Business

How utilisation ratio works

Cognizant’s Testing practice has grown from about 800 professionals three years ago to over 8,000 professionals today. When they were 800 and growing at over 100 per cent each year, they had to maintain a deep strategic buffer to service customers on their aggressive ramp-up plans. (Instead of benching, the term used in Cognizant is “strategic buffer” that is consciously made available to support the growth plans of the company and the training needs of individuals).

If they ran their utilisation at about 50 per cent when they were 800 professionals, they would have about 400 as the strategic buffer smoothly transitioning to the next project ramp-up. Hence, with a higher rate of growth, the utilisation is low. Because, expecting more work in the near future, more people will be taken on board, who would be billed only in the future.

As they reach a certain scale as they have today, it may not be possible to grow by 100 percent each year, but they can leverage the scale better by taking their utilisation higher. Today, they do not need to maintain a 50 per cent strategic buffer on 8,000 plus professionals. Even if the buffer is kept at 30 per cent (making the utilisation 70 per cent), there would be over 2,000 professionals in a state of readiness to meet their next ramp-up requirement. Hence, utilisation increases with a lower, but stable growth rate and economies of scale, according to T. Sridhar, Chief People Officer, Cognizant.

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