Cognizant Technology Solutions Corporation outperformed its peer group yet again by registering 26 per

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cent increase in net profit for the quarter ended June 30, 2008 (against $82.3 million in Q2 of 2007).

However, the company has lowered its guidance for the rest of the year owing to continued uncertainty in the market. Cognizant CFO Gordon Coburn shares his views on the company’s prospects with S Shyamala, over an email interaction.

Excerpts:

Your company has revised its outlook for the rest of the year. Do you foresee conditions worsening further?

On account of the global economic uncertainty and various cyclic and secular industry pressures, some clients are reassessing their budgets, reprioritising spending and elongating decision cycle. In the interest of caution, and to reflect our expectation of a further weakening of the global economy, we reduced our outlook for the remainder of calendar year 2008. However, we expect to continue with our industry-leading growth for the year, and our pipeline of new business with existing and new customers continues to be robust.

Experts claim the economic slowdown will generate more jobs offshore?

In difficult economic times, clients often look to global delivery in order to get more done with the same or fewer budget dollars. A case in point is our financial services portfolio, which saw improved stability, growing slightly above the company average on a sequential basis in the June quarter. This gives us a reason to believe that clients will increasingly turn to companies such as Cognizant for help with optimising their cost efficiencies and adapting to the changing industry environment.

When do you plan to improve your utilisation rates?

During the second quarter of 2008, our offshore utilisation, excluding recent college graduates who were in our training program during the quarter, was slightly over 70 per cent and our onsite utilisation was approximately 88 per cent. Throughout the remainder of 2008, we expect to further increase our offshore utilisation to take advantage of scale economies and to leverage our historically heavy over investment in bench resources.

For the past two quarters the company has stopped giving guidance on hiring. Do you see further drop in hiring as well as attrition rates?

The IT industry is undergoing a transformation, where companies are providing solutions to business problems leveraging technology rather than merely providing technology capability. This has resulted in the emergence of newer patterns of hiring, where companies are hiring professionals from varied—and not just technical—backgrounds. Companies are also trying to break the linearity between headcount and revenue growth. They are investing heavily in services such as automation, consulting and analytics, where the revenue-per-individual is higher. Generating revenues is no more necessarily about adding headcount at the same rate as revenue growth. Higher attrition is caused by the demand meeting or surpassing the supply. As any industry matures, it is not unusual to find disproportionate volumes of business and people gravitate towards the market leaders.

Business from Europe has shown tremendous growth in Q2. What are the key markets within the continent?

For the first time at Cognizant, Europe made up over 20 per cent of total quarterly revenue at 20.3 per cent in the June quarter. Our European business grew almost 15 per cent sequentially and over 83 per cent year-over-year for the quarter, as a result of our continued investment in that region and our focused efforts to increase our presence in this geography. We are focusing on Asia and Latin America.