Plan to grow 8-9% ahead of Nasscom projections

Nasdaq-listed Cognizant Technology Solutions has lowered its full-year guidance but is confident of meeting the revised growth target of 20% this year despite macroeconomic concerns. R Chandrasekaran, group chief executive (technology and operations), Cognizant, tells FE?s Debojyoti Ghosh that though the environment in Europe and North America is not ?rosy?, the company is ?very bullish? about its growth outlook and is aiming to grow 8-9% ahead of Nasscom?s projections. Edited excerpts:

Has the slowdown in IT spend caught up with Cognizant too, forcing it to cut its full-year revenue outlook to 20% from 23%? What is it that made you lower the outlook?

As we entered the year, we saw an upswing in the business. But some of the acceleration that happened during the beginning of the year slowed down. There was weak demand from some of our large banking clients in North America. The customers had a more conservative approach towards IT spend. Overall the macro environment is challenging as the scene in Europe and North America is not as rosy as it used to be in 2010-11. However, we are still very bullish about our growth target in 2012 and expect to grow 8-9% ahead of the Nasscom projections. We are confident of achieving our target given the differentiating models that we adopt for business.

With a slowdown in the discretionary spending, which verticals have been impacted the most?

There is a lot of structural changes happening across industries as companies are struggling to maintain costs and, at the same time, looking at innovation and business transformation. In the BFSI segment, the banking industry had a major impact, while in the healthcare vertical, pharma is going through a challenging phase. And in this space, the bulk of our work comes under discretionary spend. We have seen a slowdown among our large banking customers in North America and Europe. However, the overall healthcare business is doing well, especially the health insurance segment. Currently, BFSI contributes 40% to our overall revenue and it will continue to do so, while banking remains flat or lower than company average. Insurance as a vertical is doing well, we had a sequential growth of 6% in Q1. Retail and manufacturing also remain strong verticals. Despite the ongoing challenges we expect a broad-based growth this year.

The quarterly results of the top-tier Indian IT players hinted at a muted business environment and Cognizant lowering its revenue outlook indicates a similar sentiment. How do you assess the current environment?

It is definitely not as great as it was in 2010-11. There is volatility in the market. However, we expect North America, one of the major markets for IT players, to stabilise during the later part of the year. The market condition should be better by then. For Cognizant, we are confident that the right mix and offerings will help us drive demand even in this muted environment. Our offerings like BPO, infrastructure services and consulting are very strong. Our BPO business has grown more than company average supported by expansion of work with existing clients and recent wins with new clients. Recently we have won multi-year deals with major healthcare firms to provide claims processing, enrolment, and other services. We have also added another multi-year deal involving the delivery of clinical data management and drug safety services for a pharmaceutical company in the Asia Pacific.

If you achieve the revenue forecast of $1.79 billion during the April-June quarter, you may surpass Infosys. How do you see competition with Indian IT majors?

This is not something that we chase internally. We are more concerned about our growth ahead of the industry. Creating new capabilities, offerings and gaining market share is our major focus. We are more concerned about how to increase our market share and be ahead of industry growth. Even in the current environment, a 20% growth forecast is best in the industry.

During the January-March quarter Cognizant had a net addition of 2,800 people. What are your hiring plans for India and the US?

We ended the quarter with 140,500 employees. Going forward, headcount growth will continue to be robust. We hired a lot of graduates who will be joining us during Q2 and Q3. At Cognizant, we maintain a balance between lateral and campus hires, the ratio is normally about 50:50. About 75% of our overall headcount is based in India.

For the US, we have a strong hiring plan. We have recruited several hundreds of experienced professionals in the US in the last few months and a couple of hundred graduates from campuses. While we have done undergraduate recruiting for specific needs earlier, in 2011 we started focusing aggressively on key universities for our pan-organisation needs. Last year, we visited 14 undergraduate campuses and four B-schools in the US, including Pennsylvania State University, Rutgers, Virginia Tech, University of Texas and others.