As the spend comes back, I’m very confident that because we have good engagement with our clients, we are also going to naturally be the providers for discretionary spend. You could, in some ways, use the strength of our current deal momentum to support the discretionary — the historic discretionary muscle of the company. Now, I think Jan raised an important point which I think is very, very important. We ran the Net Promoter Score survey this year and we have historic high scores. And there are 3 or 4 things which have come out of that. Our attrition rates have gone down. They’ve gone down and they’re trending downwards, even into the next quarter. Our employee satisfaction scores are at an all-time high. Our client satisfaction scores are at an all-time high.
Customers are engaging with us much more over a variety of swim lanes which means when the discretionary comes back, each of these swim lanes is going to contribute back to that — back to the strength of those relationships, so. In fact, there’s one thing which really registered with me on the Net Promoter Score survey which is about our customers saying Cognizant is back in some form. I’m paraphrasing it, Cognizant is back or the mojo is back. I think that is the momentum which will allow us to get back the discretionary spend as and when our customers start to spending it. So, I think we have set this foundation, a very strong foundation. The 2 things which our clients have spoken about, as I said, Cognizant is back. The second is we have a much more stable leadership, good execution, agile responses and much lower — significantly much lower turnover of employees.
And these would actually rub off on the discretionary as it comes back.
Ashwin Shirvaikar: Good to hear. The second question, again, it’s a good job on the margin performance. The question I have is on the deals that you are signing, you mentioned that there is now need to be flexible in terms of structuring, in terms of bringing various partners together and so on and so forth. Does any of what you are doing today to get new deals affect how you think of future margin potential?
Jan Siegmund: Yes. So when we sign up the deals, obviously, they are in a competitive environment and we apply a disciplined approach to those deals in order to keep a balance of growth and continued margin expansion. And it played out this quarter, Ashwin, really, to the benefit of the margin because we had anticipated some investments a little bit stronger than we actually needed in this quarter on, for example, investments into larger deals with maybe initially lower margins and we didn’t meet those investments. So I think this view that we have about very carefully layering our large deal portfolio and supporting it with disciplined approach on non-billable and administrative cost controls is playing out. And I think we’re entering that year, next year with that confidence that, that balance is intact.
And I think I mentioned it in our prior call, in the large deal, expected business profile that we do have deals that we expect to exhibit lower margin profile. But we also have deals that have very meaningfully — actually, renewals of historic deals that have very meaningfully improved our gross margin profile in the renegotiation. So in the net profile, the impact has been actually more muted and that may not continue all into the future. But for now, it has been a very balanced outcome, I would say.
Ravi Kumar: So Ashwin, we are — the first thing we just changed is we are participating on deals across the swim lanes I just spoke about and we are competitive enough and we have built the institutional infrastructure to support execution and actually better our performance to the metrics which we commit when we win those deals. So we have to keep strengthening that. This is always a work in progress. We have to continue to stay competitive and we have to continue to price them to win and deliver them to margins as I call it. And we continue to keep our competitiveness by strengthening our productivity tools and our automation tools and our AI tools. So this is an ongoing process and you have to keep changing the baseline because as you want to be competitive, you have to continue to keep working on the productivity levers.
Unlike in the past, where these productivity levers were labor-oriented or, I would say, they were classical, now they are technology oriented. And hence, we have a unique opportunity to create some nonlinearity. In the past, we did not participate in those deals. Now we are participating and winning them, so the confidence has been really high.
Operator: Our next question comes from the line of Jason Kupferberg with Bank of America.
Tyler DuPont: This is Tyler DuPont on for Jason. I wanted to ask about the demand environment you’re seeing as we start — as we look into the end of 2023 and as we start to look into even the beginning of 2024. When looking at the updated revenue guidance being narrowed, I’m just curious what incremental trends you’ve seen over the past couple of months, whether that’s changes in win rates, ramp times or softness, whether that’s a particular service offering, vertical, geography, anything like that, that may be driving the additional cautious stance.
Ravi Kumar: I think the cautiousness is related to the uncertainty around the discretionary spend. I think everybody in the market is facing it, including us. What we are certain is our deal momentum and our large deals and our bookings continues to be very vibrant. What we do not know, especially in a seasonally slow quarter, quarter 4 is always a seasonally slow quarter because of furloughs as well. What we are unable to predict is how much of the discretionary gets impacted and how much of our large deal momentum will get neutralized by this. And to that extent, we felt it was only fair that we keep a risk — we keep the risk adjusted to what we believe could be soft in quarter 4.
Tyler DuPont: Okay, that’s very helpful. And then, I guess, just to kind of go even just a little bit deeper into visibility into 2024 budgeting decisions. I know it’s still early and you don’t give guidance on ’24 or anything yet. But just given the current rather choppy macro environment that we’re seeing and have seen, can you just speak to sort of the conversations you’re having with clients regarding ’24 budgets, sort of how does that visibility compare with this time last year? And is there more certainty in certain verticals than others? Or just any clarity there would be very appreciated.
Jan Siegmund: Yes, I’ll jump in for — number one, I think we actually kind of gave a lot of — half of the P&L we already disclosed because we’re really committing to our 40 to 20 basis points of margin expansion. And so now the revenue range, going forward, will be subject to our guidance call in 3 months. But if you — what we know today is, as Ravi said, that I think, gradually, the economic uncertainty has increased and discretionary spending has softened throughout the last 3 quarters. So we have seen that trend not stopping yet. And part of our lack of knowledge, if it’s stopping in the fourth quarter, or if it’s going to turn around early in the year or later in the year is really not known to us to be quite honest as well.
And clients will be forming their budgets and their IT budget at the same time as we are developing our own budget. So this is kind of always a simultaneous process. What has improved for us is obviously the visibility of the longer-term deals that are now in our portfolio and that they will be contributing and scaling in ’24, so that gives us a little bit of a planning safety. And then we have to just kind of really make assumptions on — and you can do that for your own self. It’s like, are you bullish on the discretionary spend and economic development on next year, or are you the same, or more bearish. And I think that will then determine the revenue outcome for next year to do so. I think that’s really what we will go under. We haven’t finished that process and — but in February, beginning of February, we’ll commit to that.
