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Cognizant Rationalising Costs to Re-Invest in Talent & Digital Solutions

Cognizant is exercising “tighter control” over expenses through a slew of measures, including slower pace of hiring and reduced travel overheads as the IT major looks to re-invest in talent and digital solutions to drive growth.

The  company, which has a significant number of its headcount in India, said it took “targeted actions” at senior-level executives in the second quarter – a move that is expected to result in $65 million of annualised savings. “…in the second quarter, we took targeted actions at the senior levels of our pyramid to simplify our organisation structure. These actions are expected to result in $65 million of annualised savings with approximately half of that to be realised in the remainder of 2019,” Cognizant CFO Karen McLoughlin said at a recent earnings call.

She added that in the next two quarters, “ the company expects to further reduce overall costs through a number of actions. .including aligning headcount growth with revenue growth by further slowing the pace of hiring and being thoughtful on where we backfill attrition. Headcount growth on a full year basis will align to our full year constant currency revenue guidance,” she said.

McLoughlin said Cognizant continues to focus on its workforce strategy and management, and expects to incur an additional USD 48 million of compensation-related costs during the remainder of 2019 for its programme to recognise and retain best talent.

Cognizant is also focussing on higher-value services like digital as it chases higher margins.

“We will also have significantly tighter control of areas within SG&A such as disciplined hiring of non-billable resources, further rationalisation of our real estate portfolio, tighter control over T&E (travel and expense) including significantly reduced travel for internal and other non client-facing meetings, limiting business-class travels, relocations etc.” she said.

The company intends to hire over 500 revenue-generating associates over the coming quarters, a combination of customer-facing and sales support professionals.

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