IT: Cognizant CFO Hints at Further Cost Cuts, Says Rival TCS Good at Cost Management

Chief Financal Officer (CFO) of IT services provider Cognizant has said that the company will further streamline costs in its core legacy business.

“As that business (legacy) has matured, the reality is it needs less investment than it did five, ten years ago. I think the pivot we have to make is how do we think about cost structure on that part of the business,” Karen McLoughlin said while speaking at a Bernstein conference last week.

She further said that rival Tata Consultancy Services (TCS) managed costs better. “I'm not sure we will ever get to the levels of a TCS. They do a remarkable job on that and driving margins."

At Cognizant, the cost of revenue at the end of the fourth fiscal quarter ended December 2019 was Rs 80,359 crore. The New Jersey-headquartered company follows a January-December fiscal year.

At TCS, it stood at Rs 92,322 crore at the end of the fourth quarter.

Cost of revenue refers to the cost of producing and distributing the company's services including salaries, employee benefits, subcontracting and equipment costs among other costs.

Cognizant has been working on reducing expenditure, including a voluntary separation program and planned job cuts by the middle of the year. In October last year, the company indicated that it would cut as many as 7,000 jobs. There were also several exits at the senior executive level.