Outsourcing giant Cognizant has had to let dozens of staff in Switzerland go as UBS continues its policy under CEO Ralph Hamers of bringing entire IT departments back in-house. Both the major Swiss banks, UBS and Credit Suisse are long-standing Cognizant customers. UBS used to pay Cognizant up to $330 million a year for IT services and business process outsourcing. Credit Suisse spends around $220 million a year with Cognizant Services, $100 million of it in Switzerland.
The major IT consultancy and outsourcing companies make immense amounts of money from the financial sector, and U.S.-based Cognizant, one of the sector’s top companies globally, has sales of $5.6 billion to the finance sector, a good third of its total turnover.
However, the relationship between UBS and Cognizant has been turning frosty in recent years, and in Switzerland there has been a falling out. UBS last year elected not to renew a service contract, with effect from the end of April. This meant that at a stroke Cognizant lost half of its business with UBS – around $60 million worth.
As a result, Cognizant faced making 70 to 80 consultants working for UBS redundant. The company had had up to 200 staff under contract to UBS. The bank took on around a third of them and another third were taken on by other IT services companies such as Epam and Infosys.
Neither Cognizant nor UBS would comment on the termination of the contract.
Two separate said there were two reasons for UBS dropping Cognizant. In May 2020 the U.S. company was the victim of a ransomware attack that wrecked its efforts to provide IT services from home offices.
UBS then canceled its global contract for several years of IT services early, with effect from the end of April this year, on security concerns. The second reason is UBS’s tendency over the last few years to take IT services back in-house.
In 2018, the bank unilaterally canceled its long-standing partnership with Cognizant in India. UBS sold its «India Service Center» with around 200 staff to Cognizant in 2009 and at the same time signed a contract for several years of services, which was first of all not extended and then canceled entirely.
Competition between outsourcing vendors is extremely fierce and the pressure on prices is enormous. UBS constantly beat Cognizant and other IT service providers down on price.
Mike Dargan, who became UBS’s chief information officer in 2016, reversed the bank’s strategy of outsourcing. The massive acceleration in innovation and digitalization in the financial sector forced Dargan to the conclusion that IT development and services should be dealt with by in-house departments in order to keep up.
Chris Gelvin, a UBS veteran who has been head of group operations since 2018 and was in January this year also appointed chief transformation officer, is responsible for implementing this strategy.
In the meantime, Dargan has risen within the ranks of top management to become COO as well as chief digital and information officer. The step-by-step ending of the vendor contracts and the in-housing strategy are completely in line with Hamers’ thinking.
