Nasdaq-listed Cognizant Technology Solutions is aiming to get back on growth trajectory with the appointment of Ravi Kumar S as its new chief executive officer. Going forward, the IT services major plans to focus on large deals as well as strategic acquisitions that complement its digital capabilities. Rajesh Nambiar, chairman and managing director, Cognizant India, talks about the company’s growth strategy, acquisitions, and focus on large deals, in an interview with Ayushman Baruah.
From your initial conversations with new chief executive Ravi Kumar, is there a shift in strategy and what are some of the focus areas?
First of all, Cognizant’s overall strategy remains unchanged. Our mantra now is to bring back growth and be the employer of choice. Cognizant’s growth strategy has four pillars: accelerating digital, globalising Cognizant, increasing our relevance to customers, and repositioning our brand. Ravi is examining the way we approach each of these pillars with the goal of accelerating growth. There are three areas of focus for the company that are tied to growth. First, it is about making Cognizant an employer of choice in the industry. Second, it is strengthening our ability to win large deals, and third is enhancing our operational discipline.
Cognizant has given a negative to flat revenue guidance for Q1 and refrained from a full-year guidance. How do we read into this?
The primary reason for not giving a full year guidance is that our new CEO has just joined and it’s been just three weeks in the company. This means he would need some time to understand the company before making commitments on forecasts. But as we said, we should be able to give a guidance in our next earnings in early May.
There is not too much of a demand slowdown but we do see some global economic uncertainties which undoubtedly will have some impact on our clients and the overall industry as well. Even though our fourth quarter bookings have been strong, some of the large deals will take time to convert into revenues and some of the benefits will be seen in the subsequent quarters and not necessarily in the first quarter. Hence, we have a muted guidance for Q1.
What is your strategy to mine large deals?
Over the last few years, I think we have become better at not just winning but managing large deals. These deals could be very margin dilutive so we need to manage them really well. We need to have advanced solutioning capabilities which is what we have added. Last week, we announced a new 10-year services agreement valued at about $1 billion with CoreLogic. So, these are the type of deals that you will see more and more as we move forward. Such kind of deals demonstrate the confidence clients place on us as these are long-term commitments. There are two teams looking at our large deals’ portfolio — one in North America and the other in GGM (global growth market). I believe there are opportunities in both these markets.
Having made many acquisitions in Q4, what will be your M&A strategy going forward?
Our M&A strategy has not changed at all. We continue to stay focussed on ensuring we add capabilities to our digital battlegrounds as we called out before. In Q4, we made four acquisitions, all geared towards increasing digital revenue mix and enhancing our consulting capabilities. We completed two acquisitions and announced an additional two in the fourth quarter. The two acquisitions we completed are AustinCSI, a digital transformation consultancy to strengthen our enterprise cloud and data analytics advisory services, and Houston-based Utegration, a full-service consulting and solutions provider specialising in SAP technology for the energy and utilities sector. We announced the acquisitions of UK-based Mobica, an IoT software engineering services provider, and OneSource Virtual where we acquired its professional services and application management practices.