More reports on: Cognizant Technology Solutions, Infosys Technologies

After Infosys, Cognizant to ramp up US hiring

06 May 2017

US-headquartered Cognizant Technology Solutions (CTS), which has over a third of its workforce in India, said on Friday it will rationalise its cost structure by bringing the employee base in line with demand. The company intends to ramp up hiring in the US while reducing dependence on the H-1B visas.

In the last few months, all information technology (IT) majors have been under pressure to hire locally after US President Donald Trump tightened visa norms.

During an earnings call for the first quarter of 2017, CTS president Raj Mehta said the company hired 4,000 US citizens and residents in 2016.

"In 2017 and beyond, we expect to significantly ramp up our US-based workforce by hiring experienced professionals in the open market and by making more use of university, veteran, and related programmes," he said.

Infosys announced this week that it would hire 10,000 locals in the US. (See: H1-B review fallout: Infosys to hire 10,000 US workers). Mehta added that for the recent filing period as on 1 April, the company applied for less than half the number of visas it sought last year.

The senior management told analysts that the move was not in response to immigration norms and was based on their clients' needs.

"We are shifting our workforce largely in response to clients' increasing need for co-innovation and co-location. While we will still seek visas for highly specialised and skilled talent, we're reducing our dependence on these visas," said Mehta.

As part of this shift, Mehta said they would continue to expand their US delivery centres. "Today, we have over 20 US delivery centres and we continue to expand this footprint. We are executing the shift to digital at scale by helping our clients simultaneously optimise their costs as they invest in the future. And we are shifting our workforce rapidly in the US with more US jobs and US delivery centres," he said.

Cognizant has been under pressure from activist investor Elliot Management to optimise costs and focus on improving operating profit margins.

On Tuesday, CTS rolled out a voluntary severance scheme for D+ category employees - directors and senior vice presidents - giving them the option to exit the organisation with either six or nine months' pay as severance package, depending on their category.

Employees unhappy
The company's plan to downsize has not gone down well with all employees.

On Thursday, 10 employees filed a petition with the assistant commissioner of labour in Chennai, accusing the company of forcing employees to resign.

For the quarter ended March 2017, the company reported robust performance with a 10.7 per cent year-on-year growth in revenues at $3.55 billion. Its revenue grew 2.4 per cent sequentially from last quarter's $3.46 billion. Profits grew 26 per cent y-o-y to $557 million from last year's $441 million.

The company's strong performance comes at a time when the industry as a whole is witnessing strong headwinds. Vishal Sikka-led Infosys recorded muted sequential growth for the quarter while Wipro and TCS posted 1.7 per cent revenue growth in constant currency terms.

On an annual basis as well, CTS remained ahead of its peers with 10.7 per cent growth in revenues while the other IT majors grew at less than just about half its rate. Shiv Nadar-led HCL Technologies is yet to announce its quarterly results.

CTS has reaffirmed the annual guidance it provided during the previous quarter, expecting revenues to be in the range of $14.56-14.84 billion.

The company has declared quarterly cash dividend of $0.15 per share for shareholders on record as of 22 May 2017, payable by the end of the month.

"We delivered solid results in the first quarter and continued to build our digital solutions portfolio, expand our skills, and enhance our engagement with clients," said Francisco D'Souza, chief executive of CTS. "We're making good progress in accelerating the shift to digital services and solutions to create value for clients and shareholders, positioning us well to achieve both our revenue and margin targets for this year."

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