Cognizant sees demand uptick in financial services, says Rajeev Mehta

Despite lowering the upper end of its revenue guidance for 2018, Nasdaq-listed Cognizant says it is seeing good demand across all verticals. Rajeev Mehta, president of Cognizant, tells Debasis Mohapatra and Alnoor Peermohamed the company has a laser-sharp focus on revenue and is not taking up contracts that don’t yield the right kind of margins. Edited excerpts:

Cognizant has cut the top end of its full year revenue guidance for 2018. What is the rationale behind this? Do you see any significant slowdown in IT spending due to external factors? 

We narrowed the range based on where we were in Q3 and where we’re going. But we have said from the beginning we will be in this range (8-10 per cent). As you know, in the previous few years we’ve taken up our margins significantly and we’re on track to touch around 21 per cent (operating margin) this year and approximately 22 per cent next year. On revenue, we’ve had strong growth in three of the four business segments and we’re encouraged. The segment which has been a little bit weak was financial services — more so, banking and insurance. But we’re starting to turn on that. We’re seeing a good uptick in North American-based clients, but we had a couple of European ones that we’re dealing with. We’re optimistic that they’ll follow a similar trend.

I think the overall good news is we’ve diversified the business quite significantly and we’re on track in terms of revenue and margins.

Despite weak growth in Q3, you’re seeing an uptick in the financial services vertical in the coming quarter. Do you feel the momentum will come back in the banking and insurance space?

We shouldn’t look at it (growth in financial services) on a quarter-on-quarter basis. Because projects go up and go down and in Q4 you have a lot of seasonal holidays. But if you look at going into next year — what we’re seeing with our North American clients — we’re encouraged. Despite the insourcing by banking clients, we’ve found a balance in North America and the demand is on the uptick. The other thing I would like to point out is that we’ve been focusing on revenue and margins. So we’re shifting our business more towards digital and making smart choices. There are some projects and engagements that we felt were not strategic.

How was the momentum in the large deal space? Are you well-placed to tap them as compared to some of peers in the industry?

We have done large deals. For example, our deal with Emblem (EmblemHealth). We have done those multi-billion dollar deals. But large deals take a lot of time to materialise. One of things we have initiated with our partner accounts, from which have around a $100 million revenue flow, is that we have put our teams together. They are proactive when they are going to clients. There are platform solutions that allow us to get higher margins, which is better than chasing a fiercely competitive big contract that may have lower margins.

Cognizant had a healthy addition of employees in the last quarter. But, we have seen reports regarding pyramid optimisation with senior employees leaving the company. Would you prefer a younger workforce? 

India continues to be an important part of our overall strategy. So we continue to hire and I don't see that going down.