BackCognizant has contingency plan for US immigration Bill
Cognizant CFO Karen McLoughlin on risk management strategies
Premium(Karen McLoughlin says Cognizant is always focused on risk management. )
Bangalore: For the first time in two years, US-based Cognizant Technology Solutions Corp. raised its full-year guidance and further cemented its position of being the benchmark for Indian software exporters after reporting forecast-beating numbers in the June quarter. Chief financial officer Karen McLoughlin, who has been with the company for a decade, spoke in an interview about her role in managing finances at the fast-growing company, the strategies Cognizant has put in place for managing risk and steps the company is taking to prepare itself against disruptive clauses in the US Immigration Bill. Edited excerpts:
What is it like managing finances of such a fast-growing organization as Cognizant?
I’ve had the honour and pleasure of working with Frank (CEO Francisco D’Souza), Gordon (Coburn, president) and other terrific leaders in the team. Certainly, managing growth is something we understand very well and are always focused on, so from my perspective and others in the organization we’re focused on how to make sure the infrastructure continues to scale with the organization both in terms of size—the number of people in our facilities and how to support that—and also in terms of making sure we continue to groom the talent, bringing the next set of leaders up through the organization and really providing the right set of career opportunities for people. I think we understand how to do that very well and it’s obviously very rewarding to work on everyday.
How does Cognizant manage risks? How selective are you about your clients—have there been instances where you have walked away from certain deals?
Risk management is something we’re always focused on. We’re fortunate that most of our clients tend to be Global 2000 companies—so we’re dealing with very large companies, but I think the relationship works best when you have companies that are culturally aligned with ourselves. Well-recognized names in the industry and large, successful organizations tend to be our customers. So it’s something we look at when we enter into relationships with new customers, but given the nature of our business and the type of customers we do business with, we’re very fortunate to have some of the world’s best companies on our client list.
Cognizant has really grown fast over the last five years and never really seen a rough patch. Some investors are asking if that makes the company less prepared for tougher times.
I don’t think so. If we go back to the recession of 2008-09, when clearly the entire world economy was in trouble and you clearly saw customers slowing down on decision-making and in some cases even stop decision-making, I think what you saw then was the strength of the organization and the management team helped drive the company successfully during that timeframe. So even in that very significant downturn, we grew significantly faster than our competition. It really comes down to having the strength in your relationships with customers... and really making sure that we’ve made the right investments to deliver the right services to our customers depending upon their needs.
What kind of investments are you setting aside for your emerging business accelerator (EBA, which is overseen personally by CEO D’Souza) programme?
We don’t give specifics of how much we’re investing in EBA, but a significant amount of dollars are going towards EBA. We have guided to a non-GAAP operating margin of 19-20%, which is lower than some of our competitors, and we use those extra dollars to invest in the business, whether it be EBA or other parts of the business.
The Immigration Bill has caused significant concern in the IT (information technology) industry and some of your competitors such as TCS (Tata Consultancy Services Ltd) have said they’re prepared for every scenario in the Bill. Given that the Bill (if passed in its current form) will force you to make changes to your business model, how prepared is Cognizant?
First and foremost, it’s very unclear what form the final Bill will take. The Senate has proposed one version of the Bill, the House has proposed another. I think it’s premature to comment on what the final outcome of the Bill might be. But... we’re evaluating certain types of risks, we have contingency plans in place... and we will continue to evaluate those and see how the Bill plays out.
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