Cognizant has labor on its mind as it aims to retrain its employee base as its business is increasingly driven by digital services.
The company’s fourth quarter earnings conference call illustrated how managing its labor resources better–and layering in automation–is key to its goal to improve non-GAAP operating margin to 22 percent in 2019 over time.
Cognizant reported a strong fourth quarter, upped its outlook and outlined plans to start a foundation with $100 million devoted to science, technology, engineering and math education. Cognizant aims to add 25,000 U.S. workers over the next five years and added 6,000 in 2017.
The company has 260,000 employees.
What’s interesting about Cognizant’s labor efforts is that it is aiming to retrain its workers, manage attrition and automate core processes.
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CFO Karen McLoughlin said on a conference call:
Offshore utilization in Q4 moved higher as we continue to affect structural changes in our headcount management. We expect that these changes will help improve our resource alignment, help drive greater operational efficiency and thus, improve our profitability. We added 3,900 net new hires in the quarter, while annualized attrition of 17.9% during the quarter including BPO and trainees, decreased over 400 basis points from the previous quarter.
Meanwhile, Cognizant is automating processes and looking to predict customer demand better. McLoughlin added that “automation continues to be a bigger piece of the work that we’re doing both for clients as well as internally for ourselves.”
However, Cognizant CEO Francisco D’Souza noted that retraining is critical. He said:
Whenever you have these big technology transitions, you do have shortages in pockets of the workforce skills. Last year, we retrained about 100,000 of our associates with new digital variety of new digital skills, that’s an ongoing effort.
Digital skills are a little different than say past generations of technology because you have a number of different kills. There aren’t 1 or 2 main predominant skill sets. When you talk about digital, you actually have lots of skill sets. So the ongoing training is important and we’ll continue to do that. I do think that’s part of the reason that we have had somewhat higher employee attrition, that’s also the phenomenon we’ve seen in the past. When we invest in retraining, then it becomes attractive for sometimes our competitor is to take people that we’ve invested in making the training efforts.
Cognizant reported a fourth quarter net loss of $18 million, or 3 cents a share, on revenue of $3.83 billion, up 10.6 percent from a year ago. The results were hit by a tax charge. Non-GAAP earnings for the fourth quarter were $1.03 a share.
Wall Street was expecting Cognizant to report non-GAAP earnings of 97 cents a share on revenue of $3.82 billion.
For 2017, Cognizant reported net income of $1.5 billion, or $2.53 a share, on revenue of $14.81 billion, up from 9.8 percent from 2016.
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Cognizant also raised its outlook for the first quarter and 2018. Cognizant projected first quarter revenue between $3.88 billion to $3.92 billion with non-GAAP earnings of at least $1.04 a share. The company said that 2018 revenue will be between $16 billion to $16.3 billion with non-GAAP earnings of at least $4.53 a share.