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IT Consulting, Services Strategy Amid COVID-19: Cognizant Clues

How are big IT consulting and technology service providers adjusting their businesses amid the coronavirus pandemic? Cognizant Technology Solutions Corp. delivered some clues in a business updated this morning.

Cognizant CEO Brian Humphries

The company’s first quarter 2020 results are scheduled for release on May 7. The business performed well in January and February, Cognizant CEO Brian Humphries said in a statement today. But during the latter part of March, he added, COVID-19 increasingly affected Cognizant’s business due largely to:

  • Delays in project fulfillment as delivery, particularly in India and the Philippines, shifted to work-from-home.
  • Reduced client demand, primarily in the travel and hospitality industries.

Entering the second quarter, “Cognizant expects the pandemic to further reduce client demand as its societal and economic impact causes broader disruptions across industries” the company said.

Cognizant’s Financial, Business Moves

To offset that business weakness and help Cognizant weather the storm, the company has made these business moves:

  • Line of Credit: Cognizant drew down $1.74 billion on its revolving credit facility on March 23, 2020, bringing the company’s total cash and investment balance as of March 31st to approximately $4.7 billion2, or net cash1 of $2.2 billion. The Company has no significant debt maturities until 2023.
  • Use of Stock: During the first quarter Cognizant completed the acquisitions of Code Zero and Lev and repurchased approximately 8 million shares. Since March 31st, Cognizant has not initiated any new share repurchase programs.
  • Compensation: Cognizant associates in India and the Philippines will receive an additional payment of 25% of their base pay for the month of April.
  • Sick Leave: Cognizant has standardized 14 days sick-leave coverage globally for COVID-19 cases or self-quarantine without impacting other sick leave or vacation programs.
  • Philanthropy: Cognizant announced a $10 million philanthropic commitment to support communities around the world in addressing the pandemic’s immediate and long-term impacts.

Cognizant Business Status: CFO Perspective

Karen McLoughlin, CFO, Cognizant

In a prepared statement about Cognizant’s financial status, CFO Karen McLoughlin said:

“We are confident that the combination of our strong balance sheet, and our robust operating and cash generative business model, will enable us to weather this disruption. The execution of our 2020 Fit for Growth program along with prudently managing our cost structure to react quickly to changes in the demand environment is critical to maintaining financial flexibility to navigate near-term headwinds while repositioning the business for long-term success.”

Meanwhile, the overall IT channel partner ecosystem appears to be holding up reasonably well, according to research from The 2112 Group. Still, there’s no denying that layoffs, pay cuts and compensation plan changes are rolling out across the IT channel, ChannelE2E has found.

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