Cognizant sees over 7,000 reduction in headcount in Q1 FY24

Cognizant Technology Solutions has seen its headcount decline by over 7,000 year-on-year (YoY) in the first quarter of 2024, mirroring a trend across the Indian IT sector.

Following a similar pattern to other Indian IT giants, Cognizant has stopped filling vacant positions due to weak demand and high employee utilisation rates.

Headcount Reduction Mirrors Industry Slowdown
The Teaneck-based company’s workforce shrank by 3,300 compared to the previous quarter and 7,100 YoY, ending Q1 2024 with 344,400 employees.

“We have some capacity to handle our short-term needs,” stated CEO Ravi Kumar S. “As growth returns in a more robust way, we will start to increase headcount.”

This decline aligns with the broader Indian IT industry. The top five Indian IT services companies – Tata Consultancy Services, Infosys, HCL Technologies, Wipro, and Tech Mahindra – collectively lost 69,167 employees in the last financial year due to an uncertain demand environment.

Focus on Utilisation Before Hiring
Cognizant’s attrition rate has dropped by 10 percentage points to 13.1% on a trailing 12-month basis, while its utilisation rate climbed 1 percentage point to 82% for the quarter ended March 31.

CEO Kumar outlined that Cognizant will prioritize increasing its utilisation rate by 1-2 percentage points before initiating new hires. Notably, the company’s headcount decline has been less severe compared to some of its peers, and it even experienced net headcount growth in the past two quarters.

AI and the Future of Jobs
Addressing the potential impact of new-age technologies like generative AI on employment, Kumar offered a contrarian perspective. He believes that such advancements will ultimately lead to job growth rather than job losses.

“Human productivity will intensify,” he explained, “resulting in two outcomes: firstly, the cost of delivering technology services will decrease due to the vast backlog of work, and secondly, entry barriers in technology will be lowered as the need for deep programming skills diminishes.”

Kumar views the rise of AI as an opportunity, stating, “Every time we’ve had a technological discontinuity, we’ve only seen greater technology adoption.”

Revenue Dips Due to Weak Spending
While Cognizant’s headcount decreased, its revenue also saw a slight YoY decline of 1.1% to $4.8 billion in the March quarter, primarily due to weak discretionary spending by clients. However, the topline exceeded the higher end of its earlier guidance range, which had forecast a decline of 2.7-1.2%. TechGIG