Cognizant likely to cut jobs after slashing full-year growth outlook; Indian mid-level employees to get hit the most

Cognizant will opt for job cuts as the firm’s headcount additions were not in sync with the revenue growth in the past two quarters

FP Staff May 07, 2019 11:41:31 IST
Cognizant likely to cut jobs after slashing full-year growth outlook; Indian mid-level employees to get hit the most
  • The company would work towards lowering the cost of delivery through pyramid actions, CEO Brian Humphries said

  • Cognizant's job cuts will affect middle-level employees, typically those who have over seven years of experience

  • Cognizant reported over 15 percent drop in net income for the quarter ended March, and slashed its full-year revenue growth outlook

Information Technology (IT) company Cognizant is reportedly considering job cuts as a part of its realignment program and most of the slashing is likely to happen in India, the largest offshore delivery location for the US company, a media report said.

The US-headquartered company, which has a significant portion of its employees based in India, will opt for job cuts as the firm’s headcount additions were not in sync with the revenue growth in the past two quarters, Business Standard reported. The report added that the job cuts will be broad-based, encompassing various levels of employees.

The company would work towards lowering the cost of delivery through “pyramid actions”, The Economic Times quoted CEO Brian Humphries as saying. The report added that Cognizant's job cuts will affect middle-level employees, typically those who have over seven years of experience.

“As part of our realignment program, management is currently evaluating various strategies, including additional employee separation programs," Cognizant was quoted as saying by Mint.

Cognizant likely to cut jobs after slashing fullyear growth outlook Indian midlevel employees to get hit the most

Representational image. Reuters

In 2017, the company had rolled out a 'voluntary separation programme' for directors, associate vice presidents and senior VPs, offering them 6-9 months of salary to make way for the new generation to move up the chain. Following the announcement, 400 senior employees had accepted a voluntary separation package (VSP).

Last week, Cognizant reported over 15 percent drop in net income for the quarter ended March, and slashed its full-year revenue growth outlook.

The US-headquartered company revised its full-year 2019 revenue growth outlook to 3.6-5.1 percent in constant currency, significantly less than 7-9 percent projected just months ago.

It cited "first quarter underperformance" and the likelihood of slower growth in financial services and healthcare as reasons for the massive cut in full-year outlook.

The first quarter net income at $441 million was 15 percent lower than $520 million clocked in the year-ago period. The quarterly revenue rose to $4.11 billion, up 5.1 percent (6.8 percent in constant currency) from the year-ago period - missing the company's own estimates.

"Cognizant's growth and performance in the quarter leave room for improvement," Brian Humphries, Chief Executive Officer of Cognizant, said in a statement last week.

Humphries, who took over the baton from the Francisco D'Souza on 1 April, admitted that the company, despite its client-centricity and innovative spirit, is not yet delivering against the market opportunity.

The company’s reliance on the financial services sector has been weighing on its overall revenue growth in the past few quarters.

The company has turned to cloud computing, cybersecurity and analytics as it looks to cut down dependence on IT services, where margins are being squeezed by clients demanding more work at lower costs.

With agency inputs

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