The Company is attempting to increase its cost margins and revenue growth.
The slowdown in the IT industry and automation have affected the balance of several IT firms, which are reeling under the extreme pressure of decreased revenue growth and diminishing margins from the business. They are, therefore, using various tactics to improve the operating margins and the cost structure of their businesses.
The recent layoffs or deferring of salary hike in some IT firms are as a result of this weakening of revenue growth.
Likewise, Cognizant Technology Solution introduced a voluntary separation programme in May, where it offered up to nine months of salary to top-level executives in the US and India. The intention was to improve the margins as well as employee utilisation.
According to the Company, 400 of its top executives have accepted this programme as of now, which will save around $60 million annually.
70 per cent of the Company’s workforce is from India, and therefore, the number of executives accepting this VRS programme is expected to be higher from India.
Cognizant had an employee strength of 261,200 in March, which reduced by 4400 to 256,800 by the end of June. This was done to save cost and improve its operating margin. Also, automation led to reduction in the total workforce.
Karen McLoughlin, chief financial officer (CFO), said that the Company will be engaged in managing the total workforce count carefully. It will also continue to hire and invest in critical skills, which are needed to grow its digital business. She further adds that the attrition rate will decline in the next few months.
It is to be noted that Cognizant’s operating margin is lower than that of its Indian rivals, Infosys and TCS. The company will be boosting its cost margin through optimisation, intelligent sourcing, simplification of business unit overhead structure and leveraging corporate function spend.