 "Health care an opportunity: Francisco D'Souza")
Nasdaq-listed Cognizant's December 2014 quarter (fourth quarter for the company) not only beat Street expectations, but also surpassed the firm's forecast. The chief executive, Francisco D'Souza, tells Shivani Shinde Nadhe health care and digital practices will drive growth. Excerpts:
The fourth-quarter numbers have come as a big surprise. Was there a one-off impact?
The numbers were ahead of what we had expected. We have been saying for some time our clients are going through the most profound technology changes we have seen in our lifetime. At the same time, the economies of the world remain volatile. Clients have to deal with this, but they want to invest in new technologies. Over four-five years, Cognizant has been investing in capabilities that address this dual band. We see strong demand for such services. I think Cognizant is well positioned on both sides of the band.
Digital is an important part of that growth. The second is traditional services that continue to grow and we see clients pushing hard on traditional services as these help drive efficiency and also allow them to invest in new technology. The third is the TriZetto acquisition and the opportunities it is creating.
With TriZetto, you are betting big on health care. Given the regulatory changes, do you think this could be a risk?
Health care is a big market opportunity. It accounts for 19 per cent of the GDP spends in the US. Depending on the other parts of the world, the figures look the same. Hence, health care is an important part of the global economy. Significant disruption is occurring in this sector and there is a demand for end-to-end solutions to help drive client efficiency and the ability to grow.
TriZetto (a healthcare IT solutions company) has 250,000 care providers. They give us a strong platform. The TriZetto acquisition gives us an opportunity to change the dynamics of the healthcare sector and contribute to improve the life of millions of people. But then, we have had good organic growth across portfolios.
Your peers have been investing in start-ups to gain foothold in new technologies. What has been Cognizant's strategy?
We have dedicated presence in Silicon valley and other such start-up hotbeds. We constantly talk to start-ups, engage with them, and bring them to clients. Our approach has thus far been not to make financial investment in start-ups. I don't rule it out completely. My goal is not to be a passive financial investor in the start-up eco-system, but to have an operational relationship with the most promising start-ups that are relevant to our clients. Instead of making financial investment, I would bring to them capabilities, skill and networking that Cognizant has.
The management has said social, mobile, analytics and cloud (SMAC) will be rolled into the digital segment. Can you give us a break-up of revenue for this segment?
We were among the early movers in this space. We coined the term SMAC several years ago. SMAC comprises three technologies that underpin the digital opportunity. SMAC continues to be relevant. The digital opportunity is not just tech opportunity, but an opportunity to reinvent client business model. Hence, it's a business strategy-led change.
At the end of 2013, we had said SMAC technology was about $500 million for us. Since then, we have not updated the number, because digital is pervasive and cuts across the company. It is becoming hard to distinguish what's digital and what's not. Since it's hard to quantify, we discontinued giving that number. But the practice is significantly larger than the $500 million reported at the end of 2013.
The fourth-quarter numbers have come as a big surprise. Was there a one-off impact?
The numbers were ahead of what we had expected. We have been saying for some time our clients are going through the most profound technology changes we have seen in our lifetime. At the same time, the economies of the world remain volatile. Clients have to deal with this, but they want to invest in new technologies. Over four-five years, Cognizant has been investing in capabilities that address this dual band. We see strong demand for such services. I think Cognizant is well positioned on both sides of the band.
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You have given an ambitious growth forecast of 19 per cent for 2015. What are the key drivers?
Digital is an important part of that growth. The second is traditional services that continue to grow and we see clients pushing hard on traditional services as these help drive efficiency and also allow them to invest in new technology. The third is the TriZetto acquisition and the opportunities it is creating.
With TriZetto, you are betting big on health care. Given the regulatory changes, do you think this could be a risk?
Health care is a big market opportunity. It accounts for 19 per cent of the GDP spends in the US. Depending on the other parts of the world, the figures look the same. Hence, health care is an important part of the global economy. Significant disruption is occurring in this sector and there is a demand for end-to-end solutions to help drive client efficiency and the ability to grow.
TriZetto (a healthcare IT solutions company) has 250,000 care providers. They give us a strong platform. The TriZetto acquisition gives us an opportunity to change the dynamics of the healthcare sector and contribute to improve the life of millions of people. But then, we have had good organic growth across portfolios.
Your peers have been investing in start-ups to gain foothold in new technologies. What has been Cognizant's strategy?
We have dedicated presence in Silicon valley and other such start-up hotbeds. We constantly talk to start-ups, engage with them, and bring them to clients. Our approach has thus far been not to make financial investment in start-ups. I don't rule it out completely. My goal is not to be a passive financial investor in the start-up eco-system, but to have an operational relationship with the most promising start-ups that are relevant to our clients. Instead of making financial investment, I would bring to them capabilities, skill and networking that Cognizant has.
The management has said social, mobile, analytics and cloud (SMAC) will be rolled into the digital segment. Can you give us a break-up of revenue for this segment?
We were among the early movers in this space. We coined the term SMAC several years ago. SMAC comprises three technologies that underpin the digital opportunity. SMAC continues to be relevant. The digital opportunity is not just tech opportunity, but an opportunity to reinvent client business model. Hence, it's a business strategy-led change.
At the end of 2013, we had said SMAC technology was about $500 million for us. Since then, we have not updated the number, because digital is pervasive and cuts across the company. It is becoming hard to distinguish what's digital and what's not. Since it's hard to quantify, we discontinued giving that number. But the practice is significantly larger than the $500 million reported at the end of 2013.