Cognizant’s headcount declines by over 7,000 in Q1

Kumar said that Cognizant would first increase its utilisation rate by 1-2 percentage points and then start hiring

Information technology company Cognizant Technology Solutions' headcount declined sequentially and year-on-year (YoY) after two quarters in January-March, following in the footsteps of its Indian peers.

IT companies have stopped backfilling positions left vacant due to attrition in the recent past due to weak demand and higher utilisation rates.

The Teaneck-based company's headcount decreased by 3,300 sequentially and 7,100 YoY, ending with 344,400 employees in the first quarter of 2024. Cognizant follows the calendar year.

“We have some capacity to continue to take care of our short-term needs. And as growth comes back in a more and more robust way, we will start to improve headcount,” chief executive officer Ravi Kumar S told the media after declaring the results.

In India, the top five Indian IT services giants - Tata Consultancy Services, Infosys, HCL Technologies, Wipro, and Tech Mahindra - together lost 69,167 employees in FY24 amid an uncertain demand environment.

Cognizant's bigger rival Accenture’s headcount declined by 723 to 742,318 in the last reported quarter.

A substantial portion of the workforce of Nasdaq-listed information technology companies operates out of India and their results serve as an indicator of the broader trends within the over 5 million-strong Indian IT sector.

Cognizant’s attrition rate decreased by 10 percentage points to 13.1 percent on a trailing 12-month basis. Its utilisation rate increased by 1 percentage point to 82 percent for the quarter ended March 31.

Kumar said Cognizant would first increase its utilisation rate by 1-2 percentage points and then start hiring. Additionally, the company’s headcount has not fallen as much as some of its peers, and the metric was net positive in the past two quarters.

Asked about the potential impact of new-age technologies such as generative artificial intelligence on employment, Kumar said that contrary to popular belief, jobs would increase.  He added that human productivity would intensify and result in two outcomes.

Firstly, the cost of delivering technology services would go down because there is a huge backlog of work. Secondly, entry barriers in technology would be taken away because it would eliminate the need to be a deep programmer to write code.

“Every time we had a discontinuity in technology, we have only seen more adoption of technology. So, I actually see this from the lens of being an opportunity to that effect,” Kumar told the media.

Also read: Overhiring or AI impact: Indian IT firms divided on why employee headcount is declining

Cognizant posted a fall of 1.1 percent year-on-year in revenue to $4.8 billion in the March quarter due to weak discretionary spending by clients. However, the topline was above the higher end of its guidance range, which was earlier forecast to decline to 2.7-1.2 percent.