Cognizant Technology Solutions, India’s second largest software company, plans to ‘remove’ 10,000-12,000 mid-to-senior level associates globally from their current roles in the coming quarters.

This is to improve the cost structure to partially fund some of the planned investments and advance the growth agenda, CEO Brian Humphries told analysts.

The gross reduction is expected to lead to a net reduction of 5,000-7,000 roles (about 2 pet cent of the company’s total workforce), as the company aims to re-skill and redeploy nearly 5,000 of the total associates impacted.

Of its 2.89-lakh global workforce, over 75 per cent is located in India. This could mean the bulk of the ‘removal’ could happen in India. To ensure that there is no panic among employees, an internal microsite has been created offering detailed information and answers to questions about what’s changing, what’s not and how these changes can affect them. A series of Town Hall meetings are planned globally.

“We are working with great care to treat our associates with the dignity and respect they deserve, and to minimise any internal distractions caused by our actions as we get the company back to achieving its full potential,” said a Cognizant spokesperson.

Humphries told analysts that the larger plan involves exiting certain content work within the Digital Operations practice that is not in line with the company’s long-term strategic vision. This will impact an additional 6,000-odd roles globally and the revenue of the Communications, Media and Technology segment.

Yugal Joshi, Vice-President at research firm Everest Group, reacting to Cognizant’s announcement, said that most Indian service providers are now facing the heat of large employee base, challenging demand environment and profitability issues. As digital transformation impacts their talent model and clients, every resource is supposed to get billed. A ‘bloated’ middle management is under threat, he said.

"Cognizant’s decision to realign its workforce to market demand demonstrates the first-mover (comparing to the rest of the India-centric peers) implications and responsibilities the company needs to be prepared to address when making bold investments in portfolio, geos and staff, especially over the past three years," said Boz Hristov, Professional Services Senior Analyst, Technology Business Research, Inc.

The workforce optimisation along with the update around 'Fit for Growth 2020' strategy is just the next phase of the company’s efforts to establish automation-enabled services operating structure.

"The emphasis on recalibrating and expanding higher-caliber sales bench and CEO’s view on treating sales compensation on a gross margin level versus OpEx or indeed on revenue basis versus OpEx makes me think the company will likely begin to more aggressively embed and sell IP as part of its project contracts to protect/expand margins," he said.

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