Editor’s Note:

  • According to Wikipedia, Cognizant, a member of the NASDAQ-100 (stock symbol CTSH) was founded in 1994 in Teaneck, New Jersey. The company provides IT services, including digital, technology, consulting, and operations services. It 2018 revenues were $16.1 billion and its net income was $2.1 billion. Its assets were 15.9 billion, and it shareholder equity was 11.41 billion.
  • After a series of corporate reorganizations there was an initial public offering in 1998. Following the Y2K and dot-com boom of the late 1990s, when companies sharpened their focus on hard business parameters such as revenues and profits, the company grew by delivering critical application development and maintenance services.
  • Cognizant had a period of fast growth during the 2000s, becoming a Fortune 500 company in 2011. In 2015, Fortune magazine named it as the world’s fourth most admired IT services company. In 2017, Cognizant was named in Fortune’s  Future 50 list


Cognizant building in Bangaluru, India

By Debasis Mahapatra – Business Standard

 Bengaluru, India, May 06, 2019 – Cognizant, a company with a total staff base of 281,600 in 2018, has 70 per cent of its employees located in India, numbering around 197,000.

Cognizant is likely to opt for more job cuts this time as the firm’s headcount additions were not in sync with the revenue growth in the past two quarters.

The company, which has experienced the lowest growth of business in its history this year had given voluntary separation packages to around 400 senior executives in 2017 as part of its cost optimization measures.

According to sources, this time, not only would the job cuts be higher, but they would be even more broad-based, encompassing various levels of employees. “While last time, the job cuts were limited to senior-level staffers. This time, even non-billable mid-level executives such as managers and even staffers in the consulting vertical with low utilization levels are likely to be affected,” a person familiar with the development said.

“I believe, cost equals growth. We will improve our cost structure as a means to invest in growth,” Humphries said in the post-earnings analyst call. “Our headcount growth has exceeded the rise in revenue in the past two quarters” – CEO Brian Humphries

Another person in the know said most of these job cuts were likely to happen in India, the largest offshore delivery location for the company. Cognizant, with a total employee base of 281,600 in 2018, had around 70 per cent of its total staff located in India.

“As part of our realignment plan, the company’s management is currently evaluating various strategies, including additional employee separation programs. The timing, nature and magnitude of these initiatives are not finalized yet,” Cognizant said in an email reply.

Last week, the company surprised the market by slashing its revenue guidance by nearly half ranging from 3.6 to 5.1 per cent for 2019. Its new CEO Brian Humphries flagged up concerns with regard to execution of its plans, apart from giving clear indication of cost optimization measures, including slashing of jobs.

“I believe, cost equals growth. We will improve our cost structure as a means to invest in growth,” Humphries said in the post-earnings analyst call. “Our headcount growth has exceeded the rise in revenue in the past two quarters,” he said.

The company’s CFO Karen McLoughlin has also said employee pyramid optimization, sustaining a higher level of utilization and improvement in pricing were some of the options available for gross margin expansion.

Some experts said while most IT services firms had added more number of employees in the past one year in anticipation of future growth, but in case of Cognizant, it seems to had not worked well because of a few client insourcing and project ramp downs.

“Cognizant has just seen growth slowdown and not a negative growth. It is still growing. Perhaps, the new CEO wants to start on a clean slate, which can be one of the possible reasons for this guidance and pyramid optimization,” said Pareekh Jain, of Parekh Consulting an IT outsourcing firm. “Cognizant is rather very transparent with regard to employee issues,” he added.

The company had announced a major management reshuffle in January with its then founder and CEO Francisco D’Souza was moving to a non-executive role. Last week, Cognizant’s new CEO Humphries announced leadership changes in the digital and BFS (banking, financial services) verticals in order to drive future growth.