New CEO Kumar set to push reset button at Cognizant | The Financial Express

New CEO Kumar set to push reset button at Cognizant

A Bloomberg Intelligence report corroborates that one of Kumar’s top priorities would be to bring under control its high attrition rate.

New CEO Kumar set to push reset button at Cognizant

IT major Cognizant Technology Solutions is getting a chance to push the reset button and get back to growth under its newly-appointed chief executive officer (CEO) Ravi Kumar S. A former president at rival Infosys from 2016-22, Kumar led the global services organisation across all industry segments and also served as chairman of the board of Infosys BPM.

Analysts believe Cognizant, under its former CEO Brian Humphries, was facing challenges on two major fronts – growth and talent. “It underperformed peers on growth, especially at a time where growth in IT services accelerated for leading peers such as Accenture, Infosys and Tata Consultancy Services (TCS), owing to pent up demand from clients during and after the pandemic. Second, its attrition was above most peers and exacerbated its ability to meet client demand. It also lost many senior leaders who left given the changes at Cognizant over the last few years. This is a critical layer that Ravi will need to rebuild,” said Nitish Mittal, partner, Europe Technology Practice, Everest Group.

A Bloomberg Intelligence report corroborates that one of Kumar’s top priorities would be to bring under control its high attrition rate. “Kumar will need to tackle supply-side constraints that repeatedly clouded visibility in 2022, when guidance cuts followed each reporting period through Q3,” the report stated.

Cognizant’s voluntary attrition rate, on a trailing 12-month basis, stood at 29% during the September quarter compared to TCS’ 21.5%, Infosys’ 27.1%, Wipro’s 23% and HCL Tech’s 23.8%. All Indian IT firms have reported further reduction in attrition during the December quarter. Cognizant, which follows the calendar year, is yet to announce its October-December earnings.

The new CEO has a chance to revive the Cognizant growth story through a number of strategies, according to Everest’s Mittal. “First, he should sort out the talent turmoil and infuse some stability. This is where he can use his experience to make a positive impact quickly as he was credited with Infosys’ talent localisation story,” Mittal said. Second, Kumar must restore the company’s brand name and trust, both with clients and employees, as he is a seasoned senior executive who can manage the board and investors well.

Third, Kumar should potentially make a mark in large deals. “This will be imminent given the cost agenda of enterprises amidst a recessionary environment and Infosys’ large deals background, which is leading the peers currently,” said Mittal.

Finally, Kumar will have to focus on achieving a sustainable profitable growth. “Cognizant should start by aiming to improve its competitive positioning. This is an area where Ravi can bring in an effective growth leader with an established track record,” added Mittal.

In his new role, Kumar must quickly gain back the trust of the senior executives and make them work together as a team, an independent IT analyst said on condition of anonymity. “Arun (Kumar) has a tough job at hand to bring back the growth and respect the company had earned during the tenure of Francisco D’Souza (who served as CEO from 2007-19).”

In 2022, Cognizant cut its revenue growth forecast thrice during each reporting period through the third quarter, implying both macro-economic and company-specific pressures. During the Q3 earnings in November last year, Cognizant lowered its full-year 2022 revenue growth guidance to 7% in constant currency to about $19.3 billion, reflecting currency headwinds and an uncertain macroeconomic environment. It had forecast a full-year revenue growth of 8.5-9.5% during the June quarter.

Cognizant said its Q3 revenue of $4.9 billion was below its guidance range, driven primarily by lower billable head count in North America. “The higher-than-expected attrition coupled with strong competition for talent in North America made it challenging for us to maintain required staffing levels to meet our revenue forecast,” said Jan Siegmund, chief financial officer, Cognizant.

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First published on: 19-01-2023 at 02:20 IST