Cognizant’s growth numbers have continued to surprise the street and industry players alike. The Nasdaq-listed company, with the bulk of its operations in India, saw fourth-quarter revenues grow 20 per cent, with a similar expectation through 2010. The company also hired over 10,000 (net addition), much more than peers such as TCS and Infosys. R CHANDRASEKARAN, president and managing director, spoke to Shivani Shinde on the growth drivers and what has worked. Edited excerpts:
This quarter has been good for the industry, but Cognizant did well even in the downturn. What do you attribute this to?
Rather being on a defensive foot, we took the other approach. We stayed invested in the business in terms of managing our clients. We continued to invest in selling, general and administrative (SG&A) expenses. I think we have one of the highest SG&A in the industry. This helped us bond better with clients and grow closer.
So, coming into 2010, we have an even more loyal customer base than earlier. Second, as an organisation, we are much more versatile now. Especially with regard to our newer offerings like BPO and infrastructure services doing well. We are able to deepen our services.
Third, we have significantly beefed our consulting practice. As customers go through challenges like M&A (mergers and acquisitions), and regulatory requirements, etc, we have been able to come out with transformational plans to help them manage these structural changes. So, in the perception of clients, we have scaled up a few notches as to how we can help them.
Geographies like Europe and other emerging markets like India and Japan have also done well. So, our globalisation strategy is also doing well.
Does Cognizant being still smaller in size, compared to your peers in India, make you much more nimbler to change?
No, with 78,000, we are a considerable size. But, each unit and vertical in Cognizant is a separate one and is managed by a separate team. They have their own P&L (profit and loss account). So, we are nimble, a lot more responsive to our clients’ changes, and adaptable.
For instance, last year the market changed structurally. The number of partnerships and small acquisitions that we did were higher than what the company did in the past three years. We also expanded our services line and delivery centres more.
We are very clear on our non-linear growth and want to grow more revenue with less headcount. We have seen some early results.
There is still caution within the industry. What are your derisking strategies in case the situation changes?
Our business model is global in nature. Though we might have the bulk of our people in India, we do have presence in other regions. We have expanded our local development centres in the US, we are creating near-shore centres; for instance, we have doubled the capacity in Toronto. We have started a centre in Mexico, China is a 1,000-people centre.
In terms of verticals, no one can ignore BFSI (banking, financial services and insurance). But, we are a lot more bullish about healthcare. With 80 per cent of revenue coming from new markets and verticals, according to Nasscom, we will have to focus. For instance, we have seen good traction in media and entertainment. Retail and manufacturing did very well for us last year.
What are clients saying in terms of budgets and offshoring?
Generally, the outlook is positive, much better than last year. At the start of 2009, clients had no clue about budgets, but that is not the case now. In the next three months, we will have a better sense of budgets. Our estimate is that IT budgets will be flat to marginally higher. But, offshoring budgets will increase, as there is a clear value proposition.
Offshoring is not a problem; rather, it is part of the solution. While the anti-offshoring talk has been going on, business continues as normal. It’s not just about cost. It is the ability to react to the market demand. Besides, they do not have the capability to ramp up, due to shortage of talent. More than that, it is also the capability to deliver and it is a compelling reason for the clients to look at it.
