Cognizant Chennai
The Chennai office of US-based IT services Cognizant. The company's shift in growth strategy is likely to affect jobs in India where 70 percent of its employees are based. Flickr

India will be worst hit as US-based IT services company Cognizant is reportedly considering a shift in strategic focus to banking and financial services, reports say. About 70 percent of the New Jersey-based company's 281,600 employees are based in India.

The company expects its dollar revenue to grow 3.9-4.9 percent in 2019 against the target of 7-9 percent growth it set in February. This is the worst projection in history of the company Francisco D'Souza and Kumar Mahadeva co-founded in 1994. The company had given a voluntary separation package to about 400 senior executives in 2017 in a cost optimization move, according to reports.

The company may force even more broad-based job cuts now covering different levels of employees, a report in Business Standard said. "While last time, the job cuts were limited to senior-level staffers. This time, even non-billable mid-level executives such as managers and even staffers in the consulting vertical with low utilization levels are likely to be affected," a person familiar with developments in the company told the paper.

Most of these job cuts were likely to happen in India, the largest offshore delivery location for the company, the reports said citing another person in the know. "As part of our realignment programme, the management is evaluating various strategies, including a further employee separation programme. The timing, nature, and magnitude of the initiatives are yet to be not finalized," Cognizant said in a note.

Cognizant last week slashed its revenue guidance by nearly half ranging from 3.6 to 5.1 percent for 2019 and new chief executive officer Brian Humphries flagged concerns with regard to execution and gave an indication of immediate cost-optimization steps, including slashing of jobs. "I believe, cost equals growth. We will improve our cost structure as a means to invest in growth," Humphries said in the post-earnings call. "Our headcount growth has exceeded the rise in revenue in the past two quarters," he said. Chief financial officer Karen McLoughlin spoke of employee pyramid optimization, sustaining a higher level of utilization and improvement in pricing as some of the options available for expanding the margin.

While most IT services firms around the world added more staff in the past one year to meet growth projection, it has apparently not worked for Cognizant because of the loss of a few clients and project ramp-downs. "Cognizant has just seen growth slowdown and not negative growth. It is still growing. Perhaps, the new CEO wants to start on a clean slate, which can be one of the possible reasons for this guidance and pyramid optimization," the report quoted Pareekh Jain, an IT outsourcing advisor and founder of Pareekh Consulting, as saying. "Cognizant is rather very transparent with regard to employee issues."