Technology services and consulting company Cognizant is set to lay off around 3,500 employees, approximately 1% of its global workforce, and reduce office space in an effort to cut costs.

Despite the company reporting a 3% increase in net profit year-on-year, Cognizant was "carefully monitoring what remains an uncertain macroeconomic environment and with its potential for shifts in client priorities," said CEO Ravi Kumar on a call with analysts after Cognizant released its first quarter 2023 financial results.

The workforce reduction forms part of the company's newly launched NextGen program, designed to simplify Cognizant's operating model and realign office space. The US-based company has employees across the globe and would not confirmed where the affected workers are based, but did say the cuts will mostly affect non-billable roles - generally, jobs that do not require direct work with clients.

In a statement, Cognizant said the changes "reflect the post-pandemic hybrid work environment," while the company's drive for simplification includes "operating with fewer layers in an effort to enhance agility and enable faster decision making."

Cognizant estimates the total costs of NexGen to be around$400 million,$200 million for employee severance and associated costs, with a further$200 million for costs related to the consolidation of office space. Cognizant plans to eliminate 80,000 seats and 11 million square feet of office space in large cities in India in order to expand its real estate footprint in smaller cities throughout the country.

"We expect to realize savings from our NexGen initiative in the back half of this year," said the company's CFO Jan Siegmund.

Cognizant is not the only company to have announced layoffs as part of a wider restructuring plan. Other tech companies such as Twitter, Salesforce, Amazon, and Google have all let go of thousands of employees after a combination of over hiring during the pandemic and a prolonged economic downturn forced many to readdress their budgets.