Four-and-a-half years ago, when Francisco D'souza was appointed CEO at Cognizant Technology Solutions, he was, perhaps, the youngest management professional holding that position. Doubts were raised about his ability to deliver. Cognizant was a $1.4-billion company then. It is expected to close revenues this year at over $6 billion. In two interviews, conducted on video and phone calls, D'Souza explained the Cognizant model in fine detail. Edited excerpts:
What are the differentiators that you bring before clients?
Top of the list is industry knowledge. Domain knowledge is not static, you have to drive increasingly deeper level domain knowledge. We have people who are experts on how our clients' businesses operate. Ten years ago we were very good technologists; today there is a tremendous amount of effort to understand what the business problem is.
The second differentiator is the discipline we have in our organisation in terms of focus and customer centricity. This is important because we focus on doing a small number of things and doing them very well. I am often asked about the footprint of Cognizant. People will say, hey, you tend to have small industries that you serve, you tend to have a smaller geographic footprint than your peers. I understand the risk of that from a 50,000 foot perspective, but those are harsher choices. Because in our business we believe that we live and die by our reputation.
Is your EBITDA the new normal?
To me, the difference has never been strikingly different pricing. There are two types on companies really. There are companies like ours who are maximising growth and there are companies who are maximising margins. From the time we went public, we told our investors that we view the opportunity to do business at a low EBITDA as a privilege. The kind of investor we attract is a growth oriented one. Since the pricing is the same, anything above the EBITDA translates into a greater ability to invest.
Where have you invested?
We have our traditional business which has been good for us and those are businesses we have invested in extensively. And we thought of taking it to new areas because core services like application maintenance, development and testing are underpenetrated when you look round the world. We moved to continental Europe and then to building markets in Middle East and Egypt. The second was a set of new services which needed some push to accelerate. So in the BPO business we did a few acquisitions. The other focus was on IT infrastructure and management consulting.
How much of your business is influenced by your consultancy practice?
The indirect part is very hard to measure. Our 2,800 consultants broadly represent four to five per cent of our revenues. Five years ago, the contribution was fairly negligible. But that five per cent is just the direct impact they are having. For every dollar that our consultants make, they are probably influencing $5 to $10 of additional revenues. It is really easy to call everything consulting. People do a SAP implementation and call it consulting. We take a narrower definition of consulting; we only look at management consulting.