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Cognizant to trim hiring amid rising payroll costs

Cognizant to trim hiring amid rising payroll costs
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First Published: Mon, May 14 2007. 12 28 AM IST
Updated: Mon, May 14 2007. 12 28 AM IST
Faced with rising wages for tech workers in India and an appreciating rupee against the US dollar, Cognizant Technology Solutions, a New Jersey, US-based software services firm that has most of its operations in Chennai, Pune and Kolkata, has trimmed its hiring plans for 2007 by nearly 6%, the company’s vice-chairman said.
Cognizant had originally planned to recruit 17,200 people this year, but had reduced this number by 1,000 to keep down salary expenses that are rising at between 15% and 25% annually, and the impact of a stronger Indian currency, which results in fewer rupees for the same dollar the company mostly bills its clients in.
Company vice-chairman Lakshmi Narayanan said in an interview the firm plans to spend $180 million (Rs738 crore) this year to expand its Indian centres in Chennai, Kolkata, Pune and Coimbatore to accommodate the 16,200 employees it plans to recruit in India. Cognizant currently employs 43,000.
The Nasdaq-listed firm will focus on increasing the number of its workers who work on projects. “We have decided to try and improve the utilization of the employees in India, which is currently at about 69% compared to on-site employees (working at client offices or their countries), where it is about 84%,” Narayanan said.
Utilization rate refers to the number of employees engaged in revenue-earning projects as a percentage of a company’s total workforce. “Currently, the utilization of our Indian employees is below other IT companies (with comparable revenue) because of our strategy of employing for future needs rather than for projects at hand,” Narayanan explained.
An analyst saw Cognizant’s efforts at increasing productivity of its workforce long overdue. “In Cognizant, you don’t know which employee is available and who is not. Infosys, for example, will track it much closer,” said Harmendra Gandhi, vice-president of research for Mumbai-based Brics Securities Ltd, adding Cognizant business unit heads had been asked to use ‘benched’ employees before hiring afresh.
Infosys Technologies Ltd, India’s second-biggest tech vendor, has a utilization rate of nearly 79%.
Such measures would help Cognizant become a $2 billion company, a target it has set for end-2007, helped by increased demand from banking, financial services and insurance clients, besides the upcoming healthcare segment. “We are market leaders in those spaces—we identified healthcare as an area for growth very early,” said Narayanan.
The headstart in healthcare has helped the company market itself as the leader in the space amongst the Indian tech companies, the Cognizant vice-chairman said.
Currently, the segment accounts for nearly a quarter of its $460.3 million revenues for the January-March months, while banking, financial services and insurance segment accounts for about 47%.
Asked why Cognizant has never embraced the business process outsourcing segment the way other large Indian IT companies have, Narayanan said, “Our strategy for BPO has been a little different—we have about 1,200 employees in the segment serving more specialized functions than the typical call centre employee.”
He pointed out that the profile of Cognizant’s BPO employees are typically doctors, bio-statisticians, chartered accountants and business administration post-graduates. “Correspondingly, the revenues generated by our BPO operations would be much higher and our operations in this space complement the segments in which we provide our other solutions,” he said.
On the direction the fast-growing $48-billion Indian tech services was taking, Narayanan, who took over the chairmanship of trade body National Association of Software and Service Companies (Nasscom) recently, said there was a need to focus on “process innovation”. “In order to drive sustainable growth (in IT in India), we need to make a significant investment in innovation,” he said.
Tech companies should encourage employees by giving them the time and incentives to innovate in improving processes, Narayanan added.
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First Published: Mon, May 14 2007. 12 28 AM IST
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