Trouble started brewing after Cognizant announced that Ravi Kumar, former Infosys president, would be taking over as the Nasdaq-listed company's CEO.
A war for talent has broken out in the information technology sector. And it is getting serious.
On the one side is US-based tech major Cognizant, which is determined to create an A team to drive growth. On the other are Indian IT giants like Infosys and Wipro, which have lobbed allegations of poaching and unethical practices against Cognizant.
As 2023 drew to a close, the war escalated. Wipro and Infosys pulled out legal notices from their arsenal, and senior IT officials found themselves tackling lawsuits.
Trouble started brewing in 2023, after Cognizant announced that Ravi Kumar, former Infosys president, would be taking over as the Nasdaq-listed company's CEO.
Kumar's appointment came at a time when the IT sector was struggling after having witnessed double-digit growth following the Covid-19 impact.
As Kumar took the helm of Cognizant, the first task he got down to was hiring senior leadership within the organisation. This included Jatin Dalal, former chief financial officer of Wipro, and Mohd Haque, Wipro's former senior vice-president and business unit head for life sciences.
Wipro filed a lawsuit against both Dalal and Haque. Besides accusing them of breaching the non-compete clause, Wipro's complaint alleged that Haque, who had been with the company in several key leadership roles, had transferred confidential files to his personal Gmail account.
Since Kumar's appointment, over 20 senior executives from Infosys, Wipro, Accenture and Tata Consultancy Services have joined Cognizant at the executive vice-president and senior vice-president levels.
He has reportedly hired over four EVPs and over 20 SVPs. Dalal, Haque and Nageswar Cherukupalli from Infosys are among them.
Meanwhile, after Wipro's lawsuit, Infosys sent a notice to Cognizant, accusing it of unethical poaching practices.
Why now
While there is nothing unusual about employees moving from one IT company to another, as tech talent largely remains within the sector, observers of this space say it is the timing of the churn that has ruffled feathers -- as has the player causing this churn.
To put things in perspective, Wipro and Infosys have both seen over 10 senior leaders moving out of the respective companies to join 'smaller' rivals in 2023 alone. None has had the kind of impact as Cognizant's move.
Add to that the IT services industry's growth has been slowing as an uncertain economy, the prolonged war between Ukraine and Russia, and changes in technology have disrupted client budgets.
According to a report by rating agency ICRA, revenue growth for its sample set of Indian IT services companies is expected to moderate to 3-5 per cent in 2023-24 (FY24) from 9.2 per cent in FY23.
Though ICRA expects it to improve to 6-8 per cent in FY25, this is far from the double-digit growth the industry clocked in FY21 and FY22.
The revenue gap between Infosys and Cognizant is also narrowing. Cognizant had overtaken Infosys in revenue in FY13. Now, Infosys is set to topple Cognizant.
According to the annualised revenue for the first nine months, Cognizant stands at $14.59 billion and Infosys at $13.89 billion.
Working the net
Kumar's mandate is to take Cognizant back to its glory days. And when growth is in single digits for the industry, the only way to achieve higher figures is through building a relationship with clients.
Unlike his predecessor, Brian Humphries, who had taken the firm's focus away from India, its largest delivery base, Kumar would want to bring the attention back to the country.
"The IT services industry is more dependent than ever on talented executives who can network at the C-suite level and build strategic relationships with them. It really is as simple as that," says Phil Fersht, CEO and chief analyst at US IT advisory firm HFS Research.
Kumar, he adds, understands the importance of these connections.
"The reality is that Accenture is winning in the large deals' market because it commands the narrative at the C-level, and leaders like Ravi Kumar know the road to success is aligning with their clients' strategic goals and delivering not just for them but with them," he says.
Legal web
About the legal notices, human resources experts say the reason is that many senior executives do not follow the cooling-off mandate before joining a rival firm.
"All listed firms have a non-compete and non-solicit clause," says a senior HR consultant who does not wish to be named.
"At a senior position as Jatin Dalal of Wipro, the contract will also mention the companies that are considered as competition. The cooling-off period is anywhere between six months and a year. But few try to implement the non-compete clause," says the consultant, adding that it is, however, rare for a company to approach court over such an issue in India.
"Wipro taking legal recourse in the case of Dalal is more about setting a precedent, so that others are mindful," says Pareekh Jain, CEO and lead analyst at New Delhi-based Pareekh Jain Consultancy.
"Taking a legal route is common in US-centric firms."
In 2021, for instance, Accenture had filed a case against Stephanie Neal Trautman, who had joined Wipro as chief growth officer.
The matter was filed at the US District Court, Southern District of New York. Both parties later arrived at a settlement.
In Dalal's case, Wipro has claimed damages of Rs 25 crore along with 18 per cent annual interest till the amount is paid.
The Bengaluru city civil court referred Wipro's lawsuit against him for arbitration.
As competition in IT gets cut-throat, the tug of war for talent continues.
Feature Presentation: Ashish Narsale/Rediff.com
