Cognizant to Lay Off 3,500 Employees and Redistribute Physical Workplaces, Focusing on Smaller Indian Cities

Cognizant, an IT services company listed on Nasdaq, has announced its plans to lay off 3,500 employees due to an expected revenue decline in 2023. This decision comes as customers reduce their discretionary spending and key markets slow down.

The saved costs will be used to improve employee utilization. Cognizant has reported revenue from operations at $4.81 billion, which is a decline of 0.3 percent YoY, while net profit has grown to $580 million, a three percent increase on a YoY basis.

As part of a program called NextGen, Cognizant aims to reduce its annual real estate costs by approximately $100 million compared to 2022 by 2025. The company will “rationalize” some of its workforces in corporate functions, mainly non-billable employees, according to Ravi Kumar S, Cognizant’s CEO.

In a press meeting after announcing the results, Kumar explained that the company will “redistribute” its physical workplaces, as he believes that we are entering a hybrid era of distributed life and work. He emphasized the importance of smaller cities in India, stating that a large number of Cognizant’s associates have moved to tier-2 cities and are likely to remain there for the foreseeable future. Cognizant has workplaces in tier-2 cities like Coimbatore, Kochi, and Mangalore, and Kumar explained that the company will modernize its existing workspaces in smaller Indian cities and expand to new real estate spaces.

Kumar also mentioned that the company will eliminate 80,000 seats and 11 million square feet in large cities in India, enabling them to invest in collaboration spaces in smaller cities while creating structural savings for the future that can be invested in people and growth opportunities.

While the company does not have a big exposure to small regional banks, Kumar explained that the banking vertical is soft, and discretionary spend is soft. He added that digital transformation deals have started to slow down due to the economic slowdown, but there is an increasing trend towards cost take-out and vendor consolidation deals.

Overall, Cognizant’s plans to redistribute its physical workplaces and modernize its existing workspaces in smaller Indian cities align with the current trend toward hybrid work arrangements. By reducing its annual real estate costs and eliminating seats in large cities in India, the company can invest in collaboration spaces in smaller cities, creating structural savings for the future that can be invested in people and growth opportunities.