It is the age of the hybrid business model - and businesses need to get used to that idea. That’s the message from Francisco D’Souza, CEO of services giant Cognizant, who argues that he sees his customer base getting on board with that idea:
Most clients realize that competition today is not about being either digital or physical, but rather about being both digital and physical. Hybrid business models are the new way work will get done at the enterprise level.
While attention has focused on the rise of Digital Native players - with D'Souza citing Facebook, Amazon, Netflix and Google as examples - it’s now time to consider a new breed of company, he advises:
Companies that have long seen as the pillars of our economy are emerging as the new generation of digital heavy weights…they are combining their industry expertise and assets built over decades with power technologies like artificial intelligence, the Internet of Things, analytics, robotic process automation, cyber security and hybrid cloud to create entirely new performance thresholds and customer experiences.
This blending of industrial with digital promises to dramatically improve the way the world’s industries serves our needs and improve our lives. Digital technologies have become so integral to remaking business models and core processes that no enterprise can ignore them and so remain competitive. That’s why the rate of digitization across industries and countries continues to rise, and why digital now accounts for a substantial and growing percentage of new enterprise IT spending.
This is the client base of the future that D’Souza wants to pitch Cognizant at:
As we continue our productive partnerships with our digital native clients, we’re also focused on building a strong position in the digital industrial economy. We are resolved to be the go-to-partner for this new generation of digital heavy weights helping them figure out what’s stays physical, what goes digital and what becomes a mix of both.
So, that’s the plan. How’s that working out? Well, this week the firm turned in a fourth quarter loss of $18 million on revenues of $3.83 billion. But that was attributed to a one time repatriation hit of $617 million as a result of tax reforms measures introduced by the Trump administration in the US.
On the subject of the current US market, Cognizant has also made an announcement that should go down well in the White House, with the formation of the Cognizant US Foundation, a non-profit focused on providing stem and digital education and skilled training for US workers and students.
The Foundation will focus on education programs in multiple cities and states across the US to help improve opportunities for US workers and their families, music to the President’s ears no doubt. D’Souza even credited the initial $100 million funding for the scheme to the Trump tax changes recently pushed through.
He’s also very strong on emphasising that as an Indian-headquartered firm, he’s investing in the US workforce:
We are one of the largest employees of technology workers in the US. Last year we added more than 6,000 US citizen and permanent residents through our workforce. And over the next five years, we plan to hire at least 25,000 US workers. To support our growth, we have recruiting, training and rescaling efforts underway in several American cities with plans to extend our training programs for others studies in the near future.
Training - and retraining existing employees - is a big deal for Cognizant, adds D’Souza:
Last year we retrained about a 100,000 of our associates with variety of new digital skills. That’s an ongoing effort. Digital skills are a little different than say past generations of technology because you have a number of different skills. There isn’t sort of one or two main predominant skillsets, when you talk about digital you actually have lots of skillsets, so that the ongoing training is important and we’ll continue to do that.
The downside of this is that it can lead to a “somewhat higher employee attrition” rate as rivals poach newly skilled up Cognizant staffers:
That’s also a phenomenon we’ve seen in the past when we invest in retraining, then it becomes attractive sometimes for competitors to take people that we’ve invested in in making the training efforts. We continue to feel comfortable though that we can continue to stay ahead of that, and that the training efforts and the training engine that we have is strong.
None of this, including all the talk of hybrid models, means that the old school ‘bread-and-butter’ work should be assumed to be in the past. There’s still money to be made there, says D’Souza:
Optimizing the legacy is still, in many cases, a really solid and good business for us. We know how to run clients legacy systems, we know how to optimize them, we know how to keep them up and running - and these legacy systems are still very much the backbone of our clients operations.
So they are not going away and they are very important because digital gets built on top of legacy. We talk about legacy, but actually these legacy systems are our clients’ heritage and so they are really important to have that backbone. We’ll continue to invest in that business, we’ll continue to stay very relevant there, and there’s a lot of value to be added to clients to just being able to go in and say, ‘Look, we can help you run your existing traditional legacy environment, more efficiently, more effectively, lower unit cost and so on and so forth’.
Given the current climate in Washington, you can’t fault Cognizant for pushing forward some Trump-friendly actions. Whether that earns the firm the credit remains to be played out over time.