DXC Technology is cutting costs. The newly-formed company said Tuesday it had axed four layers of management in its delivery and support organizations and shrunk its real estate footprint by 7 percent during its first quarter of operations.
The Tysons, Va.-based company, No. 11 on the 2017 CRN Solution Provider 500, said it has cut $140 million of costs since opening for business April 3, and is on track to achieve an annual cost savings of $1 billion by the end of its first year of operations, in March 2018. DXC Technology is the company that came to be when systems integration and IT outsourcing behemoths CSC and HPE Enterprise Services merged.
"It's not a small deal to remove four layers of management in 90 days," Mike Lawrie, DXC's chairman, president, and CEO, told Wall Street analysts. "We did find a fair amount of overlap."
DXC has eliminated 40 percent of the vice presidents and directors in the 170,000-person company as it moved from 11 to seven layers of management in its delivery organization, and from 10 to six layers of management in its support organization, according to Lawrie and DXC's CFO Paul Saleh.
The spans of control across the entire company have increased by 20 percent, according to Lawrie, referring to the number of people reporting to each manager. At the same time, Lawrie said CSC hired 6,000 employees in the most recent quarter in a push to refresh its workforce.
All told, Saleh said DXC achieved $60 million of net savings in the quarter through its workforce optimization. "We've had the first phase of management layer elimination, but we still need to attract younger talent in the right location and continue to develop the talent that we have," Saleh said.
DXC has also been closing locations with low utilization rates and combining offices in big cities, Saleh said. The solution provider ended up shutting 58 facilities and consolidating an additional 31 sites.
The facility closures yielded a $25 million net savings in the quarter, Saleh said, and reduced DXC's overall real estate footprint by 7 percent, or 1.2 million square feet.
DXC saved $50 million by way of improved supply chain processes, Saleh said. The company consolidated its vendor line card, renegotiated agreements with its top strategic suppliers, and achieve additional rate reductions for third-party labor as well as non-labor expenses, according to Lawrie and Saleh.