Cognizant to cut 3,500 jobs amid looming fears of a sharp slump in revenue this year

Amid growing fears of a sharp dip in revenue in the Information Technology sector in 2023, Cognizant on Friday indicated that as many as 3,500 employees may be laid off soon as part of cost-cutting measures. Known to be a barometer for industry growth till a few years ago, the IT major is also considering giving up millions of square feet in office space to save costs. Underscoring that its revenues will decline in 2023 due to the slowdown in the IT services industry, which in turn derives a major portion of its revenue from the United States, Cognizant said it was looking at enhancing operating discipline, a move that will now impact nearly 3,500 jobs at the firm. The impending layoffs at Cognizant will follow that of another IT giant Accenture, which had earlier announced that 19,000 people would be handed the pink slip. Cognizant attributed the move to its NextGen program, under which the company said it wants to simplify its operating model and optimise corporate functions. “Our drive for simplification will include operating with fewer layers in an effort to enhance agility and enable faster decision-making. We expect the savings generated by the program to help fund continued investments in our people, revenue growth opportunities and the modernisation of our office space,” the company said in a statement. It is as part of this that the company expects 3,500 people to be impacted. Newly appointed CEO Ravi Kumar S, who faces the daunting task of reviving the Nasdaq-listed IT major, said for the first quarter of FY23, the firm was on the path of surpassing analysts’ expectations. Though the company is listed in the US, a majority of its operations are based in India. Kumar took charge on 12 January 2023 as CEO, in what was a sudden announcement after former CEO Brian Humphries was “involuntarily terminated”. The change in the company’s leadership and chairman of the board also came at a challenging time for the IT industry which is facing a difficult time. Cognizant provided revenue guidance of $19.2 - $19.6 billion, or 1.2 per cent to 0.8 per cent in reported terms, or 1 to 1 per cent growth in constant currency for the full year. At 14.6 per cent, Cognizant’s margins are among the lowest in the IT industry, comparable to Tech Mahindra. For the full year, the company has guided for the adjusted operating margin to be in the range of 14.2-14.7 per cent. The IT company reported a 3 per cent increase in net profit on a year-on-year basis at $580 million. Sequentially, profits increased by 11.2 per cent. The company saw its revenue come in at $4.81 billion, a decline of 0.3 per cent year-over-year or growing 1.5 per cent in constant currency, beating its guidance of where it expected revenue to be in the range of $4.71-$4.76 billion. The company will incur a total of $200 million in employee severance and other costs, which it said is “primarily related to non-billable and corporate personnel, which we expect to mostly incur in 2023”. It is also looking at “consolidating and realigning office space to reflect the post-pandemic hybrid work environment,” the statement read. As part of this strategy, Cognizant is looking to reduce $100 million in real estate costs by 2025 as compared to 2022. On the human resource front, Cognizant saw its headcount decline by 3,800 in Q1FY23 from Q4FY22, and it now has a total of 3,51,500 employees. The company used to previously report its involuntary attrition numbers but has changed its reporting metric this time around. The banking and financial services segment, which has had an impact on all major IT players due to the crisis in the industry, impacted Cognizant as well. The CEO said that they believe that company-specific operational challenges in financial firms have largely subsided. On the firm letting go off crucial office space he said, “This reduction in real estate costs is net of investments to expand our real estate footprint in smaller cities, primarily in India, in support of our hybrid work strategy.” Read all the Latest News , Trending News , Cricket News , Bollywood News , India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.