Cognizant, the Nasdaq-listed IT services major with large employee presence in India, provided an upbeat revenue guidance for 2018 in the range of 8-10% and projected an improvement in margins. The company continues to hold on to its growth momentum by registering a 9.8% growth in revenues in 2017 despite the subdued environment for the IT industry. In an interview with FE’s PP Thimmaya, Debashis Chatterjee, president, global delivery, said the company is very bullish on the prospect of its digital business in 2018. This segment reported a 30% growth in 2017.
Cognizant has given a reasonably upbeat guidance of 8-10% in the current environment. Your comment.
If you look at the guidance we have given, you will find the scale has turned bigger. We feel good about it. The overall demand environment is picking up. The US economy continues to do well. The big theme is digital and this whole transformation is not unique. Every client we work with is going through some sort of digital transformation. We feel confident now given the investments we have done in the digital segment over the last few years. Our guidance factors all these elements. Our digital revenue grew by 30% in 2017. The future growth is going to be digital at scale.
Has the focus on digital translated into larger deals for Cognizant?
There is a digital disruption which is happening with every client we are engaged with. This is primarily in three areas – business model, operations and technology. In some cases, all the three areas are being disrupted, while in others, it may be one or two. There are only a few providers who can essentially play at all the three interfaces providing end-to-end service. The investments we have done in the past have positioned us well for 2018. Digital is going to be key focus for most of the clients.
Is the digital transformation happening across sectors?
Customers do not have the choice anymore in terms of whether they want to be digital or nor. Most of the customers will have to take a call in what extent they need to go digital. The focus is how do they simplify the technology landscape so that digital applications can be rolled out.
The financial services segment grew 5% in 2017 which is lower than the company’s growth rate.
These are still early days. All the practices will not be performing the same way every year or quarter. In financial services, we saw that insurance and mid-tier banks grew in double digits in 2017. However, large money-centered banks are still focused on the traditional IT so that they can free up some dollars and shift more towards digital. In the large and medium sized banks, we are beginning to see some recovery. Our guidance has factored in the modest improvement in financial services. However, there are other industries which has grown extremely well for us.
Why did Cognizant’s headcount remain flat in 2017?
We were very much focused in terms of utilisation and in other areas such as reskilling and retraining; so our addition was almost flat. In 2017, the headcount growth did remain flat but we continued to hire in right areas such as digital. In 2018 also, we will continue to hire largely in the digital segment.