Headcount Reduction Amidst Industry-Wide Slowdown
Cognizant’s headcount fell by 7,600 employees in 2023, reflecting a decline from 4.16 lakh to 3.4 lakh. This decrease aligns with broader trends in the IT sector, where subdued economic indicators, cautious clients, and longer decision-making cycles have led to reduced hiring across several firms.
Breakdown of Reduction and Attrition
The company witnessed a significant drop of 4,500 employees in India and nearly 3,000 employees onsite. Geographically, its current workforce comprises 2.5 lakh employees in India, 40,500 in North America, 16,300 in Continental Europe, 8,500 in the UK, and 28,400 across other locations.
While facing industry-wide attrition challenges in 2021 and 2022, Cognizant aggressively hired, onboarding 100,000 new employees each year. In 2023, this number decreased to over 60,000. However, the company reports a positive trend in voluntary attrition, which eased to 13.8% in 2023 compared to 25.6% the previous year.
NextGen Program Costs and Restructuring
Cognizant expects to incur $70 million in 2024 due to its NextGen program, aimed at streamlining operations, optimizing corporate functions, and consolidating workspaces. In 2023, the program resulted in $229 million in costs, including employee separation costs and facility exit expenses.
Embracing AI and Human Capital Development
The company acknowledges the growing role of AI and its potential impact on certain services offered. It actively promotes AI integration, including its proprietary GenAI platform, in both client solutions and internal operations. Recognizing the need for workforce upskilling, Cognizant has trained 137,000 employees in various digital skills and invested in leadership development programs like Lead@Cognizant with Harvard University. Additionally, initiatives like Propel aim to nurture future women leaders within the organization.
Thirdera Acquisition Boosts ServiceNow Expertise
Cognizant’s $430 million acquisition of Thirdera, a leading ServiceNow partner, in January 2024 strengthens its expertise in this crucial enterprise cloud platform. This move broadens the company’s ServiceNow Business Group to over 2,400 specialists and 14,000 certifications, solidifying its position in this growing market.
Software Sales Included in P&L
It’s worth noting that Cognizant, like many IT firms, factors in the sale of software licenses and hardware as part of its profit and loss (P&L) statement. In 2023, the gross value of software for sale recorded on its books was $279 million, marking a slight increase from $241 million in 2022.
Looking Ahead
While the IT sector grapples with a cautious economic climate, Cognizant’s strategic investments in AI, workforce development, and targeted acquisitions like Thirdera demonstrate its focus on future-proofing its business model and remaining competitive in a rapidly evolving technology landscape. The success of its NextGen program in optimizing operations and its ability to adapt to changing client demands will be crucial factors in its future growth trajectory.
