SCDATA | GCPS System

Strengths and Weakness Analysis of IT Consulting & Other Services

Week 4 - Final Project

Eddie Alexis Rodriguez Rojas

Information Systems Engineering Student

u201714992@upc.edu.pe

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GCPS Navigator - Companies selection

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Se elige a IBM, Cognizant y Kyndryl para su análisis debido a que la plataforma cuenta con datos de estas empresas en el año 2021

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GCPS Navigator - Companies selection

Despite not being all the main competitors, IBM, Cognizant and Kyndryl were chosen for this analysis because they are the main companies in this sub-industry whose data until 2021 is available on the platform.

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Enterprise Comparison - Size

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IBM tiene gross profit y revenue muy por encima de sus competidores como Cognizant y Kyndryl Holdings
Por otro lado, Cognizant se acerca a IBM en profit before tax pese a tener menor revenue
Asimismo, si bien Kyndrill es peor que sus más grandes competidores en casi todas las dimensiones, tiene un revenue equivalente al de Cognizant

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Enterprise Comparison - Size

IBM has gross profit and revenue well above its competitors like Cognizant and Kyndryl Holdings.
On the other hand, Cognizant is close to IBM in profit before tax despite having lower revenue.
Also, while Kyndrill is worse than its biggest competitors on nearly every dimension, it has revenue equivalent to Cognizant's.

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Enterprise Comparison - Profitability

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Observamos que si bien IBM es superior en gross margin, Cognizant lo supera en el resto de dimensiones
Cognizant al tener mejor operating margin y net margin, pese a tener menor gross margin, por lo que demuestra ser la empresa más rentable de entre los competidores.
Probablemente, la causa se encuentre en su return on assets más alto, lo cual podría ser un indicador de que invierten en mayor investigación y tecnologías que les permiten tener procesos más eficientes que le generan ahorros significativos.
Kyndryl resulta el peor de los competidores en todas las dimensiones.

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Enterprise Comparison - Profitability

We find that while IBM is superior in gross margin, Cognizant is superior in all other dimensions.
Because Cognizant has a better operating margin and net margin, despite having a lower gross margin, it therefore proves to be the most profitable company among its competitors.
Probably, the cause lies in their higher return on assets, which could be an indicator that they invest in more research and technologies that allow them to have more efficient processes that generate significant savings.
Kyndryl is the worst of the competitors in all dimensions.

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Enterprise Comparison - Return on Investment

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Enterprise Comparison - Return on Investment

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Notamos que Kyndryl tiene valores negativos en return on invested capital, return on equity y return on assets, lo cual lo vuelve en una pésima opción para invertir.
Mientras que Cognizant se desempeño mejor que IBM en todas las dimensiones con excepción del return on equity.
Esto se debe a que IBM cuenta con mayores recursos para financiarse, probablemente, debido a la diversificación de sus propuestas de valor como las ventas de hardware, sus ofertas de infraestructura de nube y de alojamiento de Internet

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Enterprise Comparison - Return on Investment

We note that Kyndryl has negative values for return on invested capital, return on equity, and return on assets, which makes it a lousy investment choice.
While Cognizant outperformed IBM in all dimensions except return on equity.
This is because IBM has more resources to finance itself, probably due to the diversification of its value propositions such as hardware sales, its cloud infrastructure offerings and Internet hosting.

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Enterprise Trend - Size

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Se observa que para IBM, desde el 2015 hasta la actualidad los ingresos se han estado yendo a la baja. Inclusive vemos una decaida pronunciada desde el año 2018 hasta fines del 2019 tanto en ingresos como en ingresos operativos. Asimismo vemos una caida aún más pronunciada en los ingresos en el año 2020, pero con una estabilización de los ingresos operativos.

Cognizant por su parte estuvo aumentando sus ingreso y desde 2020 en adelante ha tenido un aumento pronunciado tanto en ingresos como ingresos operativos.

Kyndryl Holdings por su parte, se ha encontrado con una tendencia a la baja en sus ingresos desde su inicio en el 2018 manteniendo perdidas operativas. Pero que tuvieron una aparente tendencia a la recuperación desde el 2020.

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Enterprise Trend - Size

It is observed that for IBM, from 2015 to the present, revenues have been going down. We even see a pronounced decline from 2018 to the end of 2019 in both revenue and operating income. We also see an even steeper drop in revenue in 2020, but with a stabilization of operating income.
Cognizant for its part has been increasing its revenue and from 2020 onwards has had a pronounced increase in both revenue and operating income.
Kyndryl Holdings, for its part, has encountered a downward trend in its income since its inception in 2018, maintaining operating losses. But they had an apparent recovery trend since 2020.

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Enterprise Trend - Financial Health

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Si bien IBM tiene los liabilities más altos, se mantiene constante por debajo de 1, lo cual significa que está fuera de la zona de peligro. ASimismo, su long term debt ratio se mantiene debajo de 0.4, lo cual quiere decir que con cerca del 40% de sus activos podrían pagar sus deudas a largo plazo. No obstante, tiene una tendencia a la baja en su current ratio, estando incluso por debajo de Kyndryl.

Cognizant por su parte, se ha mantenido por debajo de 0.4 liabilities y con una reciente tendencia a la baja. Sumado a un ratio de liquides más alto de entre sus competidores y con un long term debt ratio de 0.1.

Mientras tanto, Kyndryl Holdings se mantiene con una peligrosa tendencia a la alza de sus liabilities, la cual se volvió más pronunciada desde el año 2020 en adelante. Al igual que en su long term debt ratio tuvo un incremento bastante fuerte desde el 2020.

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Enterprise Trend - Financial Health

While IBM has the highest liabilities, it remains consistently below 1, which means it is out of the danger zone. Likewise, its long term debt ratio remains below 0.4, which means that with close to 40% of its assets it could pay off its long-term debts. However, it has a downward trend in its current ratio, being even below Kyndryl.
Cognizant for its part, has remained below 0.4 liabilities and with a recent downward trend. Added to a higher liquidity ratio among its competitors and with a long term debt ratio of 0.1.
Meanwhile, Kyndryl Holdings remains on a dangerous upward trend in its liabilities, which has become more pronounced from 2020 onwards. As in its long term debt ratio, it had a fairly strong increase since 2020.

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Conclusions (Strengths and Weakness)

There is no question that IBM is by far the largest company by revenue level but it is losing market share, which is reflected in its current ratio. However, IBM manages to outperform ROE by a wide margin, probably due to the diversification of its value propositions.
Cognizant turns out to be the most profitable, probably due to the appreciation of its assets and its operating efficiency. In addition, it is the company with the best financial health, being able to deal with short-term debts and even only requiring to liquidate less than 10% of its assets to pay its long-term debts.
Kyndryl, for its part, although it has a level of income comparable to Cognizant, is by far the least profitable company evaluated, since it is at a loss and, therefore, generates negative returns. It is also getting dangerously into debt by acquiring assets. This is probably because you are looking to invest in new technologies in search of a competitive advantage.

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Value Driver Analysis of IT Consulting & Other Services

Week 4 - Final Project

Eddie Alexis Rodriguez Rojas

Information Systems Engineering Student

u201714992@upc.edu.pe

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Value Driver Analysis - Return on Assets vs Liability Asset ratio

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Encontramos una correlación negativa bastante fuerte entre el return on assets y la relación liability asset ratio. Es decir, a mayor relación liability asset ratio puede conducir a un menor return on assets para esta subindustria.

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Value Driver Analysis - Return on Assets vs Liability Asset ratio

We found a fairly strong negative correlation between return on assets and the liability asset ratio.
In other words, the higher the liability asset ratio can lead to a lower return on assets for this sub-industry.

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Value Driver Analysis - Revenue Growth Rate vs Gross Margin

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Se observa una correlación positiva entre el Total Revenue Growth Rate y el Gross Margin. Lo que implica que un precio alto o, de manera equivalente, un gross margin alto, puede conducir a una menor revenue growth rate para los IT Consultants

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Value Driver Analysis - Revenue Growth Rate vs Gross Margin

A positive correlation is observed between the Total Revenue Growth Rate and the Gross Margin.
This implies that a high price or, equivalently, a high gross margin, can lead to a lower revenue growth rate for IT Consultants.

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Value Driver Analysis - Sales General Admin Cost / Total Revenue vs Inventory Turnover

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Encontramos otra fuerte correlación negativa entre los ales General Admin Cost over the Total Revenue  y la Inventory Turnover, lo que implica que una mayor rotación de inventario puede conducir a un menor costo operativo como porcentaje de los ingresos para las venta minoristas.

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Value Driver Analysis - Sales General Admin Cost / Total Revenue vs Inventory Turnover

We found another strong negative correlation between General Admin Cost over the Total Revenue and Inventory Turnover ales, implying that higher inventory turns can lead to lower operating cost as a percentage of revenue for retail sales.

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Value Driver Analysis - Operating Margin vs Gross Margin (SubIndustry)

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Haciendo un análisis de los últimos 3 años, se observa que existe una correlación positiva entre el Operating Margin y el Gross Margin en esta subindustria, lo cual quiere decir que las empresas suelen ser eficientes a nivel operativo.

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Value Driver Analysis - Operating Margin vs Gross Margin (SubIndustry)

Making an analysis of the last 3 years, it is observed that there is a positive correlation between the Operating Margin and the Gross Margin in this sub-industry.
This means that companies tend to be efficient at the operational level.

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Value Driver Analysis - Operating Margin vs Gross Margin (Main Companies)

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Value Driver Analysis - Operating Margin vs Gross Margin (Main Companies)

Making a comparison between IBM, Cognizant and Kyndryl it is observed that:

Cognizant is always above the curve in the last 3 years, which demonstrates better operating efficiency even than IBM, which has a higher revenue level.
Meanwhile, Kyndryl tends to be below the curve in every year and with some instability.

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Conclusions (Value Driver Analysis)

In this sub-industry, the one with the most debt has the least return on their investment. Likewise, high prices are handled, therefore there are few opportunities to increase income
However, we know that this industry is very efficient at the operational level. Which is why retailers with high inventory turnover can get lower operating costs.
While IBM is the biggest, Cognizant has proven to be much more efficient at an operational level. While companies like Kyndryl remain unstable due to their indebtedness.

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Week 4 - Strengths and weaknesses and Value Driver Analysis of IT Consulting & Other Services

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