Cognizant bullish on double-digit revenue growth

Brian Humphries joined as CEO of Cognizant Technology Solutions on April 1, 2019 to revitalize the company. In the last three years, the company’s revenues have grown sharply, margins have improved and its business has become more diversified both in terms of domains and geography. In 2021, Cognizant reported a record annual revenue of $ 18.5 billion. Its growth rate was the highest since 2015. Its profitability has improved and not surprisingly that its stock price recently hit a new high. “I am extremely bullish about the industry, and Cognizant’s position within the industry,” Humphries told BusinessLine in an interview. Excerpts:

How has your strategy worked in the last three years?

The strategy is to globalize the company; scale digital business, which today contributes to 50 per cent of overall revenue against 30 per cent three years ago, and strengthen industry capabilities by selling solutions and delivering client outcomes against their pain points versus just a provider of resources. We also repositioned the brand so that people think of us as an international provider of digital capabilities. This is important to attract talent.

Cognizant is looking at 11 percent growth for the next three years. Isn’t it too ambitious?

We set targets that we are comfortable and able to meet. We are simultaneously driving revenue growth in double digits as well as margin expansion. One of our core objectives is to invest in people and clients and this makes sure of driving adequate returns. That’s been our recipe and been quite successful.

Where will the growth come from?

It is coming in from a number of areas with digital being the foremost. Our position with key partners like Microsoft, Salesforce, AWS is of all-time high in terms of relevance. Growth will also come from international markets – outside the US – like Australia, Japan and the Middle East. In the auto hub of Germany, our global partnership with Formula One Aston Martin enables us to showcase our digital capabilities there.

What about moving up the value chain to improve margins? How about consulting?

The client facing team in all industries has been evolving the skillset to be consultative. This team instead of waiting to be asked to provide resources will be more proactively approaching clients, understanding their industry, the point of view and serving up optionality in terms of pain point resolutions. This advisory sales team – both commercial and delivery- will be supplemented by Cognizant Consulting. This transition started three years ago, and it was one of the first strategies put in place when I joined the company. The bill rates have been going up based on these efforts.

You have been very strong in acquisitions in the last three years …

Merger and acquisition (M&A) is a means to achieve the strategy of globalizing the company including a global delivery network to compliment India and globalize the revenue mix; strengthening our global capability and increasing our client impact by more consultative engagement. We spent nearly $ 1 billion or $ 1.5 billion a year on acquisitions around cloud, digital engineering, IoT. We have aligned M&A with 100 per cent digital; align by industry or align by geography.

Cognizant has one of the highest attrition numbers in the industry. How are you arresting this?

There is a war to attract talent, and the IT services industry is at an elevated level of attrition. We are in the same range when compared with our competitors. Efforts were put around career paths; learning development and overhauling the promotion process. Traditionally, promotions were based on tenure but today it is on the role. If you are skilled and capable of taking a more senior role with a higher bill rate, you would get promoted. This creates constant upward mobility in the organization and avoids going to the outside market as we often had historically. Last year, we invested a lot more in compensation than at any stage in the history of the company, and it was much more than the budgeted due to labor market dynamics. The spending was in excess of $ 1 billion.

Will allowing employees to work from home help you to handle attrition much better?

Employees today have the option of working from home, in an office or hybrid environment. Most of them want a hybrid environment. This is very good for Cognizant and helps in employing more women. This also goes well with our ESG commitment.

A number of senior people also left Cognizant after you joined?

Most of them left in the first 15 months of my joining but the company has been a lot stable in the last 18 months. We had promoted many to senior leadership roles. Seven out of the eight industry leaders in North America are of Indian origin and have been with the company for many years. While the media has been writing that there was an exodus of senior people, the fact is that there have been a lot of internal promotions. Like GE, IBM and HP, Cognizant has become a sophisticated company with strong leadership practices, and the next generation of talent emerging. My ambition ahead is that of more promotions within the company and always having external hires is important to continue to have fresh leadership thinking.

Published on

April 06, 2022

Leave a Comment