Specialist
Former divisional leader at Cognizant
Agenda
- Cognizant’s (NASDAQ: CTSH) operating environment and demand in the broader SI (system integrator) industry
- Competitive dynamics vs legacy players such as Tata (NSE: TCS) and Infosys (NSE: INFY) and larger peers such as Accenture (NYSE: ACN), Deloitte and Capgemini (PAR: CAP)
- Double-digit growth sustainability, digital offerings and retention dynamics as mid-level talent attrition continues
- IT spend recovery, pricing and outlook for 2022 and beyond
Questions
1.
Could you provide a brief overview of Cognizant’s overall operating environment, including 2-3 key trends or drivers we should be monitoring?
2.
What overall key themes are impacting state of demand in the SI [system integrator] industry, and what are customers focused on? What is your 12-18-month outlook for demand?
3.
How much of a pull-forward do you think exiting the pandemic world could be for demand in the SI industry? Do you think clients are looking to take on larger-sized projects or more agile projects as we potentially exit out of the end of the pandemic? Do you think this has a meaningful impact on the state of demand broadly in the SI industry?
4.
What is your outlook for digital demand? Do you think that digital vs non-digital products or channels and services have any specific demand outlook, or is this something that differs across the SI sector if we look at it on a competitor-by-competitor basis?
5.
Can you describe Cognizant’s competitive positioning against its larger peers such as Accenture, Capgemini and Deloittle?
6.
Do you see Cognizant moving out of the competition with legacy players such as Tata and Infosys and trying to compete with players such as Deloitte, Capgemini and Accenture, or do you think the company will stay in that middle position or take a heavy stance to move into one segment or the other? Where do you see it sitting 1-3 years from now?
7.
How is Cognizant positioned against pure-play software engineering players such as Epam, Endava, Globant and perhaps Genpact as well? What do you see evolving in terms of the competitive dynamics in that segment?
8.
How do you see the market share of Cognizant and players it’s directly competing against evolving over the next 12-18 months? Who do you see as the top three players from a market share perspective in terms of the digitally-focused SIs?
9.
You mentioned some boutique players being positioned to take market share. Are there any smaller players or entrants that you feel are more threatening to Cognizant than others over the next 1-3 years?
10.
How do you assess. By comparison, Accenture posted 19%. What factors do you think are playing into this difference and what is your outlook for Cognizant’s supply environment for the rest of 2022?
11.
Do you think Cognizant will see any serious wage inflation and compressed margins as it continues to compete for talent? Do you think there are any geographies where it has struggled more than others to keep headcount stable, and where we could see increased wage inflation as it focuses to hire and retain talent?
12.
How do you assess Cognizant’s ability to pass on wage inflation to customers on renewals? How much pricing power does the company command with customers? Are there any customers in specific verticals or by client size that are potentially stickier, and with whom Cognizant can have increased pricing power on renewals to pass off some of this inflation or margin compression?
13.
Cognizant added many college graduate hires in India in 2021, up significantly from 2020. Is anything specifically fuelling the need for talent in that territory? Is there a focus on higher-margin services in India or lack of an ability to hire in other geos that is making India a priority for the company at this time, or is this something that’s historically been the case?
14.
Healthcare is the second largest segment by revenue percentage for Cognizant – just barely – but yet this was the only segment not to see double-digit growth in Q4 2021, but did experience double-digit growth YoY at 7.9%. Do you think there are any barriers to sustain double-digit organic growth in this segment that weren’t present in financial services? Are there specific trends to healthcare in the US, or internationally?
15.
Is there any seasonality to Cognizant’s revenue growth in any specific segments, perhaps for healthcare?
16.
We discussed the Russia-Ukrain conflict. Some third-party guidance has estimated that we might see increased risk to ransomware or other cybersecurity-related solutions. Do you think there will be an increased demand for cybersecurity solutions as a result of this, and do you think that Cognizant has any headroom or opportunity in that sector to capitalise on this?
17.
What is driving increased revenue growth in Europe relative to North America? We saw pretty high revenue jumps in Q4 2021 in Europe. Are there any specific tailwinds in Europe that could be petering out, or headwinds in North America that are slowing growth?
18.
You mentioned some competitors might be prying into this sector in North America, and I think you mentioned a bit of that in healthcare as well. Are there any other verticals in which you think Cognizant does not have the strongest moat against competitors which it might try to reach parity on a shorter timeline than other verticals? Are there any specific areas in which the company’s market share might be eroding faster than others?
19.
Cognizant has posted double-digit YoY revenue growth for the first time in several years. What top-line growth rate do you view as sustainable or achievable for the company? What do you think it should be forecasting? What do you think we’re likely to see at the end of 2022? What do you think a growth rate could look like over the next 3-5 years?
20.
Are there any specific verticals we should watch out for in terms of Cognizant potentially outpacing its end markets, or end markets where you think the company will see increased growth? Do you think the verticalised growth we’re seeing today will continue over the next 1-3 years?
21.
You mentioned Cognizant has been quite acquisitive over the last few years, with USD 2.5bn in acquisitions since 2019. What do you think represents an attractive M&A opportunity for the company? What is the company’s M&A strategy?
22.
Do you think that Cognizant has a favourite in terms of the platforms it’s looking to acquire? In terms of the capability, do you think it’s aiming to acquire more into Salesforce, Azure or AWS? Is it trying to go for everything right now, is there a unified strategy to acquiring those assets or do you think there should be one if there’s not?
23.
How do you assess Cognizant’s product portfolio across IoT, cloud, artificial intelligence and analytics? Are there any areas where you think the company should focus most of its investment along those product lines, or do you think there are any areas where it’s under-investing?
24.
What areas would you highlight where Cognizant could pursue incremental cost efficiencies at the bottom line? Are there any areas of the corporate structure that you feel are bloated, or inefficiencies that could be righted? Do you think the company has the right headcount, incentive or quota mix on the sales team?
25.
What do you think of Cognizant’s April 2019 acquisition of Samlink in Finland? Would you be able to walk us through the integration story and what happened there?
26.
What do you think is the most important acquisition Cognizant has made over the past couple of years, and how do you think that integration’s progressed? What ROI do you think the company could realise from that over the next 1-3 years?
27.
What are your thoughts on Cognizant’s management and its strategy so far? Is there anything it should be doing differently or would do differently? How do you think its strategy will play out over the next 1-3 years?
