Global IT major Cognizant Technology Solutions (CTS) will remove at least 10,000-12,000 mid-to-senior level associates worldwide from their current roles in the coming quarters, announced the company’s CEO Brian Humphries on Thursday, 31 October.
The gross reduction is expected to lead to a net reduction of approximately 5,000 to 7,000 roles which is about 2 percent of its total headcount. Another 5,000 of its associates will be re-skilled and re-deployed.
“We expect the remaining 5,000-7,000 associates to exit the company by mid-2020 either through attrition or role elimination.”Karen McLoughlin, Cognizant CFO
The company has not detailed out the geographies that would be impacted by the reductions. However, given that India accounts for the biggest share of the company's headcount, the impact of these layoffs is expected to be significant.
Cognizant's total headcount stood at 2,89,900 people at the end of September 2019 quarter. The company had recently stated that its headcount in India has crossed the two-lakh mark.
‘Simplification of Operating Model’
CEO Humphries added that the company is now announcing a simplification of its operating model and a cost reduction programme that will allow it to fund investments in growth.
"Over the past few months, we've sharpened Cognizant's strategic posture and begun executing plans aimed at improving our competitive positioning. Looking ahead, we see a clear path to unlock the organisation's full growth potential, win in our key digital battle-grounds, and return Cognizant to its historical position of being the bellwether of the IT services industry," Humphries said.
The optimisation of cost structure is expected to result in total charges of approximately USD 150-200 million, primarily related to severance and facility exit costs. This is expected to result in an annualised gross savings run rate of approximately USD 500-550 million in year 2021, the company said.
The company posted 4.1 percent increase in net profit to USD 497 million for September 2019 quarter, and said it will slash up to 7,000 jobs in the next few months as part of a cost reduction programme.
The US-based company, which has a significant portion of its workforce based in India, had posted a net profit of USD 477 million in the year-ago period.
It has also raised its annual revenue growth outlook to 4.6-4.9 percent for 2019.
IT Employees Union Opposes Cognizant Decision
Chennai-based Union of IT and ITES Employees (UNITE) has opposed Cognizant’s move, calling it a ‘motive for profit-maximization ignoring the life of its employees and their family’.
Alagunambi Welkin, General Secretary of UNITE told The Quint, “UNITE argues that, from the Q3 results fact-sheet, their quarterly revenues stand at 4.25 billion USD, and their profit margin is 17.3% for the quarter.”
In such a scenario, when the company is performing so well, Welkin says it is absolutely wrong and even violative of India’s labour laws to carry out such retrenchments.
Cognizant has over two lakh employees in India and is the second largest IT employer after TCS.
(With inputs from PTI)
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