New Jersey-headquartered Cognizant labelled “preposterous” Infosys’s allegations that the former had hired current chief executive officer (CEO) S. Ravi Kumar to slow down the development of Infosys’s healthcare software product (Helix). Kumar, an Infosys veteran, left Infosys in October 2022 and joined Cognizant as CEO in January 2023.
In a filing on 10 March in a Dallas court, Cognizant said Infosys’s allegations were absurd and implausible. “It thus defies common sense to suggest that Cognizant’s board of directors would select the company’s CEO—or ‘time’ his appointment—in order to snub Infosys, or for any reason other than to install a company leader who can promote Cognizant’s business growth and strategic interests,” read Cognizant’s court filing.
“It likewise blinks reality to suggest that Cognizant would select a CEO, or hire the other two named employees, based on their alleged slow-rolling of Helix, as opposed to their demonstrated skills in the marketplace,” the filing read.
Also read | Cognizant walks a tightrope as activist investor Mantle Ridge builds $1 billion stake
This is the first time that Cognizant has responded to Infosys’s complaint against Kumar, which was filed on 9 January in a counter-complaint after Cognizant sued Bengaluru-headquartered Infosys in August last year for stealing trade secrets regarding its proprietary healthcare software. Infosys had denied the allegations and responded with its own counterclaims, suggesting that Cognizant has not properly identified the trade secrets that it alleges were stolen.
Meanwhile, Cognizant’s counsels added that Kumar asking clients to avoid Helix would not amount to trade secret theft, but competition.
“At most, the Counterclaim alleges that Kumar used his ‘inside knowledge’ to ‘prevent key accounts from exploring Infosys Helix’, but understanding a rival’s product sufficiently well to convince customers not to choose it is competition—not trade-secret theft,” said Cognizant.
Cognizant is represented by Gibson Dunn & Crutcher LLP, a Los Angeles-based law firm, while Infosys is represented by Jenner & Block LLP, a Chicago-based law firm.
Also read | Why Cognizant’s salary hike announcement is a cause for concern
The two counsels did not immediately reply to emails sent on Thursday.
The battle assumes significance considering the importance of the healthcare vertical to both the companies. While Infosys gets about 7.5%, or $1.4 billion, of its full-year revenue from clients in the life sciences sector, Cognizant gets almost a third, or about $5.9 billion, from clients in this space.
Executive challenges
This is not the first time that Cognizant has run into issues regarding its executives.
The company was embroiled in a nine-month issue with Wipro over the appointment of Jatin Dalal as its chief financial officer. Dalal, previously at Wipro as its chief financial officer (CFO) since 2015, joined Cognizant as its CFO in December 2023. Wipro filed a complaint in a Bengaluru city court, alleging that Dalal had not adhered to the employment contract which restricted him from working with Wipro’s rivals for a period of up to one year. This matter was settled out of court in July last year.
Cognizant’s latest salvo comes less than three months after it accused Infosys of getting caught “red-handed” while stealing proprietary information.
Read this | Cognizant says Infosys was caught ‘red handed’ stealing TriZetto trade secrets
Cognizant acquired healthcare software QNXT and Facets in 2014 by taking over TriZetto, which provides administrative solutions in the healthcare space. These products are used by health insurance companies in the US to process health insurance claims.
Infosys made its own healthcare product, Helix, in 2022, as an alternative to QNXT and Facets. Both the companies have been servicing clients in the healthcare sector using the two software products.
The backdrop
The legal wrangle comes in the backdrop of questions being raised on the growth of the IT services industry. Over the past three weeks, four brokerages including Morgan Stanley, Kotak Institutional Equities, Motilal Oswal Financial Services, and JM Financial have forecast a slower-than-anticipated growth for the industry.
Cognizant is plagued with its own set of issues. Even though it recorded 4% growth in 2024 to end the year with $19.7 billion in revenue, the company has not been able to post growth after discounting its recent acquisitions. Kumar, 53, is tasked with bringing about a turnaround at the company.
And read | Cognizant-L&T bribery case: Will US govt’s ‘essential witness’ be able to testify?
Cognizant, which follows a January-December accounting year, reported $19.7 billion in revenue for 2024. Infosys, which follows an April-March financial year, reported a revenue of $18.6 billion in FY24.
Earlier this month, news also emerged of Mantle Ridge, a US-based activist investor, picking up over a $1 billion stake in Cognizant, although the company told Mint that it welcomed the new shareholder.
