Q&A: Why Cognizant lowered its 2012 outlook

India's third largest IT services exporter Cognizant on Monday created a bit of a flutter when it revised its 2012 revenue guidance downwards by three percentage points - from 23 per cent to 20 per cent. R Chandrasekaran, Group Chief Executive, Technology and Operations, Cognizant, explains why the company had to revisit the outlook given at the beginning of the year.

Explain why Cognizant had to revise the revenue guidance for 2012.
On one hand we feel good about the growth outlook as well as the way Q1 turned out. When you give the guidance at the beginning of the year, you do expect an acceleration of demand as you enter Q2.  When we reviewed our business, the acceleration of demand slowed down below our expectation. There is some tempered demand in the banking sector in North America as well as challenges in the pharma industry. These are the only two factors that contributed to reduced guidance. But 20 per cent growth, by any means, is a fantastic growth for any industry at any point in time. We see broad-based growth be it in financial services, healthcare, manufacturing etc. Banking and pharma are still growing but not at the rate we had anticipated at the beginning of the year.

When you say banking, are you implying investment banking - that seems to be stressed?
No. It is banking across the board though we do lot more business in investment banking. The discretionary spend in banking is lower than what we had anticipated. The other side - application management - continues to grow. To compensate banking, insurance is recording a fantastic growth. We grew by 6 per cent sequentially in Q1. We expect a good growth for the rest of the year in this segment. Similarly, in the healthcare segment, pharma is a bit of a drag. But to compensate, the payer segment (healthcare insurance companies) is growing phenomenally well. Last quarter it grew by 7 per cent sequentially. Overall, healthcare will continue to grow well for us.    

Is the slowdown in acceleration of demand a one quarter aberration?
We consider 4.6 per cent growth sequentially (Cognizant's guidance for Q2) to be a healthy growth compared to any other company or the industry.  We expect the same level of growth to continue in all the quarters for the rest of the year.   

How is the budget-to-spend ratio trending as far as your clients are concerned?
It is on expected lines except for the banking and pharma sectors. Customers are still looking for partnering with us to improve efficiency and leverage our consulting skills to help them through some of the transformational work they are doing. They are also looking at other cost take-out areas such as infrastructure and BPO. Those businesses are growing very well for us.  We are definitely able to cross-sell and deepen our partnerships with all our customers.  

Cognizant is expected to overtake Infosys for the second slot in Indian IT's pecking order this quarter. How does it feel?  
Frankly, that is not in our scheme of things, our discussions. What we are focused on is maintaining the track record of industry leading growth. We want to invest in our business and leverage our differentiated financial and operating model to gain market share.  We are also a people-oriented organization - how do we attract and retain the best talent. We take care of our customers, invest in the business and take care of our people; rest, we leave it to destiny.  We are on the right track.