Cognizant plans to grow US headcount "significantly" as H-1B uncertainty continues

Profile picture for user slauchlan By Stuart Lauchlan February 8, 2017
Summary:
Cognizant brings in 80% of its revenues from North American clients, but has 75% of its workforce in India. In these H-1B uncertain times, no wonder it plans to ramp up US headcount.
franciscodsouza
Francisco D'Souza

Is this the shape of things to come? Earlier in the week, we looked at the rumoured shake-up of the H-1B visa scheme from the perspective of the CEOs of two outsourcing giants - one from India, one from the US.

Yesterday, Cognizant's senior management made it  it’s clear that the prospect of action on immigration by the Trump administration is firmly on its radar and that pre-emptive action is being taken.

Although headquartered in New Jersey, nearly three-quarters of Cognizant’s 260,200 strong workforce is based in India. The firm said it hired over 4,000 US citizens and residents in 2016. That  number is now set to rise “significantly”, according to company President Rajeev Mehta:

There has been considerable discussion recently on the topic of skilled immigration in the US This has been an ongoing discussion for many years. Cognizant's business growth requires us to attract and retain the best and brightest talent to meet our client's needs for technology, business processes, and consulting solutions and services. We continue to focus on taking steps to ensure that we have access to a robust supply of talent in the US.

There are various initiatives in place to support this, he added:

To support this, we have built out a robust network of over 20 US-based delivery centers and plan to add additional capacity in 2017. Over the next several years, we plan to significantly increase the size of our US workforce. For over five years, we have had an active program to recruit qualified students from the undergraduate and MBA schools across the country. We continue to scale up this program. As we scale up our M&A program, we expect this to contribute to our local workforce around the world. And, finally, to address the longer-term talent needs, we continue to make investments in training and retraining programs that help U.S. workers obtain in-demand technology and business skills.

Digital drivers

The growth commitment was reinforced by Cognizant CEO Francisco D’Souza, who also emphasised the uncertainty facing companies like his at present:

It's very difficult for us to speculate on potential changes to the program there. As you know, even currently, [there are] many alternative proposals out there, and over the last several years, [there] have been even more. I would say that our intent has always been and continues to be to scale and to hire in the US as aggressively as we can. Last year we hired over 4,000 citizens and permanent residents. But we also have to continue to supplement that with talent from around the world, because we do see shortages of talent in certain areas.

We are trying to address that by focusing on retraining and re-skilling. But I think going forward you should expect to see that that will continue to be somewhat of a balance. We will continue to be as aggressive as we possibly can on scaling up and focusing on local recruitment, but I believe that there will be some prudent balance between those two things going forward.

One reason for needing to ensure a strong talent pipeline is the ongoing shift from traditional outsourcing offerings towards delivery of digital services. Cognizant, after some wrangling with activists shareholders, has now put in place a three-pronged strategy to accelerate digital growth, a strategy built around three digital practices:

  • Cognizant Digital Business to help clients architect and implement new digitally-enabled business models.
  • Cognizant Digital Operations to reinvent and manage clients' business processes.
  • Cognizant Digital Systems & Technology to simplify, modernize and secure client applications, platforms, and infrastructure.

D’Souza said the plan is to scale these digital practice areas “aggressively” across industries and geographies both organically and through acquisitions:

Having deep knowledge of our clients' core systems is a significant advantage as we work with them to build new digital capabilities. Our clients are looking to run their operations more effectively to redeploy capital to fund their digital investments. We've carefully analyzed and identified advanced automation and delivery efficiencies.

This increased focus on digital doesn’t mean that the ‘traditional’ business is going away, he added:
As we think about that shift to digital, we will of course emphasize the growth in the digital side of the business, making the investments that we need to scale up both organically and inorganically, that side of the business.

We'll continue to be thoughtful about growing the core business, making sure that we invest to stay competitive there. We think that the core business is an important part of our ability to serve clients and our ability to be an integral part of their digital futures, because as you know, most of our clients are building their new digital capabilities on the backbone of their traditional systems.

The drive towards more digital services business will also have an impact on the workforce demographics worldwide, not just in the US, he noted:

As we shift towards digital, those are the kinds of services where the value of colocation with the client is actually higher. You need to be close to the client. You need a more consultative approach. So, I expect that those services will require us to continue to have folks on-site and scale up our workforces around the world.

My take

Cognizant generated nearly 80% of total revenue from clients in North America in 2016, so getting its US workforce growth strategy in place is clearly essential in these uncertain times. We’re going to see a lot more of such statements of intent across the services and tech sectors in the weeks and months to come - which I suppose is what the current incumbent of the Oval Office is looking for.