Cognizant is taking inspiration from TCS in trying to tame costs

• Cognizant’s CFO Karen McLoughlin said that the IT major will further streamline costs in its core business.
  
• This includes the cost of revenue — employee costs, equipment cost, and the cost incurred in production and distribution of services.
  
• This comes after the IT major announced it will trim senior management roles.
  
• McLoughlin says TCS is better at cost management.
  
• “I'm not sure we will ever get to the levels of a TCS. They do a remarkable job on that and driving margins,” Karen McLoughlin said in a conference.

American IT multinational Cognizant recently announced that it will trim senior management roles in the company as a cost cutting measure. It also offered a voluntary separation package to its bench employees in the US. In fact for the several employees, the company also reduced the severance pay to three months instead of five months, along with one week pay for all the years of service.

But, that is not all. Addressing the Bernstein conference last week, Cognizant’s CFO Karen McLoughlin reportedly said that the IT major will further streamline costs in its core business. This includes the cost of revenue — employee costs, equipment cost, and the cost incurred in production and distribution of services.

“I'm not sure we will ever get to the levels of a TCS. They do a remarkable job on that and driving margins,” Cognizant reportedly said

And it’s inspiration is none other than Tata Consultancy Services (TCS).

Company	Fourth quarter revenue	Total employees	Plan to hire freshers in 2020	Jan-Mar’20 operating margin
Cognizant	₹80,359 crore	292,500	20,000	13.7%
Tata Consultancy Services	₹92,322 crore	448,464	39,000	25.1%

*Cognizant follows January-December financial year

In fact, McLoughlin said that Tata Consultancy Services (TCS) is better managing costs and margins and Cognizant is still behind them, for that matter.

“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 the cost structure on that part of the business,” ET reported citing her speech at the conference.

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