UBS' move to insource adds to Cognizant's woes

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NASDAQ-listed Cognizant, which was forced to let go of new business due to its inability to hire talent, is now facing the heat from one of its largest banking clients, UBS.

According to a report by finews.com, UBS, did not renew its global contract of several years that ended April this year. The company also had to let go of 70-80 employees as a result.

The contract is worth $60 million. According to the report, this has come at the back of security concerns due to ransomware attacks last year and also increased insourcing.

Cognizant reported a ransomware attack in April 2020, which cost the company $50-70 million. The company has also been facing the threat of insourcing by its client UBS over the last few years, as it ramped up its in-house facilities.

According to an Economic Times report, UBS' captive headcount increased from 1,500 in 2017 to 3,000 in 2018. Another recent ET report said that the company currently has about 6,700 people.

Interestingly, Brian Humphries, CEO - Cognizant told analysts a few months ago that the company lost a banking client in Europe and had “transformation product issues” with another large account, making a turnaround in European banking business difficult.

Both Cognizant and UBS did not comment for the story.

This follows the larger trend of insourcing across the banking industry. While experts have said that the huge demand for digital will also benefit the IT services firms, it does pose a challenge for IT firms as evident from the UBS and Cognizant relationship.

A Bengaluru-based senior employee in a top IT firm, who has been working for one of the large US banks for close to 10 years, said that the employees who are working for the client have been coming down over the last few years. “There used to be seven blocks dedicated to the client in the campus. This came down to five couple of years ago. The decline, albeit slower, continues,” the employee says.

As the landscape changes, IT firms too are investing in capabilities to address client concerns.

Mrinal Rai, Principal Consultant, ISG, said that the service providers are now investing in building and strengthening platforms for banking clients. “Many providers who were not earlier considered strong in this space are developing modular plug and play solutions handling areas other than core banking that clients can quickly adopt,” he added.

Since Humphries took over in April 2019, the company has seen a raft of exits across levels. He had indicated a deep surgery as part of an effort to restructure the company and make it more nimble.