‘My focus will be on start-ups’

Cognizant Technology Solutions announced last week that its vice-chairman Lakshmi Narayanan had decided not to seek re-election to the company’s board. Mr. Narayanan led the company as CEO between 2003 and 2006, when the firm crossed the billion-dollar mark in revenue. In that period, the headcount, which is the mainstay for IT services firms, rose more than fourfold to about 39,000 even as market capitalisation climbed almost five times to about $13.4 billion. He spoke to The Hindu about how he looks back at his tenure, as well as about the environment the industry finds itself in now. Excerpts:

What is your greatest achievement in your tenure as CEO and vice-chairman?

Looking back, the most important thing is the basic values and the culture that we built in the company. Apart from the external values of customer-centricity, growth, ethics etc., the internal value of making individuals autonomous, empowering people so that they are entrepreneurial and building a business was satisfying. More importantly, that empowerment and autonomy is given at a younger age. They are the ones who are building the company and they are delivering day in and day out. I think that is one of the biggest legacies of Cognizant as a company. This is really fulfilling for me. Young minds, energised, have the opportunity to do what they want in the firm and be happy about it.

Any challenges you overcame and which gave you satisfaction?

In any industry, traditionally, you would have sales and project delivery. For the technology industry, it is delivery, sales and innovation. What drives future sales is what you innovate on today. With innovation, you are not under constant revenue pressure, for today, you don’t have to sell something but you are visualising the future. Its value will be realised much later. That is quite difficult because you have to look at where the industry will be after a few years and come up with a solution for that today so that we are ready. That is one challenge different in this industry compared to other industries.

Has the IT industry done enough on innovation, given the challenges now from automation and demand for digital services?

In terms of preparedness, the industry has recognised the importance of investing in innovation quite sometime back. Look at the inflection points. Transitioning from the year 2000 to the next goal was a challenge. Many companies lost their way and wound up. The dotcom bust was another inflection point when a number of companies bolted. So the message that they have to be prepared for the future was very clear. But how much to invest, and how fast to go… these matter the most. Companies that have invested early enough in terms of acquisitions are getting the benefit. For example, Accenture has invested so much in acquisitions in the last 2-3 years and they are ahead of the game. Cognizant has also made a number of acquisitions, both big and small, to be prepared for the future. I was looking at an investment we made— Measure, a drone service company. It has certified pilots who would fly these drones. Why it was important for us was something that I questioned. It then struck me that the applications that you can enable with these pilots sitting in a remote place, in future, and flying these drones to check out, for instance, telecom towers. You don’t have to climb up the towers to check out the antennae. The drones can click pictures. It may not be appealing immediately but when you look at long-term growth, it is good.

Will you now focus more on start-ups, with which you have already been spending time?

I will focus more on start-ups. These are people with great ideas, they have the energy but they need to be guided to encourage them to think big, dream big and to focus on values, and on the ethics of doing business right from the beginning so that they don’t have to compromise. If they focus on all this, even if they grow to become large firms, they will not have any challenges.

People like us can provide a lot of help here: how to get funding, how they should develop for the long-term…

The Stayzilla issue has shaken up the start-up ecosystem. Your views?

In a roadside accident, it’s never one person’s fault. Both are losers. In the Stayzilla case, they could have discussed it and managed it. By getting into a tussle, there will never be any winner. If you want to create a win-win situation, it’s only through negotiation, discussion; and that’s something both could have done in this case.

In a downturn, activist shareholders tend to demand buybacks or dividends. Cognizant and others have announced buybacks. Is this healthy?

The Cognizant board had been discussing all the points that Elliott Management, the shareholder, brought up. For at least for a couple of years, we had mulled on these — capital allocation, the margins… they had been constantly discussed but we had not set them into action. Elliott acted as a trigger. We never took an attitude that they are dictating terms and that we would fight this. We can create a win-win situation by collaborating. These were fantastic ideas and we put those into action. In this particular case, it was beneficial for the firm as well as the investor.

In technology, you have to visualise the future, prepare for it

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