 "Post Brexit, clients are being cautious: Debashis Chatterjee")
Nasdaq-listed Cognizant Technology Solutions has, for the second straight quarter, cut its full-year earnings guidance. The new projection of 8.45-9.5 per cent in revenue growth is perhaps the lowest ever for the company. Debashis Chatterjee, president, technology solutions at Cognizant, tells Shivani Shinde Nadhe that the firm’s digital strategy will play out in the future. Edited excerpts:
The cut in revenue growth guidance to 8.45-9 per cent is huge. Did the company anticipate such a drastic cut?
No. We did not anticipate the macro-economic environment and low interest rate regime would slow down the BFS (banking and financial services) segment so much. The BFS growth in the second half is slower than what we anticipated three months back. The M&A (merger & acquisition) activity in the healthcare space in the US is taking time for closure. Plus, there is a sense of cautiousness in clients in other sectors such as information, media and entertainment. Keeping all this in mind, we have tightened our full-year (Cognizant follows a January-December financial year) revenue guidance as well as the third quarter guidance.
We want to do more small tuck-in acquisitions and our focus is to acquire something that adds to our capabilities. All our acquisitions follow that. Growth will be propelled by a combination of organic and inorganic strategy. TriZetto is a good example of how we have built capabilities. Out total contract value on this platform is approaching a figure of $2 billion.
Any timeline by when you see the BFS and the healthcare segments stabilising?
It is difficult to predict. What we can see is that the strategy we have adopted will play out. If you look at our investment and the medium- to long-term opportunity, it will be led by digital transformation. If we are able to execute well, we will be able to cater to our clients’ businesses than competition.
In the case of healthcare, it is more regulatory-driven and we do not have much control on that. At this point of time, it’s difficult to say.
The Brexit move will have a negative impact of $40 million on Cognizant. How will this impact the deal pipeline?
Our clients in the UK or in other parts of Europe are also going through their own contingency plans to understand the impact. They are being cautious.
Are you seeing any delay in closure of deals or clients cutting down contracts after Brexit?
I would not like to go that far. We continue to win deals and market share. Our sequential growth has been strong. Our deal pipeline is very robust. It is just that some of the wins or pipelined closure might get delayed due to the macro-economic environment.
How is the traction in the digital space?
We know that each organisation is challenged because of the digital disrupters, and every organisation and bank has to counter that. We feel any digital play is not just about putting up with a digital architecture or a tech architecture without thinking of the legacy. So, our strategy is about focusing with customer interface at the front office, followed by mid-office, bringing more efficiencies by using platforms, and finally modernising the legacy. The third part is what we call the Horizon-3 and it is growing well. Horizon-3 has $3 billion run-rate.
The cut in revenue growth guidance to 8.45-9 per cent is huge. Did the company anticipate such a drastic cut?
No. We did not anticipate the macro-economic environment and low interest rate regime would slow down the BFS (banking and financial services) segment so much. The BFS growth in the second half is slower than what we anticipated three months back. The M&A (merger & acquisition) activity in the healthcare space in the US is taking time for closure. Plus, there is a sense of cautiousness in clients in other sectors such as information, media and entertainment. Keeping all this in mind, we have tightened our full-year (Cognizant follows a January-December financial year) revenue guidance as well as the third quarter guidance.
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Cognizant has said it will look at acquisitions. Will M&A drive growth going ahead?
We want to do more small tuck-in acquisitions and our focus is to acquire something that adds to our capabilities. All our acquisitions follow that. Growth will be propelled by a combination of organic and inorganic strategy. TriZetto is a good example of how we have built capabilities. Out total contract value on this platform is approaching a figure of $2 billion.
Any timeline by when you see the BFS and the healthcare segments stabilising?
It is difficult to predict. What we can see is that the strategy we have adopted will play out. If you look at our investment and the medium- to long-term opportunity, it will be led by digital transformation. If we are able to execute well, we will be able to cater to our clients’ businesses than competition.
In the case of healthcare, it is more regulatory-driven and we do not have much control on that. At this point of time, it’s difficult to say.
The Brexit move will have a negative impact of $40 million on Cognizant. How will this impact the deal pipeline?
Our clients in the UK or in other parts of Europe are also going through their own contingency plans to understand the impact. They are being cautious.
Are you seeing any delay in closure of deals or clients cutting down contracts after Brexit?
I would not like to go that far. We continue to win deals and market share. Our sequential growth has been strong. Our deal pipeline is very robust. It is just that some of the wins or pipelined closure might get delayed due to the macro-economic environment.
How is the traction in the digital space?
We know that each organisation is challenged because of the digital disrupters, and every organisation and bank has to counter that. We feel any digital play is not just about putting up with a digital architecture or a tech architecture without thinking of the legacy. So, our strategy is about focusing with customer interface at the front office, followed by mid-office, bringing more efficiencies by using platforms, and finally modernising the legacy. The third part is what we call the Horizon-3 and it is growing well. Horizon-3 has $3 billion run-rate.