Hybrid Work Shrinks Office Space for Cognizant, Infosys, and Wipro by 4 Million Sq. Ft.

Cognizant Technology Solutions, Infosys, and Wipro have reduced their office space over the past year, according to company reports. Together, they now occupy 103.2 million square feet, down 3.7% from 107.25 million square feet the previous year. This reduction is part of a move to cut costs and improve profits but has raised concerns about their role as major employers in India, where they have traditionally leased large amounts of office space.

Changes in Office Space

Cognizant: Reduced its office space in India by 2.76 million square feet, bringing its total to 21.6 million square feet by the end of December 2023, down from 24.36 million square feet a year earlier. The company follows a January-December financial year and has a significant portion of its employees based in India.

ADVERTISEMENT

Wipro: Reduced its office space in India from 26.03 million square feet in March 2023 to 24.97 million square feet, a reduction of 1.06 million square feet. Wipro also closed three of its 185 offices outside India.

Infosys: Reduced its office space by 0.23 million square feet to 56.63 million square feet by the end of FY24. The company closed 11 offices, leaving it with 265 offices globally.

Reasons for Reduction

Infosys cited “optimization of real estate space” as a key reason for the reduction in their annual report. With the rise of remote work and hybrid work models post-COVID, many companies, including these IT giants, are rethinking their office space needs. A former CEO noted that the shift towards work-from-home has allowed companies to better utilise their existing spaces and reduce their overall office footprint. Additionally, a reduction in workforce numbers has also prompted these companies to reassess their office space requirements.

Impact on Workforce

The Indian IT services sector saw a weak growth rate of 3.8% in dollar revenue for FY24, the lowest on record, according to Nasscom. The sector also added fewer employees, with a notable reduction in headcount at some of the biggest companies:

• Infosys: Workforce reduced by 25,994 employees, from 343,234 in March 2023 to 317,240 in March 2024.
• Wipro: Workforce reduced by 24,516 employees, from 258,570 to 234,054.
• Cognizant: Workforce reduced by 7,600 employees, from 355,300 in December 2022 to 347,700 in December 2023.

Cognizant’s CEO, S. Ravi Kumar, had previously mentioned a plan to reduce office space by 40%, eliminating 80,000 seats and 11 million square feet in large Indian cities, aiming to invest in smaller cities and improve profit margins by 20-40 basis points in 2024.

Broader Trends and Costs

This trend in India mirrors similar moves by global tech giants like Alphabet, Meta, and Salesforce, who have also scaled back on office spaces in expensive cities. Maintaining large offices, which once helped win the confidence of Fortune 500 companies, is now proving to be a financial burden. For example:

• Tata Consultancy Services (TCS): Spent ₹3,100 crore to maintain its 307 offices worldwide, even though it increased its office space from 36.6 million square feet in FY24 to 38.23 million square feet in FY23.
• Wipro: Spent ₹1,455 crore on its physical infrastructure last year.

Operating margins for Cognizant, Infosys, and Wipro have fallen to 13.9%, 20.1%, and 16.4% respectively. Cognizant expects to save about $100 million annually on real estate costs by 2025.

Future of Office Spaces

Despite the reduction in office space by IT companies, experts like Gulam Zia from Knight Frank India believe it won’t significantly impact the commercial real estate market. This is because Global Capability Centres (GCCs), or tech captives of foreign companies, are becoming the main buyers of large office spaces. The challenge lies in upgrading older properties to meet the needs of new clients and ensuring they are in desirable locations.