Cognizant's shrinking workforce an alarm bell for India IT

Newer skill demand, increasing automation and regulatory pressure to threaten India's position as a major talent base

Skillsets requirements for the technology services companies are changing drastically as there is an increasing push towards automation and regulatory pressure to create enough job opportunities in geographies which drive bulk of their revenues.

For the first time, the IT services sector is seeing a culmination of so many factors which is creating kind of a perfect storm to pivot to a model which is less people dependent and more process and technology dependent, and this has started to make its impact felt in the talent demand and employee mix.

And no wonder why Cognizant, one of the second largest IT employers in India, saw its workforce in the country shrinking while it’s growing in some other geographies including the US and UK even though the growth is not proportionate to the growth in revenues. In 2017, Cognizant’s employee count in India declined by almost 8,000 to 180,000, perhaps for the first time ever in such a scale while it added 2,900 more people in the US to 50,400 and 2,300 in Europe to close at 13,800. Despite adding people the US and Europe, the company’s overall headcount at end of 2017 actually remained flat at 260,000 as compared to 260,200 in 2016, a marginal increase of just around 200.

It’s not just Cognizant alone. For the last few quarters, employee count at most of the offshore-centric and Indian IT services companies in fact has either shrunk or increased marginally, a far cry from what they used to hire until two years ago. Take the example of Infosys – In the December 2017 quarter, the company added 3200 employees while the headcount in September quarter had actually dipped by 113 over the previous quarter.

In case of Wipro, the December 2017 headcount stood at 162,553, a drop of 1206 over the previous quarter. Tata Consultancy Service, the largest Indian player in IT services space, just added 1667 people in the December quarter QoQ, perhaps the slowest headcount additions by the company in the recent past. HCL Technologies which has been showing steady growth bucking the trend added only 250 employees in the December quarter.

While layoffs are certainly happening in the IT industry and companies are largely attributing this to skill mismatch and non-performance among others, the fact of the matter is the whole industry is marching towards non-linearity delinking the revenue growth with headcount. The skill requirements of the industry has actually drastically changed over last couple of years as the whole model is metamorphosing into a technology driven model as clients are looking to leverage new age technologies such as artificial intelligence, machine learning, augmented/virtual reality and big data & analytics.

The skillsets required for those kinds of demands are quite different from what they used to be in the past, and even though there is a supply constraint to find some of the new age skills, it’s much easier to find those in some of the matured tech markets than in India. For example, skilled resources trained in technologies like Mulesoft, Mode.JS, AngularJS, Open Stack, Open Daylight, MS Azure, Big Data/Analytics, Python and UI/UX are more easily available in the US than anywhere.

While the equation may change in India’s favour in the long run, but for the foreseeable future, it is imminent that IT hiring is going to be under tremendous pressure, with fewer new job additions with increasing trend towards hiring in the US and some of the onshore and near-shore locations.

While Cognizant which is technically a US-headquartered company and is duty bound to step up its hiring in the US, most of its large Indian competitors including Infosys, Wipro and TCS are also going on a hiring overdrive in the country. Unless the focus shifts towards creating quality talents than just being a bulk supplier, India may no longer be able retain its status of the supply base for global IT demand.