IT services firm Cognizant, which is fighting to get back to a growth curve, announced its third quarter results. Revenues in the quarter grew 4.2 per cent to $4.25 billion over the year-ago quarter while operating margins slid to 15.7 per cent versus 18.3 per cent in the third quarter of last year.
In an analyst call, the company's management explained the firm is trying to cut costs and boost revenues through multiple measures such as job cuts, investment in sales and focus on digital growth. Here are a few significant ones:
12,000 employees redundant: The company has chalked out a '2020 Fit for Growth Plan', which is expected to run for two years. This program is designed to simplify the way Cognizant works, lower its cost structure and fund investments. As part of this plan, the company would remove 10,000 to 12,000 mid-to-senior level employees from their current roles. Brian Humphries, the Chief Executive Officer, said that 12,000 was a gross reduction number and that the net reduction would be approximately 5,000 to 7,000 roles since the company aims to re-skill 5,000 associates, thereby lessening the impact. These numbers, however, exclude another 6,000 roles that is likely to be impacted because Cognizant is exiting a subset of its content operations business. The 5,000 to 7,000 employees will exit Cognizant by mid-2020. These cost cutting efforts, together with an optimisation of its real estate portfolio, is expected to result in annualised gross run rate savings of $500 million to $550 million in 2021. As of September, 2019 Cognizant employed 2,89,900 employees, up marginally from 2,88,200 in June, 2019.
Investment in sales: The CEO told analysts that the company has identified a series of investments that require funding. This includes the hiring of 500 revenue generating employees over the coming year - a combination of customer facing and sales support professionals. The company is also investing in Cognizant Academy, its internal learning organisation, as it aims to re-skill and redeploy talent towards digital work. In addition, investments are glowing into tooling and automation, marketing and branding.
Digital drive: The growth of the future would be in digital. The CEO said that the company wants to win in four key areas - data, digital engineering, cloud and Internet of Things (IoT). "These four areas enable clients to put their data at the core of their operations, improving the experience they offer their customers, tapping into new revenue streams, defending against disruptors and reducing costs," he noted. "No matter their industry clients must quickly get better at storing, managing, reporting, analyzing and reusing their data. Clients need to leverage enormous amounts of data to fuel AI based platforms that can transform customer experiences, drive automation, and provide management insight," he added.