Brian Humphries took over as the Chief Executive Officer of IT company Cognizant in April 2019. While the company is based out of New Jersey, Humphries visits India every few months. The reason isn't hard to see - Cognizant has 2,00,000 employees in India. The country is also emerging as a large business opportunity. Business Today's Goutam Das caught up with Humphries on his most recent visit. Edited excerpts:
Q: The global economy is cooling. How does that impact the services business?
A: It depends. I am not of the opinion that services necessarily follow macro demand cycles. Very often, it is counter cyclical. So if people are tightening belts, they will outsource certain tasks to others. But (one must) also recognise that services is a cottage industry and nobody has more than 3-4 per cent share. Regardless of the macro demand, I will always want my team to spend more time with customers than our competitors to make sure we get a fair share of the market, to make sure that we gain share. Due to the shift to digital transformation and because of the agendas of the C-suite (beyond the CIO), growth will be in digital.
How is economic nationalism playing out in various parts of the world in terms of countries mandating that people are hired within their borders? Is it slowing your offshore?
More and more, it is becoming a complicated world because of Brexit, and because of what is happening in the US political environment, which has pressure of H-1 and L-1 visas. We are spending a lot of time with Nasscom (India's IT lobby), as also with other chambers of commerce to make sure we showcase the relevance of companies like Cognizant to their specific economies. To take the example of the US, the amount of money we give back to the society - last year, the Cognizant Foundation US gave $100 million to North America. It is really important to stand back and acknowledge the skills required for corporations to go through digital transformation and the relevance of India to that programme. We are certainly vocal in that regard.
The traditional strengths of Cognizant were BFSI and healthcare. What could revive growth?
BFSI and healthcare represent 63 per cent of our business. We need to foster greater growth in those areas. Some of that comes down to a refresh of talent just to get new ideas, fresh perspectives. Strong partnerships are something I have been trying to drive as well. Many of our partners such as Amazon and Microsoft have explicit interest in those verticals. So we can go to market with them. I have also been looking at increased branding and making sure we pivot to digital even in these verticals. We are also focussing on solutions that can be replicated across multiple customers. But digital is going to be the key to our future.
What have been the shifts in Cognizant after you joined?
I don't know about the shifts because I wasn't there in the past. And to be clear, it is a company with 25 years of track record. What Frank (Francisco D'Souza, the previous CEO) and the team have done is truly remarkable. Shareholder value created is second only to a few. One could argue that in recent years things have slowed down a bit. I am very focused on reinvigorating Cognizant and unlocking the true potential once again. This is a company that has growth at its core - it is the DNA of the company. We are highly customer centric. I have tried to accentuate those values. I have taken an explicit lens on being extremely client centric, getting out in front of customers all the time and leading by example.
What went wrong? What explains the slowdown we have seen in recent years - from double to single-digit growth?
I am focussed on getting back to a growth agenda and that starts with two things. An employee agenda, or making sure that all associates are skilled, motivated and engaged. These are the employees who sell and deliver to our customers. Second, making sure we are in a position where we are investing in growth. This takes all forms, shapes and sizes. Since I took over, we have approved the addition of 500 revenue generating sales support people to accelerate the growth. I want to make sure that in the more traditional businesses, we support our growth agenda. Some of that will be focussing on geographies where we have a strong footprint but it is a smaller portion of our business than the rest of the industry. Geographies like Europe. I also want to make sure that I surround myself with strong revenue and customer centric executives. So, in North America, I appointed D.K. Sinha (Head of North America), who is a veteran of 23 years in Cognizant. We also put Pradeep Shilige as in-charge of delivery. Last week, I appointed Ramkumar (Ramamoorthy) as Chairman and Managing Director, Cognizant India. It is a very important appointment for us - I can't be here every single week and Ramkumar has my blessing to be my extension locally. On top of that, we have to move much more aggressively towards digital. The great news is we are outgrowing the industry in digital. However, our mix of digital is smaller than for many of our competitors. My interest is to scale that even further. As digital becomes a bigger portion of our mix, the whole tide will rise, and Cognizant's growth rate will accelerate.
What is the growth rate target you have set for the company?
(Cognizant was in a silent period during the interaction.) We are sitting in a growth market. The services industry is seeing solid growth. The world is getting divided into software companies and services companies. We have a huge part to play. The services market is a $1.3 trillion addressable opportunity. I joke internally that if you party with children and throw candy in the air, the big children tend to get more than a fair share. It is the same for a $1.3 trillion TAM (total addressable market). We have a fantastic brand; we have talented employees; and customers genuinely love Cognizant. We are highly credible and reliable. That gives me confidence that we will get back to a much faster growth trajectory.
In the last earnings call, you spoke on cost optimisation. How is that going to play out because you have also put in a huge hiring engine?
Cost is not the same as investment. If I paint a wall, that could be a cost. If I re-skill somebody, that is an investment that will pay back over time. The real story is Cognizant is investing once again in growth. We want to get our mojo back. We want to get our swagger back. If you see any of the messages that I send internally to Cognizant employees, every single message is around embracing change, being client centric, the importance of having a winning attitude, and the importance of investing in growth. That will again be the story of Cognizant in the coming years.
Does an aggressive top line mean a compromise on margins? In that case, how do you balance shareholder aspirations?
It is always a balance. You don't want to go to one extreme or the other. We look at every opportunity and also make sure we create shareholder value. One of Cognizant's incredible strengths over the years has been our ability to please customers. As I think about going on a growth trajectory, I am also thinking of new customers that we can get after. We are deploying new methodologies; the so-called RAD model - Retention, Acquisition, Development. The model segments customers into different tiers based on potential buying power. It segments customers into whether they are acquisition customers versus development customers, meaning where we have sold them something and we have an opportunity to expand. We have a large wallet share in retention customer. I am very interested, from a pricing point of view, to recognise the economic value of customers over the life cycle of their relationship with Cognizant. Not a here and now deal. Such is my confidence in Cognizant's talent and in our delivery capabilities. My mantra, internally, is getting back to revenue acceleration and getting back our mojo.
Does this mean that even if the margin is low, you would pick up the business and mine the customer over a period?