‘Digital not only gives higher margins but makes us more relevant to our clients’

Cognizant Technology Solutions Corp. reported an 11% rise in revenue in constant currency from the year-ago period to $4.7 billion for the third quarter ended September as business momentum improved. In comparison, Tata Consultancy Services Ltd’s (TCS) dollar revenue grew 15.5% while that of Infosys Ltd grew 19.4% annually in constant currency. Based in New Jersey, Cognizant expects its full year 2021 revenue to grow 9.8% in constant currency to $18.5 billion, which would be its highest annual revenue till date, and closer to the high end of its prior guidance. In an interview, Rajesh Nambiar, chairman and MD, Cognizant India and president, Digital Business & Technology, spoke about the demand environment, deal pipeline, and acquisitions strategy. Edited excerpts:

What's you take on the overall demand environment?

I believe there is a significant amount of uptake in digital transformation. The demand environment is extremely positive at this point in time. We are seeing significant demand across the platform. There is massive digital demand which should last for several years. We believe many of the companies are in their third stage of digital shift. And we are absolutely winning the war in terms of ensuring that we are actually able to walk our customers through the shift towards digital. There is obviously a fierce, industry-wide competition around talent, which is causing some level of attrition and upheaval across the board. But despite that, we have been able to grow both on the revenue side as well as our headcount. We have added a record number of 17,000 new employees during the September quarter to touch a historic 318,400 people at this point in time. In India, we have hired over 30,000 people this year and given offers to 45,000 others who will be onboarded in FY22. So, broadly it’s great growth and that is because of the momentum that we see in the marketplace.

How is the deal pipeline and what kind of deals are you focusing on -- mega or small and medium-sized deals?

Our Q3 bookings grew 24% year-on-year. That's a very strong sign of what is going to come. I believe our deal pipeline will be even stronger as we get to the year end. We don't look at deals in terms of size but in terms of how we can make sure that we are getting more relevant to our customers. So, some of them are larger ones while some of the digital transformation deals are going to be much smaller which is fine because it is about ensuring that we are able to grow as a company both on the margins and revenue. And that way, we are able to add more value to the customers and also get better pricing. It's not just about the size of the deals but yes, we do have a combination of large, medium, and small sized ones.

What’s your strategy to differentiate and grow in the digital business?

Our digital revenue grew 18% annually and contributed 44% to the total revenues for the third quarter. But we have had good growth even in our non-digital business. Digital is so important for us because it not only gives us higher margins but also makes us more relevant to our clients in our ability to transform them. It also makes us a lot more relevant and increases the stickiness with the client. We continue to focus on the four digital battlegrounds around the areas of digital engineering, cloud, data, and internet of things (IoT). We are going to double down on them. Most of our acquisitions in the last 2-3 years have been in this space. This means we are significantly enhancing our capabilities to do more in digital engineering and cloud. To ensure that we are able to explore the data transformation going on in the industry, as well as have a strong foothold in the IoT space. So that's what we are actually aiming at.

Will you be looking at more acquisitions in the coming quarters and years?

We have spent over $3 billion over the last 2-3 in acquisitions and will continue to do so to enhance our position as the top company to enable digital transformation for our clients. Most of our acquisitions moving forward will always be in the digital battlegrounds which include digital engineering, cloud, data, and IoT. As a company, one of our strategic priorities is accelerating digital, which means we need to make sure that we are able to take our clients through the transformation. We have announced six acquisitions to date in 2021, out of which two were in the September quarter – TQS Integration and Hunter Technical Resources. While TQS deals a lot with the work we do in the IoT space, Hunter Technical Resources enables us to do a lot more in the digital engineering space.