Although financial services and healthcare have historically been the two dominant sectors for Cognizant so far, technology clients have already become among its largest clients as part of its efforts to grow in other industries, according to David Nelson, its VP of investor relations and treasurer.
“Two of the top 10 [customers] are now technology clients,” he said Dec. 4 at the Nasdaq Investor Conference in London. But he didn’t identify those companies.
“We would expect to see that trend continue as we continue to diversify away from” just having a “pure focus on” financial services and healthcare, he told attendees.
His comments came only a few days after Malcolm Frank, Cognizant EVP, chief strategy officer and marketing officer, told another investor conference that the company was looking to grow its strength in the communications, media and technology (CMT) sectors.
There is obviously a “huge digital transformation going on in those sectors,” he said at the time, telling attendees of that conference to “just look at what’s happening with Netflix, or what AT&T or Verizon — all these firms — are doing to react against that.” CMT just grew about 17% year-over-year for Cognizant and “we see real vitality and health in that segment,” he said, adding the company is also looking to grow its strength in the retail segment.
In addition to its presence at the two investor conferences, Cognizant on Nov. 16 held its first investor day in 20 years, since becoming publicly traded, Nelson pointed out Dec. 4. “Hopefully it’s not a pattern where we do one every 20 years,” he joked, noting feedback from the investment community in response to the Nov. 16 event was positive because “we gave a lot more detail in terms of … what’s going to drive [company] growth and detail in terms of the other aspects of the business.”
It was “still a little bit early to talk about next year” in terms of how headwinds especially for its largest customers will impact its growth, he said. The company, however, expects to see 6-9% organic growth over the next 3-5 years as part of its current plan, with inorganic growth boosting total growth to 7-11%, he said. Cognizant expects its mergers and acquisitions activity will “drive at least one to two percentage points of revenue growth per year,” he noted.
Among Cognizant’s larger banking clients, it’s “seeing a growing sense of urgency” that the “new wave of technology will materially disrupt their businesses,” he said.
Although the transition to digital continues to be a top priority for Cognizant and its customers, and the company sees the shift to digital moving faster than several other major enterprise technology trends did in recent years, it still expects its oldest clients will require “help on the legacy side,” he said. After all, he said, for many clients, “maybe only a fraction of their legacy applications will ever get cloud-enabled.”
One challenge that Cognizant faces is that, “in this age where digital talent is hard to come by,” the company is “seeing demand for talent pick up dramatically,” he also said. As a result, “you do see increased levels of poaching” of that digital talent, he said.
Talent that Cognizant has hired includes “large numbers of anthropologists [and] social scientists to help drive” the analysis required to “help understand the thinking of the individual – the human that actually accepts” its customers’ products and services, he said.
He added: “What’s unique about that is that we believe that there are very few other companies that actually focus on this that we’re aware of. Most of our competition will focus on other areas within digital marketing or interactive, but this is an area which we believe not many of our competitors actually have. And in fact we’re one of the largest employers of social scientists for this type of practice.”