Cognizant CEO Brian Humphries says the restructuring done last year has helped the company lay the path for M&As and a better standing in the cloud technology market, despite a difficult business climate this year due to Covid-19.
How have last year’s restructuring initiatives helped this year, given the outlook of a tough economic climate?
We had done a tremendous amount of work last year, which has given us somewhat of a six-pack as we go into 2020. We are bearing the fruits now. We determined our strategy around data and analytics, cloud, digital engineering and IoT and because we have refined the strategy, we have been able to execute an M&A roadmap against that strategy.
That’s one of the reasons we have so much momentum in the cloud. On top of that, we have made decisions last year to differentiate between cost versus an investment and as a consequence of that you see progress in Q1 in terms of best quarterly booking since 2017.
Because of our ‘fit for growth’ initiative, we now have the capability to invest more in our business while other companies may be struggling. We have committed to continue to bill out 500 commercial people, we have committed to continue to hire 20,000 college campus hires. We have also committed to develop our digital skills.
You seem confident that with the current trend of companies modernizing their core infrastructure and undertaking cloud migration work, you are well placed. How does this translate to deals, large and small?
With regards to cloud, we have made tremendous progress there in the last two years. Our strength in the cloud is evident for everyone to see and be recognised by competition. We have a lot of confidence if we are up against TCS, HCL or DXC or Infy, we really feel as though our momentum is with us.
What we have found actually is that the pipeline for larger deals, which are $5 million and above, has been quite robust. We also see lots of opportunities around captives etc. In cloud, we acquired three Salesforce platform partner (related) companies in the last four months. We had our best contract signings this quarter since 2017.
Has cloud adoption hastened after the onset of the Covid-19 pandemic? How are you capitalising on the same?
The short answer is yes. Clients are in a very uncertain world at this time and they are looking for ways to ensure agility, flexibility and obviously security considerations are paramount as well and move much more towards the utility model. The cloud affords people that capability. Companies like Salesforce, Workday, SAP and Servicenow are the ones we will align behind. But we have also tripled our headcount on Amazon, on Microsoft and indeed on Google Cloud platform this year. Its a very deliberate strategy.
The strategy that we outlined last year is really resonating—we talked about data and analytics, cloud, digital engineering and IOT and the market is moving towards us.
What is the kind of discretionary work that is being delayed by clients?
It’s in all shapes and sizes but essentially work that is less likely to give a short-term payback tends to be pushed out. Major transformation programmes can be perhaps put on hold and other change requests that are nice to have but don’t have an immediate payback. But it differs from client to client, we still see not just 33% growth in TCV (total contract value) in the first quarter but in the month of April, the first month of the second quarter, we still see strong momentum in healthcare, in financial services and other portions of the company.
Do you foresee legal challenges from clients who could have potentially lost confidential information in the Maze ransomware attack?
To be clear nobody is impervious to a cybersecurity attack. What differentiates the company is the manner in which you deal with it. We feel very pleased with the professionalism and maturity and the client centricity as we dealt with throughout this event over a two week period. We found that we have tremendous amounts of solidarity amongst our clients. It’s a regrettable situation, it was not something we did foresee earlier this year and we dealt with it as best as we could.
The impact on this would be primarily felt in the second quarter, $50-70 million of revenue and margin impact but it will be largely only in the second quarter. We will have some additional costs in Q3 and Q4 but that will be much more around continuing to strengthen our security environment.