Cognizant's U.S. shares have jumped 18 percent since the end of June, compared with 6.9 percent for the American depositary receipts of Infosys. In dollar terms, Tata Consultancy's India-traded stock is up 14 percent.

The U.S. company's selling, general and administrative expenses as a proportion of sales increased from 21 percent in 2010. The level at Infosys was little changed at 11 percent in the year ended March 31. Tata increased sales spending about 350 basis points to 20.5 percent of revenue between 2001 and 2008, according Ankur Rudra, an analyst at Ambit Capital Pvt.

"The market has changed in a way to favor Cognizant's model more than the Infosys model," said Pralay Kumar Das of Elara Securities Ltd. in Mumbai, the top-ranked analyst for Infosys and who advises investors sell the stock.

The main reason for Cognizant's growth is "aggressive investment in the sales force and aggressively pursuing deals," said Manoj Behera, an analyst at Equirus Securities Pvt. in Ahmedabad.

'Risky Focus'

Cognizant completed 14 acquisitions in the past decade, focusing on software, computing and consulting services, according to data compiled by Bloomberg. Infosys meanwhile has announced 12 acquisitions, including outsourcing back-offices of Citigroup Inc. and Koninklijke Philips Electronics NV, and the consulting firm Lodestone Holding AG. Rather than raising the share of revenue from consulting, Infosys has set a goal to expand revenue by selling software products.

That's a risky focus for Infosys, according to Rod Bourgeois, an analyst in New York at Sanford C. Bernstein & Co. "If Infosys were thriving better in its core services businesses, it would have less need for products and platform-based growth," he said last month.

Worldwide demand for consulting services is expected to remain high, Gartner Inc. said July 9. Global spending on IT outsourcing services will climb 2.1 percent this year from $246.6 billion in 2011, led by growth in Asia, the Stamford, Connecticut-based research company said Aug. 7.

Even as Indian IT companies remain the go-to providers of low-cost operations like call centers and basic software maintenance, Cognizant says demands of clients are changing.

Customers now want consultants to advise them on the best use of their technology budgets and to offer specialized services specific to a company, said Gordon Coburn, president of Cognizant, whose employees are mainly in India.

"It's no longer a model of labor arbitrage," Coburn said in a telephone interview from London. What clients want is "helping them figure out how to use technology, helping them to design their systems, helping them to do large program management, helping them to understand what changes in regulations mean for their technology infrastructure," he said.

As a result, Cognizant is hiring more of what it calls high-end labor — workers with relationship management, consulting and industry experience who deal directly with customers onsite, Coburn said.

Cognizant's revenue in the quarter ended June 30 rose 21 percent from a year earlier to $1.8 billion, surpassing Infosys's sales for the first time, according to data compiled by Bloomberg. Tata was the largest Indian IT-services provider, with revenue of $2.75 billion. Sales at Infosys were $1.78 billion.

'Unreasonable Terms'

Cognizant has projected revenue of at least $7.34 billion for 2012. Infosys, which cut its forecast for sales in the year ending March 31 to no less than $7.34 billion, has emphasized profitability over revenue expansion and turned down projects that would trim margins.

"Refusing to accept unreasonable terms and walking away from business" with a company that contributed 25 percent of revenue was "a test of our resolve," Chairman Emeritus N.R. Narayana Murthy said in a letter to shareholders before he retired last year.

The company makes decisions based on its goal of meeting "clearly articulated aspirations," Infosys Chief Executive Officer S.D. Shibulal said on Aug. 29. "We've defined it as above-industry average growth, and one of the industry-leading margins."

Cognizant on average allocates 30 percent more workers to a client than Infosys, and mostly in roles such as consulting that may lead to more contracts, according to Offshore Insights. The Pune, western India-based researcher cited a study it conducted among 15 customers of both Infosys and Cognizant in the 12 months ended March that was used to advise clients on which services provider to choose.

Among the 15 companies, 14 increased the proportion of work they outsourced to Cognizant over the period, said Sudin Apte, chief executive officer of Offshore Insights.

A higher presence at customer sites gives Cognizant greater ability to "mine" a customer account for more contracts than Infosys, said Apte, who ran the India operations of global research company Forrester Research Inc. for a decade.

Cognizant's market share has doubled in seven years to 18 percent in the year ended March, according to an April 19 report from CLSA Asia-Pacific Markets. Infosys's share fell 4 percentage points to 21 percent, while Tata's fell 3 percentage points, CLSA said.

Increased spending on sales and marketing has come at the expense of profitability for Cognizant, whose operating margin narrowed to 14 percent last year from 16 percent in 2010. Infosys's margin was little changed at about 25 percent in the 12 months ended March 31, while that at Tata slipped to 21 percent from 24 percent in the same period.

"Infosys has been more keen on protecting their margins, and of course they're underperforming in a market that is a lot more keen on chasing growth," said Walter Rossini, who manages $200 million of Indian assets at Aletti Gestielle SGR SpA in Milan. "This strategy has not paid off for Infosys."

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