Cognizant, the Nasdaq listed IT services major registered a 2.4% sequential rise in revenue for the first quarter of 2017 calendar year setting itself a strong launchpad to be on track to achieve its guided growth rate of 8-10% for the year.
P P Thimmaya
Cognizant, the Nasdaq listed IT services major registered a 2.4% sequential rise in revenue for the first quarter of 2017 calendar year setting itself a strong launchpad to be on track to achieve its guided growth rate of 8-10% for the year. The company is expanding very deeply into the whole area of digital business, which it is betting to be next big growth area even as it undertakes certain organisational restructuring measures to tune in the efficiencies, said, Debashis Chatterjee, president, Digital Systems and Technology, Cognizant, in an interview with FE’s P P Thimmaya. Excerpts:
What is the realignment programme that Cognizant is undertaking?
In 2016 when we looked at our operational matrix, we felt there could be an margin improvement of 350-400 basis points in the way we run our business over a period of three years. We looked at things like how can we take utilisation higher, improve our pyramid efficiencies, look at our overheads. We have been very successful in the last 20 years and some of these above mentioned areas we did not look into. We ran this exercise internally to look at opportunities for improvements. We plan to improve our operating margins to 22% in calendar year 2019.
What is the voluntary separation packages offered to senior employees?
It is aligned to accelerating our initiatives towards the digital way. As part of this, we have taken steps to ensure that our workforce is able to deliver sustainable and high quality growth. We are recruiting, expanding our facilities to build digital at scale. When we talk about reskilling there will be a situation where some people who will make the cut and some who may not want to make the cut. In this process, we are offering the voluntary separation package to eligible leaders, which is a very small percentage of our total workforce – at the director to senior vice president level.
How do you see Cognizant’s first quarter performance?
It has been a very robust quarter and good start to the year. This quarter positions us to achieve our full year growth guidance of 8-10%. The other thing which is gaining momentum is on the digital front. We need to help our clients to achieve digital at scale. Our advantage is that we have a range of capabilities to drive digital across all aspect of all clients’ activities that are based on three pillars – business, operations and technology. To truly accelerate the shift to digital, we are doing this through both inorganic and organic growth. We’re scaling up our digital skills under the guidance of Chief Digital Officers in each of our industry and regional business units.
How do you see the demand for digital business?
The demand is very robust. We are looking at digital as an end-to-end business. It is still evolving but we are well positioned to ride the wave along with our clients. On the organic side, there is tremendous reskilling which is happening within the organisation. We are developing more than 10,000 engineers and architects, another 10,000 across niche areas of artificial intelligence, the internet of things, and cognitive computing. Given the tens of thousands of employees already skilled in these areas, the target is that by the end of this year, we will have 100,000 of our associates who are technically proficient in specialised areas of digital.
Is there a turnaround in the financial services vertical?
The demand is positive compared to last year. The earnings of banks is pretty good though there is some pressure on the large banks. Most of our growth comes from new areas like cloud, mobility which is all digital. Overall, it is looking positive.
What kind of impact would you see from regulatory changes in US healthcare sector?
We have to wait and watch. We are definitely seeing a modest improvement in quarter one. It is too early to say whether it will be sustainable. The regulatory environment is still not clear in terms of changes but we are still optimistic.