Nasdaq-listed Cognizant will cross the $10-billion-revenue mark if it meets its revenue growth forecast (guidance) of 16.5 per cent in 2014. Malcolm Frank, executive vice-president (strategy & marketing), spoke to Itika Sharma Punit about the current demand environment and new technology, among others. Edited excerpts:
If you meet your guidance in 2014, you will cross the $10-billion mark. How do you feel about it?
It is a purely arbitrary number; so, we're not nostalgic about such things. We never felt that way when we crossed $1 billion; we never felt that way when we crossed $5 billion. So, we are not going to feel that way when we cross $10 billion, we don't think that really means anything. The important issue is how do we maintain what we think is the special sauce of the Cognizant experience as we continue to scale. The issue is to maintain the culture of entrepreneurism, and to continue to be nimble and continue to outgrow the industry. Those are the things that people are expecting from us and our clients are expecting from us, and so we need to work quite hard to ensure we maintain those things even as the firm scales.
Analysts believe your guidance for 2014 is conservative...
Expectations are for the market to determine. From our perspective, we feel quite good about how we are proceeding into 2014. We feel more comfortable about the environment as we enter 2014 compared with how we felt when we entered 2013. Europe is better than how it was 12 months ago, ditto with the US, and we are also seeing acceleration across Asia-Pacific. Our investments in Latin America are also paying off.
In 2013, you revised your guidance twice. Will you revisit your guidance for 2014?
We also have to see how the year unfolds. We don't have a crystal ball, but as of now, the guidance that we have put out is how we expect 2014 to be.
You have done several tuck-in acquisitions in the past. What are the areas you are looking at right now?
Our philosophy on acquisitions remains the same - we will look for tuck-ins. Also, we will look at capabilities as opposed to capacities. Like you saw in 2013, we made acquisitions in France and in Germany; we will continue to look for acquisitions from a geographic perspective. You will also see us looking for acquisitions in the SMAC (Social, Mobile, Analytics and Cloud) stack and in emerging technologies, and the associated services there. Within industry groups, we would continue to look at acquisitions in financial services, health care, life sciences, and manufacturing. We continue to build our capabilities in these verticals through acquisitions. There is nothing I would point to that weighs above the others at this point.
Your peers have been talking about non-linearity being one of the themes in 2014. What are your views?
I have been in this industry for three decades and discussions about non-linearity have been happening every year. But as of now, it is largely a headcount-to-revenue business. That said, we think there are opportunities in SMAC. I think the opportunity to separate headcount from revenue is greater now than it has ever been. But today, across the industry, we are yet to see a material shift in that direction.
How is the client sentiment in the US?
We think the US looks quite good from a number of perspectives; first, the economy continues to recover, though I think it is slower than most people would desire. Second, we are seeing a technology shift, particularly around SMAC (social, media, analytics and cloud) technologies, and the internet of things. American firms are trying to digitise quite aggressively, which we think will serve us well.