Cognizant is currently in the process of executing major cuts to its personnel at all levels, as it responds to the business impacts of COVID-19 and Maze ransomware attacks on its clients.
With 290,000 employees around the world, Cognizant is a formidable outsourcer of technology services for a variety of major American companies. Its consulting, call centers, software development, digital infrastructure, and IT strategy services have made it a key player in this space. Its ability to provide these services at a lower cost than competitors, driven by the low salaries of employees outside of the US, has often been a key part of this equation, though rivals seem now to be managing costs more efficiently. Nearly 200,000 of Cognizant’s workers are located in India, with about 50,000 in the US, and some in Europe.
400 executive positions are expected to be cut, even up to the director and senior vice president levels.
Martin Wolf, founder and president of martinwolf M&A Advisors cautions that cuts like this are becoming an industry-wide issue. Wolf outlined three main customer-related issues at the root of the losses Cognizant and similar project-oriented service organizations are experiencing. They are: customers requesting lower margins, delaying projects, and reducing the scope of a project. The low costs of product sales are not enough to meet the cost of delivering the services. Pointing to IBM’s layoffs of thousands of workers, he expects other large service providers such as Tata, Infosys, and Accenture to be experiencing similar issues.
Since its launch in 1994, Cognizant has faced a range of international controversies, including bribery, discrimination, and tax evasion. In 2019, the company had been under fire for their content moderation services for Facebook. To provide this service, workers were required to watch objectionable, emotionally challenging videos to determine whether they should be removed from the site or not. The Maze ransomeware attacks that impacted the company’s customers earlier in the year have also cost the company financially and in negative publicity, during an already difficult financial period.
As the company looks ahead, they are considering reductions in a variety of areas, including expensive contractors, company wage increases, travel, entertainment, recruiting, events, and marketing, amongst others. It seems Cognizant has a tough road ahead to recoup following these challenges.