1. Healthcare soft due to investments, but we are bullish

Healthcare soft due to investments, but we are bullish

Nasdaq-listed IT services major Cognizant is expected to cross the $10-billion revenue threshold...

By: | Published: November 8, 2014 12:07 AM

Nasdaq-listed IT services major Cognizant is expected to cross the $10-billion revenue threshold by the end of this calendar year with an employee strength in excess of two lakh. R Chandrasekaran, executive vice-chairman, Cognizant India, in an interview with PP Thimmaya says he expects a healthy demand environment for technology services. Excerpts

How do you view Cognizant’s third quarter performance?
Our growth came in above the guidance. We revised the full-year revenue guidance upwards despite a $40-million currency headwind during the quarter. We feel pretty good about the healthy demand environment and the deal win rate. Overall, we remain very optimistic for the rest of the year. In the second quarter, we had talked about certain client-specific situations which led to a lower guidance, but their effect seems to have abated.
As for the 2015 calendar year, it is too early as customers have just started thinking of next year’s budgets. We just concluded a customer conference in the US and the initial indications are that demand will be good, though a lot will be known when they finalise the IT budget next year.

How is the new digital strategy playing out?
Our strategy is to help our customers run better and run different. Run better is helping our customers bring in operational efficiencies and reduce the total cost of business. It is focused on creating synergies and guaranteed business benefits.
Under run different, with the advent of digital technologies, many of our customers are wanting to differentiate themselves leveraging these. The investments that we have made in creating the digital capability within Cognizant is helping us win a fair share of deals from existing and new customers.
Will you look at investing in IT startups?
From an industry point of view, it is a good thing. Customers are looking for innovation and, whoever can bring those ideas, we should embrace them. It also gives the startups the reach they need. We will continue to look for those kinds of opportunities where we can invest and take those ideas.
In Cognizant, we already have an investment fund that has, so far, promoted ideas within the organisation. We will continue to look outside also, but nothing has come so far. This will go hand-in-hand with our small tuck-in acquisition strategy.

Your smaller business verticals, like retail, manufacturing and logistics, grew faster this quarter.
We have a well-balanced business. Financial services has been big and strong historically. This quarter, retail and manufacturing grew 3.6% sequentially while communication, technology, information and media grew more than 4%, though on a smaller base.
Our strategy is to keep investing in these segments — all these are strategic for us. We are quite encouraged by the growth rate across industry segments. For example, healthcare was very strong last year but a little soft this year because of the investments that have already been made in the sector. We remain bullish on healthcare.

What benefits will Cognizant accrue from the
$2.7-billion acquisition of healthcare IT company TriZetto?
It is a strategic play as TriZetto addresses half of the US population and a fourth of the healthcare provider segment. Their offerings in the healthcare segment are phenomenal and combining this with Cognizant’s infrastructure can be a very good value proposition. We can reinvent the way solutions are delivered through cloud for the healthcare segment.

Is continental Europe still a challenging market?
Europe is a very important market for us, though it has been lagging behind the US in adoption of the global delivery model. However, things are changing rapidly there and it is along-term play. We have made a couple of acquisitions in Europe and remain optimistic on the future. One cannot judge a region from 1-2 quarters of performance.

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