Cognizant will lay off as many as 7000 mid-to-senior level workers and re-skill up to 5000 as part of widespread cost-cutting plans at the system integrator.
Representing roughly two per cent of the company’s global workforce, the move is designed to generate annual cost savings of $500-550 million, which will be reinvested in growth.
“Over the past few months, we've sharpened Cognizant's strategic posture and begun executing plans aimed at improving our competitive positioning," said Brian Humphries, CEO, Cognizant. “We are announcing a simplification of our operating model and a cost reduction program, which will allow us to fund investments in growth.
“Looking ahead, we see a clear path to unlock the organisation's full growth potential, win in our key digital battlegrounds, and return Cognizant to its historical position of being the bellwether of the IT services industry.”
During the next two years, the technology provider will focus on “optimising its core portfolio” while investing in four key areas, spanning data, digital engineering, cloud and the Internet of Things.
“To compete and win in these digital markets will require significant investment not only in these technologies but in a variety of enablers that include sales and marketing, talent re-skilling, acquisitions, and partnerships,” a company statement read. “Therefore, the company is streamlining its cost structure to partially fund these investments and execute its growth agenda.”
The cost structure optimisation is expected to be complete by the end of 2020 and result in total charges of approximately $150-200 million, "primarily related to severance and facility exit costs".
“We remain on track to achieve our revised full year revenue guidance,” added Karen McLoughlin, CFO, Cognizant. “However, to continue to invest in our growth initiatives, we must move quickly to improve our cost structure.
“Our announcement of this multi-year realignment plan underscores our commitment to accelerate the execution of our strategy to make us fit for growth. Throughout this evolution, we intend to continue to capitalise on our strong balance sheet and attractive cash flow profile to return cash to shareholders.”