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Cognizant: decoupling revenue and headcount

Tuesday, February 13, 2018

IT and outsourcing giant Cognizant blazed an important new trail this week, announcing 10% annual revenue growth despite a reduction in headcount globally – the first company of its size in this sector to display annual growth without a concomitant expansion on its employee base.

The drop in staff numbers of around 200 may seem like a small drop in Cognizant’s employee ocean of over 260,000 employees, but nevertheless some analysts are seeing the news as indicative of a fundamental shift as the largest IT and services players look to solve the existential question of how to leverage automation and digital technologies to maintain growth whilst shrinking costly headcounts which in several cases encompass hundreds of thousands of employees.

Moreover, the overall reduction of 200 workers comes despite Cognizant’s taking on approximately 6,000 new employees in the US, suggesting that much of the drop has taken place in India where much of the company’s more transactional work is delivered.

“As the industry moves from the labour arbitrage factory model to the technology-based digital model the revenue per person rises and fewer people are needed… Cognizant is one of many firms which is driving hard into the new digital marketplace and this effort is showing results both in their increased growth and the improved revenue per person and falling headcount,” said Peter Bendor-Samuel, CEO of analysts Everest.

Cognizant’s noteworthy first may soon be matched by a couple of its competitors, especially Infosys and TCS which have reported declining employee numbers over recent quarters but whose annual results are not out until April.

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