Cognizant President: Company’s Shift to Digital Services Continues to Yield Dividends

Cognizant’s ongoing shift of its business to more digital services continues to pay off for it, and we can expect an increasing percentage of its total revenue to come from digital, according to its president, Rajeev Mehta.

“We didn’t do well in 2016 in terms of our revenue,” he said Nov. 29 at the Credit Suisse Technology, Media & Telecom Conference in Scottsdale, Ariz. But it’s been a very different story so far this year, he told attendees.

“In 2017, I think we’ve done many things,” he said, explaining: “I think one is obviously, we strengthened our whole compliance program. In addition to that, we’ve had strong growth in 2017. Many of our business units have had double-digit growth and, overall, we’re performing at the high end of our range.”

What’s especially significant though is how Cognizant is “looking at how we go after digital,” he said. “You’ve seen that in terms of the revenues that we generated and that we reported” from digital this year, he noted.

Cognizant recently reported that revenue for its third quarter (ended Sept. 30) grew 9.1% from a year ago, to $3.77 billion, with digital-related revenue growing “well above company average.”

“More importantly, we went through a very large realignment” in 2016, reorganizing into three service lines: digital business, digital operations, and digital systems and technology, Mehta told the conference.

“And I think that’s [paid] huge dividends, and that’s helped to drive the growth that we’ve had this year,” he said.

The “biggest challenge” Cognizant faced was that it was a “260,000-person organization and the way that we were organized was not around what our clients were looking for,” he said, adding: “Many years ago, clients were looking for a testing solution or an infrastructure solution” from Cognizant. But these days, clients are looking for a company that can help them look at their digital operations and user experiences, and provide them with a strategy for “how they can continue to grow on that side” of their businesses, he explained.

It was important for Cognizant “to digitize a lot of the back-office operations that [clients] had and then help them build systems that are much more agile, nimble, flexible” and provide them with “the ability to work on the cloud,” he said. But, “when you looked at Cognizant,” that’s not how it was organized a couple of years ago, he conceded, adding: “The days of these large-scale development testing factories or large-scale maintenance projects, those were going away,” so Cognizant needed to start building solutions for its customers around the three new divisions formed in the realignment.

About 26% of Cognizant revenue now is on the digital side of its business, he said, adding: “I think you’ll see that continue to increase.”
He went on the say that now “the company is focusing a lot on what I call … high-quality growth and really repositioning ourselves as a company that can help develop these digital businesses for our clients.”

Cognizant recently made two acquisitions — Netcentric and Zone — that CEO Francisco D’Souza said on its last earnings call will “broaden our portfolio of digital services and solutions.”