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IT major Cognizant said it will witness a decline in revenue this year and in a bid to cut costs, it is planning to lay off 3,500 employees and give up millions of square feet in office space.
In the quarter ended March 31, the company reported a margin of 14.6 per cent, among the lowest in the industry. It reported a three per cent rise in its net profit to $580 million, but its revenue fell 0.3 per cent to $4.81 billion. Cognizant provided revenue guidance of $19.2-$19.6 billion or -1.2 per cent to 0.8 per cent in reported terms.
The company's voluntary attrition, albeit down from 26 per cent, was also among the highest in the industry at 23 per cent.
The layoffs, which will account for one per cent of the company's total headcount, have been attributed to the company's NextGen programme, which aims to simplify its operating model and optimise corporate functions. In the quarter that ended in March, the company's total headcount was 351,500. It was 3,800 lower than the previous quarter and 11,100 higher than the same quarter in 2022.
"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 modernization of our office space," the company said.
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In connection with the NextGen program, it expects to record costs of approximately $400 million with approximately $350 million of such costs anticipated in 2023 and approximately $50 million in 2024.
"This consists of approximately $200 million of employee severance and other costs primarily related to non-billable and corporate personnel, which we expect to mostly incur in 2023, and approximately $200 million of costs related to the consolidation of office space, with approximately $150 million in 2023 and $50 million in 2024," the company said.
The CEO added that Cognizant aims to be an employer of choice. In the last 18 months, the company has announced a salary hike thrice. Last month, its salary hikes impacted 300,000 employees.
Cognizant said it will give up 11 million sq ft in office space to cut costs in large cities.
"Having spent more than three months assessing the business, meeting with over a hundred clients and thousands of employees, I firmly believe Cognizant has a strong foundation for accelerating growth," said Ravi Kumar S, the company's recently appointed chief executive officer (CEO).
