Cognizant has decided to let go of 350 people who earn annual salaries ranging from 80 lakh to 1.2 crores INR. The company seeks to bring down costs and turn the focus more on digital from traditional technology services. These employees are of 50-55 years aged. Also, most of them are based out of India. The list has already been submitted to chief executive officer Brian Humphries’ office.
There are a total of 10,000-12,000 mid-to-senior level positions globally. Humphries added that around 5,000 employees would be re-skilled and re-deployed. This will bring down the net reduction in the workforce. This does not include any employees who would lose jobs after the IT firm exits its content operation business.
The number of affected people this time is a meager 350. The company, though, could significantly bring down costs because they are high-paying employees.
Peter Bendor-Samuel, the chief executive at IT advisory and research firm Everest Group said,
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“This is a move to cut costs and improve margins. We can expect other moves to cut costs and this is likely to follow a model of further reorganization with some additional headcount reduction.”
On the conference call with analysts, Cognizant chief financial officer Karen McLoughlin expressed,
“We anticipate we are getting close to the end of this cycle. We do not anticipate this will be picked up and replicated with other service providers. Critical for the long-term health and competitiveness of the company”.
Cognizant has been shifting its total concentration towards the digital technology-led business services. It is a segment that is looking for faster growth than traditional software implementation services. Technology services companies like Tata Consultancy Services, Infosys, HCL Technologies, Wipro, Tech Mahindra, and Cognizant are dependent on a business model where they bill clients based on the hours spent by employees.
Users increasingly gaining services on smartphones and handheld devices, tech service contracts are becoming outcome-based. This has disturbed the time and material based model of these companies.
A Bengaluru (India) -based analyst said,
“The job cuts of senior and mid-level roles would continue to happen and for Cognizant, in particular, this correction process would take another year.”
Meanwhile, the French IT services firm Capgemini laid off about 500 employees in India this year attributing slow growth of projects and a failure to ramp up accounts at the expected pace.