Opportunities coming our way because of our scale and capability: Rajeev Mehta

Interview with CEO, IT Services, Cognizant Technology Services

After one of its strongest quarters in revenue growth, Rajeev Mehta, chief executive officer of US-based Cognizant's information technology services business, says the company is upbeat about the growth opportunities. Edited excerpts of an interview with Bibhu Ranjan Mishra:

You have delivered a strong set of numbers at a time when most offshore-centric IT service players have shown weak growth.

We have already talked about our 'run better and run different' approach. This, combined with the strength we have built in the digital space, is really helping us to go and deal wins. If you look at the 'run better' approach, we still see strong demand for our traditional services and more dollars are coming in the infrastructure services practice. Then, in 'run different', we have been investing a lot on digital solutions and with that, we are seeing a strong demand across all our verticals and geographies.

How does your deal pipeline look and how is the deal conversion?

Our pipeline is the strongest in the industry; so also our win rate. We are seeing opportunities across all our practices, geographies. We are seeing much larger deals because we are now playing in what we call 'multi-service lines'. That has the combination of IT, operations, BPO services, infrastructure and consulting capabilities. We are bringing all those together with integrated solutions and offering to our clients bundled with digital. The deals are also becoming larger for us with that. We are also starting to see a phase when some of the platforms we have are becoming an integral part of the conversation as well. Opportunities are coming our way because we have the scale and capability to win.

How have your digital offerings panned out versus the traditional services?

We don't believe in one versus the other. The works we do in the digital space have downstream interfaces with our traditional businesses. They drive business for each other. While we do a lot of work on the traditional space, we learn a lot of our clients' businesses. When we do digital works, those need to interface with all the legacy downstream system. So, they go hand in hand.

Your health care vertical seems turbo-charged after the TriZetto acquisition. Are some of the concerns you raised last year over now?

I don't think our health care business had not done well in the past. Last year, after the (US) Affordable Care Act, etc, people (clients) were trying to figure out how to spend optimally but it had not impacted our business. The acquisition of TriZetto opened enough opportunity in this space to make us a market leader in health care. This is evident from the synergy deals we are seeing already. The acquisitions of TriZetto and Cadient have generated $1.5 billion of revenue synergies. We have already won a very sizable and strategic deal, and have significantly ramped up our team.

How far has your inorganic growth strategy helped in the growth you now see?

The growth we had was exceptional, even if we keep the TriZetto piece out. We had growth across all our businesses and the acquisitions furthered it. While TriZetto is the largest acquisition we have ever done, smaller ones like Cadient and Itaas have really offered us platforms for digital offerings.

The only region where you saw a decline was Rest of Europe. Do you think you should look at some acquisition targeting continental Europe?

If you look at Rest of Europe not including the UK, we had a decline but remember there was a 6.3 per cent currency impact. If you discount that, Rest of Europe also grew significantly for us.

What is going to be your acquisition strategy?

I think you will see us doing small tuck-in acquisitions, especially in the digital space. Large ones like TriZetoo, we still want to digest. We are very pleased on how it (TriZetto acquisition) is progressing; all the metrics are very positive. We would also continue to look at acquisitions that will help us get into newer geographies, markets and service lines. The focus is to really drive synergy revenue from these acquisitions.

You have touched close to 218,000 in headcount and still add at least 6,000 on a net basis in most quarters. This is a huge size. Where do you stand in terms of using automation tools and platforms?

Our offshore utilisation is about 76 per cent, so there is a lot of leverage we have to improve and that is one thing we are looking at. Besides, we have increased the headcount because we see such a strong pipeline and growth, and we want to make sure we have the resources to respond very quickly to our clients' requirements. We will continue to look at that. The other thing is that automation is going to be a big play in terms of leveraging how we control the headcount. We have a lot of platforms with a lot of automation tools built into those. In the next two years, you will see continued migration, where the revenue growth will not be proportionate to headcount growth.