The consulting company Cognizant is laying off about 3,500 employees, which represents an approximate reduction of 1% of its global workforce. This cut, according to the company, is part of its NextGen restructuring plan, which also contemplates a reduction in its office space to lower its costs.
Despite its profits growing 3% last year, Cognizant seems concerned about what it has called “an uncertain macroeconomic environment, and with the potential for changes in customer priorities«. This has been pointed out its CEO, Ravi Kumarin a meeting with analysts and other stakeholders following the release of the company’s first-quarter 2023 results.
The NextGen restructuring program is designed, in addition to cutting costs, to simplify Cognizant’s operating model. Also, as we’ve mentioned, to bring Cognizant’s office space online with the hybrid work format. They will also move towards an operating model with fewer layers, with the goal of “improve agility and enable faster decision making«.
Cognizant has a presence in various countries around the world, and for now it is unknown which will be affected by the layoffs. What they have assured from the consultant is that the majority will be positions that do not require direct work with clients.
The implementation of the NextGen plan will cost Cognizant about $400 million. Of these, half will be for compensation to laid off workers, as well as for the costs associated with the reduction of jobs. The rest will be used to consolidate office space. 350 of them will be anticipated in 2023, and the remaining 50 million will be attributed to 2024.
The effect of the restructuring on space will be noticeable in India, where the company plans to reduce 80,000 positions and more than one million square meters of office space in large Indian cities. At the same time, Cognizant wants to increase its office space in smaller cities, especially in the United States. According to its CFO, Jan Siegmundthe economic effects and the savings resulting from the implementation of the plan will be seen throughout the second half of this year.
Of course, the cost reduction associated with office expenses will not begin to generate savings until 2024. By 2025, at Cognizant they expect to reduce their annual costs related to real estate by about 100 million dollars compared to 2022.
