TCS Layoffs Signal AI-Driven Transformation in India's $283 Billion IT Sector

India tech giant TCS layoffs herald AI shakeup of $283 billion outsourcing sector

BENGALURU, Aug 8 (Reuters) - Indian outsourcing giant Tata Consultancy Services' (TCS.NS), opens new tab decision to cut over 12,000 jobs signals the start of a broader AI-fueled trend that could end up eliminating around half a million jobs over the next two to three years from the $283 billion sector, experts said. While TCS pegged the move to shed 2% of its workforce to skill mismatches rather than AI-related productivity gains, experts viewed the largest-ever layoffs by India's top private employer as the beginning of things to come in the labour-intensive sector. Roughly 12,200 TCS middle and senior management jobs will be lost. The industry, which has played a crucial role in creating a middle class in India, is increasingly seeing AI being used for everything from basic coding to manual testing and customer support. The sector employed 5.67 million people as of March 2025 and accounted for over 7% of India's GDP. It has a huge multiplier effect due to the direct and indirect jobs it creates and the cars-to-homes consumption it drives in the world's fifth-largest economy. It has historically absorbed a majority of India's engineers but that will change as rising AI use ekes out more efficiencies and demands newer skills that many current employees lack, according to half a dozen industry veterans, analysts, and staffing firms. "We are in the midst of a massive transition that will transform white-collar work as we know it," said Silicon Valley-based Constellation Research founder and chairman Ray Wang, echoing other experts who warned that more layoffs are likely on the cards. The most vulnerable employees include pure people managers with minimal tech knowledge, those in charge of testing or identifying bugs and ensuring user-friendliness before delivering software to clients, and infrastructure management staff who provide basic tech support and ensure networks and servers are working well, experts said. "About 400,000 to 500,000 professionals are at risk of being laid off over the next two to three years as their skills don't match client demands," tech market intelligence firm UnearthInsight's founder Gaurav Vasu said, adding that about 70% of those layoffs would impact workers with 4-12 years' experience. "This (fear stemming from TCS layoffs) may hurt consumer demand for tourism, luxury shopping and even delay long-term investments such as real estate," Vasu said. TCS and its peers Infosys (INFY.NS), opens new tab, HCLTech (HCLT.NS), opens new tab, Tech Mahindra (TEML.NS), opens new tab, Wipro (WIPR.NS), opens new tab, LTIMindtree (LTIM.NS), opens new tab, and Cognizant (CTSH.O), opens new tab collectively employ over 430,000 workers with 13 to 25 years of experience, according to staffing firm Xpheno. "At the moment, they may appear like the big fat middle layer," Xpheno's co-founder Kamal Karanth said. None of the IT firms responded to Reuters queries seeking comment. "With cost optimization being the key driver for new deal wins, clients are asking for productivity benefits - a trend which is also growing due to the rise in AI adoption. This requires IT firms to do more work with the same number of employees or the same work with fewer employees," Jefferies analyst Akshat Agarwal said in a research note. ADAPT OR PERISH TCS, which had more than 613,000 workers before the layoffs, said in its late July announcement it was gearing up to be "future-ready" by investing in new technologies, entering new markets, deploying AI at scale for its clients and itself, and realigning its workforce model. It did not answer Reuters queries on how many layoffs were tied to AI adoption and why it could not redeploy the affected employees. "This is very devastating news," said a 45-year-old, Kolkata-based TCS employee affected by the latest layoffs. "It is very difficult for people my age to get new jobs." Some others who are still at TCS fretted over its mediocre performance bonuses for senior employees in recent quarters, a new "bench policy" that limits the time somebody could be without a project regardless of personal circumstances or past performance, on-boarding delays, and the emotional turmoil caused by the layoffs. "All these developments have tanked the morale of mid-career folks like me," a Pune-based TCS employee said. The Indian outsourcing sector has been a key employment engine since the 1990s, offering upward mobility to millions of engineers. But revenue growth has weakened recently as its clients, stung by inflation and U.S. tariff uncertainty, defer discretionary spending and demand better cost management. "The tech industry is at an inflection point, as AI and automation move to the very core of how businesses operate," industry body Nasscom said. During past tech revolutions, disruption was felt at the organisational level. "With AI, for the first time, the onus is on the individual to reinvent or re-skill themselves," former Tech Mahindra CEO CP Gurnani said. Reporting by Sai Ishwarbharath B and Haripriya Suresh; Editing by Dhanya Skariachan and Kim Coghill Our Standards: The Thomson Reuters Trust Principles., opens new tab * Suggested Topics: * World at Work Haripriya Suresh Thomson Reuters Haripriya reports on India's $254-billion Indian information technology (IT) industry, the country's burgeoning GCCs, as well as new-age startups. With seven years of experience, she has previously reported on politics, civic issues, crime, and breaking news in south India, and tracked the country's gig economy. She has a degree in Media Studies with a specialisation in journalism from the Symbiosis Centre for Media and Communication.

Indian IT is in Denial of AI Layoffs, Big Tech Wants to Call it Out | AIM

Two major tech giants -- one in India and another in the US -- are letting people go, but the narratives around those layoffs seem diametrically opposite. When TCS CEO K Krithivasan addressed the company's move to lay off 12,000 employees, he blamed "skill mismatch" and "organisational shifts" from waterfall to agile. But anyone paying attention could read between the lines. These are AI layoffs -- just not the kind you're allowed to say out loud in India. Microsoft, on the other hand, is making no effort to hide it. Layoffs are framed as part of a larger, aggressive push into AI. The message is that redundancy is the price of transformation. Microsoft basically wants Wall Street to know it's moving fast and hard on AI, even if that leads to job cuts.

India tech giant TCS layoffs herald AI shakeup of $283 billion outsourcing sector - The Economic Times

While TCS pegged the move to shed 2% of its workforce to skill mismatches rather than AI-related productivity gains, experts viewed the largest-ever layoffs by India's top private employer as the beginning of things to come in the labour-intensive sector. Roughly 12,200 TCS middle and senior management jobs will be lost. The industry, which has played a crucial role in creating a middle class in India, is increasingly seeing AI being used for everything from basic coding to manual testing and customer support.

ANALYSIS-India tech giant TCS layoffs herald AI shakeup of $283 billion outsourcing sector

* Experts say TCS's moves signal more sector-wide layoffs * AI-led trend could eliminate up to 500,000 jobs in key sector * People managers, testing and management staff most vulnerable * AI putting the onus on individuals to re-skill themselves BENGALURU, Aug 8 (Reuters) - Indian outsourcing giant Tata Consultancy Services' decision to cut over 12,000 jobs signals the start of a broader AI-fueled trend that could end up eliminating around half a million jobs over the next two to three years from the $283 billion sector, experts said. While TCS pegged the move to shed 2% of its workforce to skill mismatches rather than AI-related productivity gains, experts viewed the largest-ever layoffs by India's top private employer as the beginning of things to come in the labour-intensive sector. Roughly 12,200 TCS middle and senior management jobs will be lost. The industry, which has played a crucial role in creating a middle class in India, is increasingly seeing AI being used for everything from basic coding to manual testing and customer support. The sector employed 5.67 million people as of March 2025 and accounted for over 7% of India's GDP. It has a huge multiplier effect due to the direct and indirect jobs it creates and the cars-to-homes consumption it drives in the world's fifth-largest economy. It has historically absorbed a majority of India's engineers but that will change as rising AI use ekes out more efficiencies and demands newer skills that many current employees lack, according to half a dozen industry veterans, analysts, and staffing firms. "We are in the midst of a massive transition that will transform white-collar work as we know it," said Silicon Valley-based Constellation Research founder and chairman Ray Wang, echoing other experts who warned that more layoffs are likely on the cards. The most vulnerable employees include pure people managers with minimal tech knowledge, those in charge of testing or identifying bugs and ensuring user-friendliness before delivering software to clients, and infrastructure management staff who provide basic tech support and ensure networks and servers are working well, experts said. "About 400,000 to 500,000 professionals are at risk of being laid off over the next two to three years as their skills don't match client demands," tech market intelligence firm UnearthInsight's founder Gaurav Vasu said, adding that about 70% of those layoffs would impact workers with 4-12 years' experience. "This (fear stemming from TCS layoffs) may hurt consumer demand for tourism, luxury shopping and even delay long-term investments such as real estate," Vasu said. TCS and its peers Infosys, HCLTech, Tech Mahindra, Wipro, LTIMindtree, and Cognizant collectively employ over 430,000 workers with 13 to 25 years of experience, according to staffing firm Xpheno. "At the moment, they may appear like the big fat middle layer," Xpheno's co-founder Kamal Karanth said. None of the IT firms responded to Reuters queries seeking comment. "With cost optimization being the key driver for new deal wins, clients are asking for productivity benefits - a trend which is also growing due to the rise in AI adoption. This requires IT firms to do more work with the same number of employees or the same work with fewer employees," Jefferies analyst Akshat Agarwal said in a research note. TCS, which had more than 613,000 workers before the layoffs, said in its late July announcement it was gearing up to be "future-ready" by investing in new technologies, entering new markets, deploying AI at scale for its clients and itself, and realigning its workforce model. It did not answer Reuters queries on how many layoffs were tied to AI adoption and why it could not redeploy the affected employees. "This is very devastating news," said a 45-year-old, Kolkata-based TCS employee affected by the latest layoffs. "It is very difficult for people my age to get new jobs." Some others who are still at TCS fretted over its mediocre performance bonuses for senior employees in recent quarters, a new "bench policy" that limits the time somebody could be without a project regardless of personal circumstances or past performance, on-boarding delays, and the emotional turmoil caused by the layoffs. "All these developments have tanked the morale of mid-career folks like me," a Pune-based TCS employee said. The Indian outsourcing sector has been a key employment engine since the 1990s, offering upward mobility to millions of engineers. But revenue growth has weakened recently as its clients, stung by inflation and U.S. tariff uncertainty, defer discretionary spending and demand better cost management. "The tech industry is at an inflection point, as AI and automation move to the very core of how businesses operate," industry body Nasscom said. During past tech revolutions, disruption was felt at the organisational level. "With AI, for the first time, the onus is on the individual to reinvent or re-skill themselves," former Tech Mahindra CEO CP Gurnani said.

India tech giant TCS layoffs herald AI shakeup of $283 billion outsourcing sector

BENGALURU (Reuters) -Indian outsourcing giant Tata Consultancy Services' decision to cut over 12,000 jobs signals the start of a broader AI-fueled trend that could end up eliminating around half a million jobs over the next two to three years from the $283 billion sector, experts said. While TCS pegged the move to shed 2% of its workforce to skill mismatches rather than AI-related productivity gains, experts viewed the largest-ever layoffs by India's top private employer as the beginning of things to come in the labour-intensive sector. Roughly 12,200 TCS middle and senior management jobs will be lost. The industry, which has played a crucial role in creating a middle class in India, is increasingly seeing AI being used for everything from basic coding to manual testing and customer support. The sector employed 5.67 million people as of March 2025 and accounted for over 7% of India's GDP. It has a huge multiplier effect due to the direct and indirect jobs it creates and the cars-to-homes consumption it drives in the world's fifth-largest economy. It has historically absorbed a majority of India's engineers but that will change as rising AI use ekes out more efficiencies and demands newer skills that many current employees lack, according to half a dozen industry veterans, analysts, and staffing firms. "We are in the midst of a massive transition that will transform white-collar work as we know it," said Silicon Valley-based Constellation Research founder and chairman Ray Wang, echoing other experts who warned that more layoffs are likely on the cards. The most vulnerable employees include pure people managers with minimal tech knowledge, those in charge of testing or identifying bugs and ensuring user-friendliness before delivering software to clients, and infrastructure management staff who provide basic tech support and ensure networks and servers are working well, experts said. "About 400,000 to 500,000 professionals are at risk of being laid off over the next two to three years as their skills don't match client demands," tech market intelligence firm UnearthInsight's founder Gaurav Vasu said, adding that about 70% of those layoffs would impact workers with 4-12 years' experience. "This (fear stemming from TCS layoffs) may hurt consumer demand for tourism, luxury shopping and even delay long-term investments such as real estate," Vasu said. TCS and its peers Infosys, HCLTech, Tech Mahindra, Wipro, LTIMindtree, and Cognizant collectively employ over 430,000 workers with 13 to 25 years of experience, according to staffing firm Xpheno. "At the moment, they may appear like the big fat middle layer," Xpheno's co-founder Kamal Karanth said. None of the IT firms responded to Reuters queries seeking comment. "With cost optimization being the key driver for new deal wins, clients are asking for productivity benefits - a trend which is also growing due to the rise in AI adoption. This requires IT firms to do more work with the same number of employees or the same work with fewer employees," Jefferies analyst Akshat Agarwal said in a research note. ADAPT OR PERISH TCS, which had more than 613,000 workers before the layoffs, said in its late July announcement it was gearing up to be "future-ready" by investing in new technologies, entering new markets, deploying AI at scale for its clients and itself, and realigning its workforce model. It did not answer Reuters queries on how many layoffs were tied to AI adoption and why it could not redeploy the affected employees. "This is very devastating news," said a 45-year-old, Kolkata-based TCS employee affected by the latest layoffs. "It is very difficult for people my age to get new jobs." Some others who are still at TCS fretted over its mediocre performance bonuses for senior employees in recent quarters, a new "bench policy" that limits the time somebody could be without a project regardless of personal circumstances or past performance, on-boarding delays, and the emotional turmoil caused by the layoffs. "All these developments have tanked the morale of mid-career folks like me," a Pune-based TCS employee said. The Indian outsourcing sector has been a key employment engine since the 1990s, offering upward mobility to millions of engineers. But revenue growth has weakened recently as its clients, stung by inflation and U.S. tariff uncertainty, defer discretionary spending and demand better cost management. "The tech industry is at an inflection point, as AI and automation move to the very core of how businesses operate," industry body Nasscom said. During past tech revolutions, disruption was felt at the organisational level. "With AI, for the first time, the onus is on the individual to reinvent or re-skill themselves," former Tech Mahindra CEO CP Gurnani said. (Reporting by Sai Ishwarbharath B and Haripriya Suresh; Editing by Dhanya Skariachan and Kim Coghill)