$100 million! What Cognizant will save by giving up 11 million square feet in office space

Cognizant

Cognizant will give up 80,000 seats, or 11 million square feet in office space primarily in large Indian cities, as it looks to reduce its annual real estate costs by $100 million. This, the company said, is aimed at rationalising workspaces as it looks to realign office spaces in a post-pandemic hybrid work environment.

Towards this, the company will incur $200 million in costs related to the consolidation of office space — $150 million in 2023 and $50 million in 2024. In India, it is looking to set up satellite offices in tier-2 cities and also modernise existing workspaces.

“This reduction is net of investments to expand our real estate footprint in smaller cities, primarily in India, in support of our hybrid work strategy,” Chief Executive Officer Ravi Kumar S told analysts.

“We expect the structural shift in our real estate costs to help eliminate 80,000 seats and 11 million square feet in large cities in India. This shift will also enable us to invest in collaboration spaces in smaller cities while creating structural savings for the future that we can invest in our people and growth opportunities,” Kumar said.

These changes are part of the company’s NextGen program, as part of which it's also eliminating 3,500 roles in non-billable and corporate functions.

Speaking to the press after the company’s results for the first time as the company’s CEO, Ravi Kumar S said that he is a strong believer that flexibility is not at odds with productivity.

“In the past, we had regimental methods of running physical offices. I do believe that flexibility is not at odds with productivity. There's no reason to believe that. Equally, I believe social capital is needed in our industry, because we hire a lot of school graduates, GenZs at the bottom of the pyramid. We also have team deliverables to work with…. The ability to keep constructing the social capital is very important, specifically for this industry where handholding is required to freshers,” he said.

He added that he doesn’t expect employees to return to offices five days a week, and doesn’t expect all employees to come back — with it being a combination of people working from offices, some working from home and office, and some choosing to stay remote.

“It will always have a different rhythm for different projects. We have to prepare for a diverse and inclusive workplace. That's why I believe I want to tap into the tier-2 cities in India and make this an opportunity for my employees to have the same experience as the employees in tier-one cities have. But equally, I can't go to every tier-two city in India. I can only go to a limited set of cities,” he said.

He maintained that he thinks their presence in smaller cities will be important. "A large number of associates have moved to tier two cities, and they will probably remain in tier two cities for the foreseeable future," he said.

He added that currently, he doesn’t believe all employees are going to come back to tier-1 cities, and is therefore looking at taking some costs out and investing it in people.

“Have I figured this out completely? If anybody says I have figured out hybrid workplaces, they're all speculating and guessing and everybody has a thesis, I have a thesis and evolving that thesis and I'm not fixated on it. I'm continuing to evolve on it,” he added.