BENGALURU: US IT services firm DXC – which was formed in 2017 with the merger of CSC and HP Enterprise’s service business – let go of 10,000 people, or 7% of its workforce, in the last fiscal as part of a turnaround plan. At least half of these job cuts were in India, sources told TOI.DXC employs 43,000 people in the country, one of its largest delivery engines for application outsourcing and software development. The entity’s total headcount was 1.7 lakh around the time the merger was announced, but it’s now down to 1.33 lakh.DXC CEO Mike Lawrie said the company plans to add people with digital capabilities. “...this balance between digital growth and traditional decline will continue to be lumpy as we go through the next year. But, this is the revenue dynamic that we talked about before that will ultimately support long-term growth for the company,” he said in the Q4 investor call.The company’s US SEC filing showed that its total restructuring costs recorded, net of reversals, during fiscal 2018, 2017 and 2016 were $803 million, $238 million and $23 million, respectively.DXC has looked at a three-pronged cost rationalisation exercise, including headcount, subcontractor expenses and real estate. “DXC has no choice but to manage a controlled reduction in its global workforce over the next 2-3 years, and India will be one of the key regions where some downscaling will be necessary, especially as global expansion of skills and delivery becomes a key differentiator,” said Phil Fersht of US-based consulting firm HfS Research.Fersht said DXC is facing a gargantuan task to find a path to growth and stability in this current market. “Meshing together so many cultures from firms such as CSC, HP, Xchanging, Fruition Partners and Luxoft in a market where being laser-focused on strategy, messaging, execution and cost-control is a challenge none of DXC's competitors are facing,” he said.In India too, the company has been facing growth challenges. The India operations reported Rs 2,702 crore in revenue in 2017-18, compared to Rs 2,808 crore in the year before. Net profit was down at Rs 276 crore, compared to Rs 305 crore. While significant number of jobs have been cut in India, it’s not clear how much of hiring in new digital areas is being planned here.James Friedman and Michael Yang of Susquehanna Financial Group (SFG) said DXC had guided to takeout $1.6 billion of costs and to expand margins 540 bps over a three-year horizon. In the 15 months through June 2018 – or less than half the three-year duration – they delivered 460 bps of margin expansion, with $1.1 billion saved, they said.Friedman pointed out that average DXC cost per employee is a high $108,000, 2x higher than Accenture, and 3x higher than Cognizant and Infosys. SFG calculates that every 1% cut in salary yields $163 million in savings for DXC.The report said that DXC spent $3 billion on subcontractor costs in the 2017 financial year, reaching 14.2% of revenue, compared to 7% for Infosys. “If DXC can reduce these costs by just 150 bps, it could see as much as $300 million of cost savings,” it said.Rod Bourgeois, head of research and consulting at Deepdive Equity Research, said that in presenting its FY20 guidance, DXC explained that deals geared to expand long‐term wallet share at clients will cause drags on revenues and margins during the year. He said DXC was committing upfront savings to clients in exchange for winning digital projects, and such moves would bring some short‐term pain for long-term gain.When contacted, DXC India said: "We don’t have anything further to add to what’s stated in the DXC fourth quarter earning’s call last week."