How Cognizant's Rajesh Nambiar sees demand going up, attrition coming down

If our clients are seeing some headwind that will eventually have impact: Cognizant India's Rajesh Nambiar

Nasdaq-listed Cognizant has disappointed the street by lowering its revenue guidance for the full year and reporting a decline in bookings. Attrition is back at its peak. The management said on the earnings call the guidance was being lowered owing to supply-demand imbalances, attrition, and softer than expected hiring. Rajesh Nambiar, executive vice-president, chairman, and managing director, Cognizant India, in an interview with Shivani Shinde, talks about the quarter gone by and how he sees demand going up and attrition coming down. Edited excerpts …

Infosys has upped its guidance and you have lowered it. Is this a client issue? What made the company do so?

The second-quarter performance has been very well balanced for us. Growth is being driven by digital, and we delivered our largest quarterly revenue at $4.9 billion, up 9.5 per cent up in constant-currency terms. But the bigger news was that the operating margin grew to 15.5 per cent, up 50 basis points year-on-year.

We did not have any acquisitions in the last quarter but we are pursuing a lot of them.

From a guidance point of view, we had said we would be a $20-billion company by the end of this year. Even with this guidance we will be $19.7-19.9 billion. We will have an inorganic component to this.

From a macro point of view, we continue to monitor the impact of a worsening economy. If our clients are seeing some headwind, that will have an impact on the industry. But today, we do not see any meaningful slowdown in demand.

What are you hearing from clients on demand and budgets?

I find conversations are unchanged. They remain focused on innovation, transformation, and modernisation. The good news is that even if there is some kind of headwind, expenditure on technology to optimise will still be there. While it is important for us to monitor what is really going on in our clients’ environment, it’s also important to see what they see as real impact.

Attrition has again shot up, this time a record. Do you see this coming down anytime soon?

It is an industry-wide phenomenon. Rather than attrition, I want to focus on retention. One of the parameters is our employee engagement, which is ensuring that we are able to have the right level of retention. Our employee engagement scores have gone up. Our Internal Job Movement (IJM) saw 33,000 people being promoted in the past 12 months. That’s giving us stability.

In a recent 8k filing, the company said some of your responsibilities had been taken away and it looks like your role has been reduced. Could you clarify matters?

I joined the company as executive vice-president, chairman, and managing director, India, and then we were looking at integrating our business units. The idea was to move towards an integrated practice. We want to make sure that we combine it instead of having these three different segments. That’s what we did for the last one year. We experimented with a couple of those pilots. Digital business & technology (DB&T) and digital business operations (DBO) were the first integrated. At the beginning of July, we introduced that as a model where we take both the practice organisation and delivery organisation together. This is important for our clients because they don’t have to deal with multiple levels within the organisations. So my role was to enable this model.

Any benefits of the restructuring that Cognizant has done?

It is still early days. This simplifies our model a lot. Our practice becomes straightforward and you have end-to-end accountability, from vision to road map to offering and capabilities, including mergers and acquisitions, post-merger integration, through pre-sale solution delivery. We announced four integrated practices.

With attrition again going up do you see more hiring?

We continue to hire both from the campus as well as laterally. Last year we took in 33,000. For this year the target is 50,000. We are building a bench on the strong demand that we are experiencing in the market. That’s something we'll continue to focus on.