Nasdaq-listed Cognizant Technology Solutions continues to face near-term challenges which have impacted its bookings and revenue during the third quarter. Cognizant, which follows the calendar year, lowered its full-year 2022 revenue growth guidance to 7% in constant currency to about $19.3 billion, down from 8.5-9.5% it had guided during the June quarter. Rajesh Nambiar, chairman and managing director, Cognizant India, talks about the current challenges as well as the company’s strategy to move to growth trajectory next year, in an interview with Ayushman Baruah. Edited excerpts:
What are the reasons for lowering revenue growth guidance for 2022?
We have revised the full-year 2022 revenue growth guidance to 4.5%, or 7.0% in constant currency, which reflects currency headwinds and an uncertain macroeconomic environment. The near-term challenges on revenue are attributable to several factors like an uncertain global macroeconomic environment that impacted bookings and revenue, reduction in the US onshore billable resources in the recent quarters, a reduction in visa travel, and Covid-induced shift to near and offshore delivery centres. The financial impact of this US headcount reduction is magnified, given this is our highest revenue and margin dollar per head population.
Do you have a strategy to get to the growth trajectory next year?
We are approaching 2023 with a focus on reversing these trends. We have already initiated a series of actions to increase US onshore billable resources, including enhanced focus on lateral hires and subcontractors, accelerated visa travel, and targeted compensation programmes, and expect to see progress in Q1 2023. We are also continuing to reposition to higher value services, increasing operating margins and cash flows to enhance investments in the business to drive growth. Additionally, while continuing to execute on our business strategy, we are driving value for shareholders, having deployed $1.5 billion in share repurchases and dividends.
Do you see clients cutting down on discretionary spending?
Yes, we see client spending being reduced on lower-priority projects or those with a longer return on investment. We are also seeing some early signs of slowing in discretionary digital projects. Despite these dynamics and an uncertain macro environment, we are seeing growth in our products & resources, which is being driven by demand in digital services from logistics, automotive, consumer goods, and travel & hospitality clients. Similarly, in insurance, carriers in all lines of business are enhancing their digital capabilities, driven by demand for new insurance products and improved user experiences. Our pipeline remains active and we expect to announce deals towards the end of the year.
What is your strategy to expand into other emerging markets?
Our Global Growth Markets led by Rob Walker cover countries outside the Americas comprising more than 20 countries across six regions. We continue to invest in strong local leadership and diverse talent, extend our delivery footprint and continue to deliver excellence for our clients across these markets. Our seasoned leaders in these markets are key enablers in establishing relationships of credibility and trust with our clients in their markets, and as a result, growing our overall strategic client base at a faster pace. We will increasingly go after deals that are in line with our strategy: our G2000 clients are choosing Cognizant as their strategic technology partner and in many cases, we are growing within the account or landing new clients.
Are you on track with your earlier commitment of hiring 50,000 freshers in India in 2022?
We are on track to hire 50,000 freshers from India. We have hired 16,000 this quarter. Totally, we have hired nearly 38,500 freshers this year so far. Over the past 12 months, we have hired more than 54,000.
What is Cognizant’s mergers and acquisitions (M&A) strategy going forward?
We have several targeted M&A opportunities in the pipeline. Most recently, on November 1, we announced an agreement to acquire the professional services and application management practices of OneSource Virtual, a Workday partner based in Dallas, Texas. This will complement Cognizant’s existing finance and HR advisory implementation services with Workday. It will also enable us to expand our client offerings and provide end-to-end support in the business transformation journey. The acquisition is anticipated to close by year-end, and we expect to welcome nearly 400 new employees to our strategic Workday practice.