Behind Cognizant's recent restructuring

06th November 2019
Behind  Cognizant's recent  restructuring

For the fourth time in its  23-year history, this born-in-India  global  IT services company realigns its business, in the process, removing some 4000 engineers  in this country  and shedding   some unpalatable areas  of work.
This article  was first published in Swarajya magazine on Novmber 4
By Anand Parthasarathy
Bangalore, November 6 2019: It is easy to forget that the DNA of IT services leader Cognizant is  decidedly Indian.   It started as an in- house  tech arm  run by  what was then, Satyam computers  for American  business analytics  company Dun&Bradstreet. In 1996,  D&B spun it off as a separate entity, named Cognizant and its first CEO Kumar Mahadeva, relocated the company headquarters to the US to better scoop up the Y2K or Year 2000 software conversion work. This was  low hanging fruit for Indian  software companies at the turn of the century. Its next CEO,  Lakshmi Narayanan refocused the company  on  a wider canvas of Business Process Outsourcing.  His successor , Kenya-born  Francisco D'Souza, during  a long stint of 13 years  from 2006,  made Cognizant one of the world's fastest growing  international companies in the  last decade by  shrewd  diversifications  into  digitally driven  business verticals.  
Yet   for all its global  packaging, with headquarters in Teaneck, New Jersey (US), Cognizant   has its centre of gravity in India, which is home to some 2 lakhs of its 3 lakh-strong workforce.
Which is why  the impact of  the   latest restructuring exercise carried out by Cognizant's new CEO, Brian Humphries -- he  took over from D'Souza, just 6 months ago -- will be felt   most dramatically in India.  There was no particular  fiscal urgency for the  current  manpower cuts: Just a day before the CEO's email to employees about the job cuts, the company announced its latest quarterly results: a healthy net income of $ 497  million compared to  $ 477 million in the same period a year ago  and quarterly revenues of $ 4.25 billion, up 4.2 % from the same period last year.... not the type of numbers  which would trigger off  panicky  belt  tightening.

Content moderation
No, the stimulus lay in the nature of  some of  the work Cognizant did  for a big ticket client: The company was among a handful of players  worldwide, to whom Facebook had outsourced the task of content moderation:  examining Facebook posts for disturbing or objectionable  content:  violent, racially provocative, sexually offensive.  Cognizant teams doing this work were spread around the world -- in India,  some of the work was said to  be done in the Hyderabad centre.   In his email  to employees, Humphries   put it diplomatically: .“We’ve determined that this subset of work is not in line with the company’s strategic vision."  In point of fact this work, that Cognizant first took up in 2017 at its  Phoenix, Arizona  and  Tampa, Florida  centres in the US,  has proved to be hugely  traumatic for its employees.  Articles in Verge magazine in  February and  June this year described the severe psychological toll that watching such nauseous content  hour after hour,   extracted from the employees, some of whom developed mental health problems and post traumatic stress symptoms. This was the dark underbelly of the  global outsourced IT services  business -- and Cognizant decided it was not worth the money it brought in.  

Bariatric surgery
Having decided to shed this grey business, Humphries  seems to have decided to  make it part of a larger  restructuring,  slimming some of the  fat in the middle order, much like health conscious  people decide  to   shed the 'spare tyre' around their middles.  But  like someone in a hurry Humphries  seemingly decided that a  strict diet was not enough:  bariatric surgery   was needed.  To quote from his email, he decided to "remove 10,000 - 12,000 mid to senior level associates from their current roles in coming quarters, (leading to)  a net reduction of approximately 5000 - 7000 roles  or about 2% of our population, as we will aim to reskill our associates."
Considering that about 70% of Cognizant's workforce is based in India, this may see the company  laying  4000- 5000 staff in India  before the end of the fiscal year.

Challenge of AI & robotics
Unsaid  in all this, is the  pressure  currently  being felt,  by all IT companies in an environment where artificial intelligence and  robotics is  slowly nibbling at   tasks hitherto performed by humans.  Cognizant's   manpower and salary structure, according to industry monitors, places it at a disadvantage  when it competes with a TCS or an Infosys for  IT services contracts. This may why recently announced  job reductions are going hand in hand with  caps on salary hikes, cloaked in euphemisms  like "just-in-time promotions",  " a more meritocratic culture" and "streamlining our operation mode", which in unvarnished  words mean, no salary hikes, no increments, no promotions  --  even for those who are lucky enough not to  be the targets of "right sizing".
 Make no mistake, the Cognizant cull is  just the first -- among infotech services players -- and by no means the last.  Large  entities  like Accenture, IBM and HP, as well as desi players like TCS, Infosys and Wipro,  are just as vulnerable to the garam hava of AI and automation which threatens to bring  machine intelligence to tasks hitherto performed by trained humans. On the principle, 'if you can' fight 'em, join 'em', all of these companies  are investing heavily in precisely the technologies which threaten their bottom lines. 
This may delay -- but may not prevent --   more  players from   shedding some of their manpower in the face of this technological onslaught. The only question is whether they will resort -- like Cognizant --to  a surgical strike, or  to less invasive, more humane methods.