The movement to digital is real, we feel good about 2017: Malcolm Frank, Cognizant

In a chat with ET Now, Malcolm Frank, EVP, Chief Strategy Officer, Cognizant, says going to stick with the long-standing strategy that acquire for capability and not for capacity.

Edited excerpts:
What is your outlook for 2017? What is the trend that you see?

We are feeling good about 2017. It has certainly started better than it did for us in 2016. So we are feeling good with the foundation we have for the year and we are in a calendar year.

In terms of trends, this movement to digital is real and is significant. So we see clients moving from their enterprise application systems of record computing model that they have really built companies on for the past 20 years and moving to a truly digital model. We are reorganising the firm and going after that across three major lines of service and we feel quite good about that transition.

With respect to capital allocation, $3.4 billion is a huge amount of buyback. Does that mean that you will go slow as far as acquisitions are concerned? Now that you are returning to much of money to shareholders, does that mean M&A is likely to take a backseat?

No not at all. You are going to see us continue with our M&A approach. We are going to accelerate it particularly around digital. Capital allocation was clearly a big part of building Cognizant 2020 strategy over the past few years. We feel very comfortable with our ability to be aggressive in M&A particularly going after digital firms. We are going to stick with the long-standing strategy that we acquire for capability and not for capacity. So we are looking for those firms that can build digital portfolios. We continue to grow.

As someone sitting in the US right in the heart of all the action, do you think an executive order on H-1B visas will be a reality? Where do things stand at this point because now people are sidetracked with a travel ban and the revoking it but do you see this becoming a reality as far as the executive order on H-1B visa is concerned?

I do not know and I am not dodging the question. I have learnt a long time ago that you should not get into the business of predicting politics and what is going to happen on Capitol Hill but that said, the movement towards this is clearly increasing. This is an issue that comes and goes, waxes and wanes and we have seen that over the past 10 to 15 years. But we are taking it very seriously as a company. We have built all of our contingency plans.

What would these contingency plans be? Would it be more local hires, more offshoring, passing on some of this to client or a combination?

It is a combination of all that but there are so many different scenarios. It is dangerous to put a stick in the ground and do everything but there are things that we know we are going to continue to do. There are sort of no regrets decisions. We have data centres across the US. We are going to continue to build those out. Last year, we hired more than 4000 associates in the US. You are going to see that accelerating and it is not just a reaction to what is happening with legislation or potential legislation, the real driver in the true north is what is happening with our clients, their digital needs, the types of services they need to fulfil those. This will require more local model in certain markets to help our client with their digital needs.