Cognizant, one of the world’s leading professional services companies, announced its first quarter 2023 financial results.
According to reports, the company will lay off 3,500 employees. However, as of now the exact number of people impacted in India is still unclear.
Moreover, the company will also be giving up 11 million sq feet of office space to bring the cost down further.
By the reports of Moneycontol, The company has said its revenues will decline in 2023 as the IT industry is underscoring the pain in the IT services industry. The company’s CEO Ravi Kumar S seeks to revive the company that faces major competition from Accenture, Infosys, and TCS.
“Our accelerated bookings growth in the quarter, which included several large deals and a healthy mix of new and expansion work, reflects the strengths of our services, our brand, and the longstanding relationships we have with our clients. I am also encouraged by the continuing reduction in our voluntary attrition,” said Ravi Kumar S, Chief Executive Officer.
“Clients recognize how deeply we understand their businesses and how well positioned we are to create value for them at the intersection of technology and industry use cases”, Ravi Kumar S said.
“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”, Ravi Kumar S added.
The company’s Total headcount at the end of the first quarter was 351,500, a decrease of 3,800 from Q4 2022 and an increase of 11,100 from Q1 2022. Additionally, the Voluntary attrition – Tech Services on a trailing-twelve-month basis, declined to 23% from 26% in Q4 2022 and 30% in Q1 2022.
In the second quarter of 2023, the company initiated the NextGen program aimed at simplifying the operating model, optimizing corporate functions, and consolidating and realigning office space to reflect the post-pandemic hybrid work environment.
The company’s drive for simplification will include operating with fewer layers to enhance agility and enable faster decision-making. The company expects the savings generated by the program to help fund continued investments in the people, revenue growth opportunities, and the modernization of the office space.
In connection with the NextGen program, the company 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 the company expects it will 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 does not expect the NextGen program to drive meaningful cost savings until the second half of 2023 and the real estate actions will not begin to generate savings until 2024. By 2025, it expects to reduce the annual real estate costs by approximately $100 million versus 2022. This reduction in real estate costs is net of investments to expand the real estate footprint in smaller cities, primarily in India, in support of our hybrid work strategy.
Cognizant expects the personnel-related actions of this program to impact approximately 3,500 employees or approximately 1% of the workforce.
