Cognizant's new CEO Brian Humphries is making the right noises. This includes reinvigorating the sales team.
Though it is too early to say if its working, according to experts, Humphries is taking the right path.
Till about a couple of years back, Cognizant was growing at double digit even when its peers such as Infosys scaled back after the global economic slowdown. According to reports, Cognizant grew at the rate of 48 percent between 2004 and 2008 and 28 percent between 2009 and 2013.
For instance, Infosys grew close to 15 percent in 2010 whereas its growth was close to 40 percent in 2005.
Chirajeet Sengupta, Partner, Everest Group, a consultancy firm, said: "Cognizant's watershed moment came when the Elliot Management, an activist fund, picked up stake in the company."
In 2016, Elliot, an activist hedge fund, picked up 4 percent stake in Cognizant and began to change the company's course. The IT firm had high growth and low margin focus. But the Elliot management began to push for high margins by adopting automation and cost cutting.
The timing was not right, pointed out another expert. It was a time when IT was undergoing a huge transformation.
Elliot management's interference left Cognizant in a bind and this was the beginning of trouble for Cognizant.
In the quarters to come, Cognizant's growth slumped though their margins improved. The company that was growing in double digits saw single digit growth. In the last quarter, the company further slashed its revenue guidance for the whole year to 3.9-4.9 percent from 7-9 percent after Humphries took over.
It is clear where the company is heading and Humphries has been vocal about it.
After Humphries took over in April 2019, he took drastic measures to cut down costs and focus on growth. Between April and September, there have been lot of high profile exits. There were reports of layoffs and restructuring of the company's sales team.
"In the last six months, he had overhauled Cognizant. He stepped up the sales team. In many cases, he promoted internally rather than looking out for new people. In a way that maintains the company’s DNA and core values," Sengupta said.
According to experts, Humphries is doing everything right thing and early in his tenure. Stepping up of sales team is important as the company could look into diversify from banking and healthcare and life sciences, its major revenue generator. Also the company is focused on North America and the new management will look to diversify into newer areas.
Pareekh Jain, founder, Pareekh Consulting, a tech consultancy firm, explained that the company could look into other verticals including telecom, given Humphries experience from Vodafone.
Will it bring results? Only time will tell.
"Humphries is going back to the roots that worked well for Cognizant before. He would need more time given that he took over only in April. In addition to the market challenges, he is a non-Indian CEO in an Indian IT firm. It might take him more time to understand the company, its people and get attuned to all these. So it might take him a little longer to produce results," Jain pointed out.
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