See stable pricing ahead; eyeing acquisitions: Cognizant

We are very pleased with the way our Q3 has turned out to be.

R Chandrasekaran

Cognizant

IT major Cognizant has reported a stellar set of third quarter numbers. The company has posted a revenue growth of 5.4 percent with revenue coming in at USD 1.89 billion.

In the second quarter, Cognizant hopes to better that number and take it much closer to the USD 2 billion mark.

For the full year Cognizant expects a revenue growth of 20 percent at USD 7.3 billion.

Having already beaten Infosys in the last quarter, Cognizant's full revenue growth of 20 percent is much higher than Infy's 5 percent.

In an interview to CNBC-TV18, R Chandrasekaran, group chief executive-tech & operations of Cognizant says pricing has been very stable in the last three or four quarters. "Our going in assumption for next year also will be a very stable pricing environment. Pricing, overall, should be stable for us," he adds.

The company, he says, has been on the lookout for an acquisition. "We are looking for acquisition that will drive demand for our services. Now, we will look for niche capabilities like consulting or newer geographies. We have been on the lookout for acquisitions, particularly in Europe, focusing on Germany and France," he adds.

Also read: Next 12 months to be better than last for IT sector, says TCS

Below is the edited transcript of his interview on CNBC-TV18.

Q: You have held out a guidance of about 20 percent, when your peers are holding nothing close to that. What gives you the confidence and the optimism, given the kind of uncertain economic environment globally?

A: We are very pleased with the way our Q3 has turned out to be. It is a clear indication of our differentiated strategy, focusing on customers, staying invested in our business and differentiating ourselves by taking a unique set of value proposition to our customers that really reiterates their confidence in our ability to deliver value. So, this is the time and tested strategy that we have been deploying in Cognizant. It once again proved that we have been able to beat the estimates and turn in industry leading performance.

Now, if you really look at it, most of the customers are under what we call as the dual mandate. On the one hand, they all have severe cost pressure due to cyclical nature of demand and the economic environment. That really calls for driving efficiency and the effectiveness the way they run their business. So, on one hand, that drives demand for our services.

But, at the same time customers, are also under secular pressures arising out of digitisation, digital experience that the consumers are demanding. That really calls for a lot of transformation. That really drives another set of demands for our services. So, the investments, which we have been making driving efficiency and effectiveness and providing top leadership and transformation services, is really boding very well for the success of Cognizant quarter-after-quarter.

Q: You are absolutely confident of being able to hold on to that 20 percent guidance. Pricing is another key differentiator from your peers. Everybody else in the IT pack has actually seen a pricing decline. You have managed to keep pricing flat. Do you anticipate the ability to be able to do that or do you see some pressure coming in on pricing and pricing actually declining?

A: We see a very stable pricing environment for our services. In the last three or four quarters, pricing has been very stable. Our going in assumption for next year also will be a very stable pricing environment.

We really want to take the focus away from pricing, really focus on what we deliver to our customers, focus on output and outcome and really move into managed services model. That's how we are going to keep the pricing environment stable for our services. Pricing, overall, should be stable for us.

Q: You were talking about the need to offer services because the world is going digital. How robust the deal pipeline is looking at this point in time? Are you expecting 'transformational' deals in that sense?

A: Absolutely. As we look into the future, a lot of our demand is going to come from the new offerings, what we call as your rising three services within Cognizant framework. These are all newer technology services what we call as the SMAC (social, mobile, analytics and cloud) stack. News service delivery, leverage more of platform-based delivery. We have already announced in the last quarter the first deal that we won for managing digital assets for one of the large automotive manufacturer's using our assetSERV platform. So, those types offerings are going to get lot more traction.

Also, new geographies, we have been very pleased with the way our APAC business is turning out to be, phenomenal growth that we saw in the last quarter. We are making investments in Latin America. So, new geographies will also start kicking in. So, these are the new offerings, new geographies, new service delivery model that will keep driving the growth for our services into the future.