Cognizant’s headcount in India dropped by 8,000 at the end of 2017. Even as the number of people it employs in the US and Europe rose, the company’s annual filing with the US Securities and Exchange Commission (SEC) showed a trend that analysts expect to see replicated across other Indian IT companies as well.
The Teaneck, New Jersey-headquartered IT firm also incurred $36 million in costs related to the investigation into bribes paid in India, taking the total costs to $63 million — more than ten times the value of the improper payments — and said the investigation found the bribes were paid over a longer period of time.
For the first time, Indian IT companies are seeing falling headcounts as automation and a need to create talent overseas makes investing in India headcount far less important. The National Association of Software and Services Companies (Nasscom) has also forecast lower headcount growth, even as companies expect to hire in the thousands in the US, in the wake of increasing restrictions on immigration.
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At the end of 2017, Cognizant employed about 260,000 people, out of which 180,000 were in India. At the end of 2016 the company’s headcount stood at 260,200 people, out of which 188,000 were in India. Cognizant’s US headcount rose by about 2,900 to 50,400 and its Europe headcount rose by about 2,300 at the end of 2017. Earlier this month, Cognizant said it would hire an additional 25,000 people in the US over the next five years.
The IT sector, which has been a key job creator in the country, will see a net addition of 1,000,000 people in FY19, said R Chandrasekhar, president of Nasscom, at the industry’s flagship event in Hyderabad earlier this month. The sector added a similar amount in FY18, less than the initial projection of an addition of 150,000 jobs. Chandrasekhar said it was time to look at sectors beyond technology services for employment growth.
This is a trend we expect to see. If you take Infosys, they can’t hire 10,000 in the US in the next two years without rationalising in India. Large headcount addition used to be a positive for companies as a leading indicator for growth, but that is no longer the case,” an analyst with a Mumbai-brokerage, who declined to be identified, told ET.
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Cognizant’s annual report also provided an update into the bribery investigation that has been on for about 15 months. In September 2016, Cognizant informed the US Department of Justice and the US Securities and Exchange Commission that it was in violation of the US Foreign Corrupt Practices Act due to payments made relating to the company’s facilities in India.
“In 2017, we incurred $36 million in costs related to the FCPA investigation and related lawsuits in addition to the $27 million we incurred in 2016. We expect to continue to incur expenses related to these matters in 2018,” the company said in its annual filing with the US Securities and Exchange Commission. Cognizant had identified about $6 million in improper payments, though the company has expanded the time frame over which the bribes were paid.
In its 2016 annual filing, Cognizant had said the investigation had established that the payments were made from 2010 to 2015. The latest filing said the payments had been made from 2009 to 2016.