Cognizant Cuts Cost By Firing 3,500 Of Its Employees

Cognizant, a primary provider of IT services, announced on Thursday, May 4, that it would let go of 3,500 workers, or around 1% of its staff (mostly non-billable), since it expects revenue growth to slow down in 2023.

Plans For Cost Efficiency

The NextGen program at Cognizant began in the second quarter of 2023. 3,500 staff will be let go as part of the strategy. Additionally, the company will realign office space and give up nearly 11 million square feet of office space in top-tier Indian cities.

As per Financialexpress, Cognizant has started a “NextGen” initiative to streamline its corporate operations, consolidate and realign office space to suit the post-pandemic hybrid work environment and simplify its operating model.

According to the corporation, there were 3,51,500 employees overall at the close of the first quarter, down 3,800 from the prior quarter of 2022 but up 11,100 from Q1 2022.

Expected Cost-Cut

The company estimates incurring expenses of around $400 million in connection with the NextGen program, of which $350 million is expected in 2023 and $50 million in 2024. This includes over $200 million in employee severance and other expenditures, primarily for corporate and non-billable employees, as well as roughly $200 million in costs for the consolidation of office space. However, Cognizant cannot predict that the NextGen program will result in significant cost savings until the second half of 2023, and it does not think that the real estate actions will start to produce savings until 2024.

Bookings for Cognizant’s order pipeline increased 28% year over year in the first quarter. Bookings increased 9% to $25.6 billion on a trailing twelve-month basis, with a book-to-bill ratio of around 1.3x.

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