BENGALURU: Cognizant Technology
Solutions said 400 of its senior executives have accepted a voluntary
separation programme (VSP) it initiated a few months back, which it expects to
result in annual cost savings of about $60 million.
The company initiated the VSP in May, offering up to nine months of salary as
part of it to some of its top-level executives in the US and India.
The move is part of the Nasdaq-listed company's wider plan to improve margins
and employee utilisation in a fast changing IT environment that has been under
pressure due to automation and lower revenue from legacy business.
"In Q2 we took some actions that will improve our cost structure and
operating margins while allowing us to continue to invest in the business for
growth. These actions resulted in approximately $39 million of charges related
to the realignment program, primarily from severance cost, including those
associated with the voluntary separation program that was initiated and
concluded in the second quarter," CFO Karen McLoughlin said in an
post-earnings analyst call last week.
It was not immediately clear how many Indian executives accepted the company's
offer but considering that more than 70% of Cognizant's workforce is based in
this country, the numbers could be on the higher side even by conservative
The company said of the $39 million of realignment charges, $35 million was for
the associates who accepted its VSP. It also expects to incur additional cost
related to advisory fees, severance, lease termination, and facility
consolidation costs for the remaining part of the year.
McLoughlin said in February the company aimed to improve cost through
optimization, intelligent sourcing, simplifying business unit overhead
structure and leveraging corporate function spend to boost operating margin,
which is significantly below its Indian rivals such as TCS and Infosys.
For the first time, Cognizant also reported a drop of 4,400 jobs in its
headcount, pushing its employee strength to 256,800 at the end of June from
261,200 at the end of March. The decline was attributed to performance
evaluations and the voluntary separation program.
"While we will of course carefully manage head count, we will continue to
hire and invest in critical skills needed to grow our digital business, and we
expect attrition to decline in the coming months," she said.