Cognizant to lay off 3,500 employees and reduce office space
Technology services and consulting company Cognizant said on Thursday that it is going to lay off around 3,500 employees that’s approximately 1% of total workforce. Cognizant also said that it will slash spending on office space by up to $100 million by 2025 in comparison to 2022.
Despite the company reporting a 3% increase in net profit year-on-year, the company’s chief executive officer Ravi Kumar on a call with analysts after Cognizant released its first quarter 2023 financial results Cognizant was “carefully monitoring what remains an uncertain macroeconomic environment and with its potential for shifts in client priorities”.
The company’s cost-cutting measures are a part of its new initiative called the “NextGen programme” where it aims to simplify its operating model, optimise corporate functions, and consolidate its office space to reflect the post-pandemic hybrid work environment.
The company has employees across the globe and did not confirm where the affected workers are based, but did say the cuts will mostly affect non-billable roles — generally, jobs that do not require direct work with clients.
Cognizant estimates the total costs of NexGen to be around $400 million, $200 million for employee severance and associated costs, with a further $200 million for costs related to the consolidation of office space. The company plans to eliminate 80,000 seats and 11 million square feet of office space in large cities in India in order to expand its real estate footprint in smaller cities throughout the country. “We expect to realize savings from our NexGen initiative in the back half of this year,” said the company’s CFO Jan Siegmund.
Cognizant is not the only company to have announced layoffs as part of a wider restructuring plan. The US forms the company’s main market for Cognizant and other IT services companies such as Tata Consultancy Services (TCS) and Infosys that continue to face headwinds as the country is battling high inflation and banking crisis, stemming from lenders such as Silicon Valley Bank and Signature Bank, leading to tighter financial conditions. However, TCS and Infosys have not announced any layoffs until now.
Several US tech companies such as Twitter, Meta, Salesforce, Amazon, Microsoft, Oracle and Google etc., have all laid of thousands of employees due to over-hiring during the pandemic and a prolonged economic downturn that forced many to cut down on their budgets. In March, another IT consulting major Accenture also announced that it would cut about 19,000 people or 2.5% of its global workforce amid the ongoing bleak economic outlook.