaps and bounds. This implies that there is loads of scope to test devices and applications against varying scenarios and heterogeneous components. At Cigniti, we have rich expertise in Service Virtualization tools as well as proprietary solutions and industry specific jumpstart kits that help us offer effective enterprise-wide Service Virtualization Adoption Strategies.

Digital Transformation is No Longer a Choice

Gartner states, "A global pandemic touches every aspect of personal, commercial, organizational, and economic life. Individuals and organizations can feel powerless to improve their situation. Recovery will not happen overnight; leaders need to pace actions in concert with customer and market developments. Leaders need to keep people focused on the present while preparing for the future." Times like these make us adopt a different perspective on everything. Organizations are now looking at their priorities through a COVID-tinted lens to identify what are the most critical aspects that would ensure business continuity and help them sail through the crisis and sustain after everything settles down.

The COVID outbreak has caused several trends to derail, many to transform, while pushing the accelerator button on a lot of them. Those organizations, which were still dubious about the necessity of digital transformation, are now speeding up their digitalization journey & looking to scale up their digital capabilities. Co-located Agile teams are implementing remote agile transformation to ensure minimum disruption. As global workforces start working remotely, they are creating heavy demand for cloud-based platforms and cloud migration services. With social distancing and limited human-to-human contact becoming the norm, there is a colossal shift happening in the behavior and expectations of the end users. Zero-touch technologies such as contactless payments & RFID scanning will play a significant role in controlling the spread of the contagion by eliminating the touch-required activities from industries such as Supply Chain & Logistics, and Retail.

Digital Transformation is no longer a choice, it has become a necessity. It is an imperative that is enabling businesses to gain resilience and achieve continuity amid the crisis. Powered by Artificial Intelligence & Machine Learning capabilities, digital is what will dominate the wave of the next normal. AI-driven digital transformation will be pivotal to business growth in a post-COVID world. Businesses will increasingly rely on real-time data and insights to assess the risks and take informed decisions. At Cigniti, we have established a 4-pronged AI-led testing approach that incorporates our extensive experience as well as IP to help enterprises achieve business resilience through digital transformation & provide a strongly differentiated value add to our clients. Our result-oriented, comprehensive, AI-driven Quality Engineering services assure high-quality & customer experience @ high-speed.

Industries that see the light

The future is uncertain for every organization of the world. No one knows for sure when everything will get back to normal, and whether this normal will be anything like the normal that we know. Whatever the next normal be, we at Cigniti are working on developing & fortifying our future-forward capabilities to support industries through and after the crisis.

Gartner predicts that all the industries will be materially impacted directly or indirectly due to the impact of COVID-19 in regular operations. Many organizations will face a slowdown, but some industries will have a positive overall impact on technology investments compared to others. Banking & Securities, Insurance, Manufacturing, Retail, & Transportation industries have been the most affected by the Coronavirus outbreak, and uncertainty looms over the longterm impact on all of them. The Communications, Education, Public Sector, and Healthcare industries are seeing a positive impact, which may continue in the long term as well.

TSP Industry Impacts on Technology Investment Due to COVID-19

Industry Short-Term Impact on Tech Investment Long-Term Impact on Tech Investment
Banking and Securities Negative Uncertain
Communications Positive Positive
Education Positive Positive
Public Sector Positive Positive
Healthcare Positive Positive
Insurance Negative Uncertain
Manufacturing Negative Uncertain
Retail Negative Uncertain
Transportation Negative Negative
Source: Gartner

Travel & Hospitality

Although Travel & Hospitality industry has been among the most severely-impacted sectors, it is likely to assume a faster pace of recovery after the outbreak is controlled. With a rich experience in the industry gained from dealing a range of air, travel, & hospitality clients, Cigniti can offer affordable quality engineering solutions to help them accelerate their revival journey.

Independent software vendors

New working ecosystems, social distancing, new hygiene practices, etc. would become the new norm for the way people function, resulting in the emergence of new technologies. This presents a great opportunity to Cigniti as a partner in implementing these technologies that enhance the remote capabilities of global organizations.

Retail & Ecommerce

With most retail stores operating with limited staff, and many others shut down temporarily, consumers are turning to online shopping resulting in the boom of ecommerce. For physical retail stores, embracing zero-touch technologies will help them gain momentum post the crisis. In order to strategically tap on all the touch-points and offer a true omnichannel experience, retailers need to ensure flawless functioning for seamless and secured tech- driven retail transactions. Our comprehensive service offerings span across the retail and digital commerce ecosystem, supported by our Retail and Digital Test Center of Excellence (TCoE) and Domain Competency Group (DCG).

Healthcare & Life Sciences

Hospitals and telemedicine companies are getting overwhelmed with the growing demand for medical devices, diagnostic equipment, and more while struggling to serve the increased numbers of patients and volumes of calls. Many countries including the developed are struggling with shortage of equipmentand medicine. Post-COVID, several governments and international bodies would re- strategize their preparedness to tackle such crisis in future thus leading to the growth of HCLS and its supply chain. With Healthcare, Pharma, and Medical devices being few of the top industries that we have been working with since last 8 years, we have focused on how we can augment our teams capabilities to serve these industry domains. Using our next-gen healthcare testing capabilities, we are prepared to support the Healthcare & Life Sciences sector in their growth.

Banking, Financial Services, & Insurance

Digital transformation is going to be inevitable post COVID. The demand for online banking and zero touch banking would witness the rush to digitalization of the sector. Having helped large, medium, and small BFSI organizations in accelerating their digital transformation journey, Cigniti is well-experienced in testing industry-standard products, implementing omni-channel banking, and delivering end-to- end testing through our dedicated test centers of excellence.

As many of the processes in the insurance industry are paper-based, it is taking a major hit due to the lockdowns. Cigniti is helping global insurers & financial services providers in their digital transformation journey, thereby helping them deliver improved customer experience and gain competitive advantage.


With the closure of schools & educational institutes worldwide, they are adopting alternative methods for educating students through virtual classrooms, distance online learning tools, & remote collaboration tools. The COVID crisis has accelerated digital transformation for the education sector. Having worked with several educational institutes on their digital journey, Cigniti is ready to facilitate seamless distance learning & educating experience for students & teachers respectively.


The pandemic has resulted in the shutdown and massive reductions in various production lines. To mitigate the impact, many manufacturing companies may expedite their process of digitization, smart factory, & Industry 4.0 initiatives. Cignitis IoT testing capabilities & next-gen IP will support the manufacturing industry in building remote monitoring & production capabilities, thus helping eliminate production & supply bottlenecks.

Future of Software Testing

In 2020, we might see a dip in terms of spending (as covered in the above sections) but there are a lot of reports that indicate that the impact would be moderate in terms of the IT spend for short period.

The emergence of new technologies (covered in the above section) will fuel the growth of software testing industry. To meet the demand and to accommodate the rush to move to market has its own challenges like integration, secured transactions, performance, virtualization, etc.

This brings new opportunities for Cigniti focused on result-oriented, comprehensive, AI-driven Quality Engineering services to assure high-quality & customer experience @ high-speed.

NelsonHall expects Traditional Testing Services (TTS) spending growth to be declining over the next five years. TTS spending continues to transfer to Specialized Testing Services (STS), as testing professionals are undertaking more testing activities that were carried on by non-career testers. With testing becoming less manual and more specialized and technical, this transfer is accelerating. Testing spending is driven by STS, growing at 5.6% per annum, while TTS spending is declining.

Service Type Est.Market Size 2018 ($bn) Est.Market Size 2023 ($bn) Est.Market 2018-2023 (%)
TTS Spending 19.6 18.0 -2.0
STS Spending 23.0 30.0 5.6
Total Spending 42.6 48.0 2.4

Digital transformation focused organizations are investing significantly in automation to provide continuous testing for their digital projects and reduce their dependency on manual testing.

Client Segment Est.Market Size 2018 ($bn) Est.Market Size 2023 ($bn) Est.Market 2018-2023 (%)
Efficiency Organizations 13.2 15.3 3.0
Digital transformation -focused organizations 7.8 11.9 8.8
Digital natives 2.0 2.8 8.8
STS 23.0 30.0 5.6

Source: NelsonHall estimates

What does this mean for Cigniti?

Headquartered in India, Cigniti is a leading player in STS. STS delivery remains India-centric. Cigniti sees a huge market potential. Cigniti has helped large enterprises including Fortune 500 companies in accelerating their digital transformation journey.

Opportunities and Threats

Though there may be a slumping business for 2 quarters, but more and more enterprises will focus on accelerating the digital transformation journey, so we see lot of opportunities. The pandemic is not slowing down, and enterprises have tightened their wallets. However, the change in consumer behavior due to COVID has resulted in new channels and technologies. While enterprises will cut down the costs, there will be an equal pressure on their IT teams to deliver the seamless experience to its customers, thus leading to more offshore shift.

Internal controls

The Company has framed satisfactory internal controls and governance within the company as detailed elsewhere in this annual report.

Segment-wise or product-wise performance.

Revenue by Verticals FY 2019-20
ISV 14.1%
Travel and Transport 27.1%
BFSI 16.3%
Others 10.6%
Healthcare 14.4%
Energy and Utilities 4.1%
Retail & e-Commerce 13.4%


Revenue by Regions FY 2019-20
NA 80%
UK & Europe 11%
Canada 5%
Others 1%


Even amidst such a global crisis, Cigniti is able to win logos. We are confident that emergence of new technologies will get new business and we will empower business resilience through our AI-driven quality engineering. We are hopeful that the economy will be back on track on a few months. While key industries like Communications, Healthcare, Public Sector and Education are continuing to grow, there is a dip in Travel & Hospitality where Cigniti has high exposure.

New age enterprises and legacy businesses can bank on our proficiency in digital, loT, Agile, DevOps, etc. Our continuous focus is on value-based selling and on increasing our deal size by winning new enterprise accounts and mining existing accounts. Cigniti looks forward to adopting state-of-the-art digital practices and assisting companies to actualize their business goals. We aim for penetrating into new geographies, winning new clients across industry and domains, and further strengthening our leadership.

Human Resources

HR is critical in ensuring that our most valuable asset, employees, are empowered, enabled, and supported in driving our key business objectives. Our employee strength for FY19-20 is 2236. Our policies, processes, and practices are centered around to attract, engage, empower, and retain the best and the brightest talent. Over the last year, HR has focused on continuous process reengineering, automation and bringing in innovative ways of employee engagement.

Detailed review of HR activities is covered on page no. 34 to 38.

Risks and concerns

While the U.S. contributes to a major of Cignitis revenue, Cigniti has also been steadily expanding across geographies such as Europe & Asia Pacific, and focusing on strategies to enhance revenues from existing geographies. Besides USA, Cigniti also has offices in UK, UAE, SA & Australia to add new logos and deepen its presence in the existing accounts from these geographies.

Competition Risk

While increasing competition in software testing may affect the market share, Cigniti, through a mixture of organic and inorganic routes, has been developing capabilities to remain competitive. Cigniti is the worlds second largest Independent Software Testing Services Company by headcount and has secured a technical positioning of the company brand in the global arena. Through a smart mix of global marketing initiatives, sound industry analyst relations and other brand building initiatives, the Company has been consistently strengthening its brand. Most importantly, Cignitis consistent endeavor to be a thought leader in independent software testing through its offerings, IP, building labs for the connected world, commitment to test engineering community through world class quality engineering events to engage the best minds in quality engineering landscape, and more has ensured that it comes across as the most respected independent software testing services vendor.

Discussion on financial performance with respect to operational performance.


Revenue for the year was Rs. 87,197 Lakhs, reflecting a growth of 7% as compared to the FY 2018-19.


The EBITDA for the year stood at Rs. 12,869 Lakhs as against Rs. 13,277 Lakhs in in the previous year, reflecting a reduction of 3%.

Profit After Tax

The Company has reported Profit After Tax (PAT) of Rs. 12,160 Lakhs in the FY 2019-20 as against Rs. 14,736 Lakhs in the previous year.

Earnings per Share

The EPS (Basic) of the company stood at Rs. 43.87 in FY20 as against Rs. 53.62 in FY19.

Financial Ratios

Following are ratios for the current financial year and their comparison with preceding financial year, along with explanations where the change has been 25% or more when compared to immediately preceding financial year:

Sl No. Ratio description March 31, 2020 March 31, 2019 Change % Explanation
1 Debtors Turnover (in days) 69 55 25% Refer Note 36 A(i)
2 Inventory Turnover (in days) - - - Not relevant for our Company
3 Interest coverage ratio - - - Company has Zero Debt as at Mar20
4 Current Ratios 2.12 1.57 35% Current assets increased on account of higher Trade Receivables
5 Debt Equity ratio - - - Company has Zero Debt. Refer note 14
6 Operating margin (%) 14.8% 16.3% -9%
7 Net profit margin 13.9% 18.1% -23%
8 Return on Net Worth (%) 46% 98% -53% Refer notes 12 & 13