In a significant move that reflects the evolving dynamics of the global outsourcing industry, Tata Consultancy Services (TCS), India’s largest IT services firm, has initiated a major workforce reduction impacting approximately 12,000 employees. This accounts for nearly 2% of its global staff and primarily targets mid- to senior-level positions.
The layoffs come amid a broader strategic recalibration, as TCS navigates a rapidly shifting landscape increasingly dominated by artificial intelligence. While the company maintains that the job cuts are due to “skill mismatches,” industry analysts view this as a harbinger of a deeper transformation driven by AI integration and automation.
India’s \$283 billion outsourcing industry, long considered a global powerhouse for IT services and employment, is now facing an inflection point. Experts predict that over the next two to three years, between 400,000 and 500,000 jobs could be lost across the sector. Functions such as software coding, application testing, customer support, and even certain managerial roles are expected to be heavily impacted by AI tools and workflows.
Over the past few years, TCS expanded its workforce by nearly 36% to meet surging demand during the pandemic and post-pandemic recovery. However, the cost of operations has also increased significantly, with per-employee expenses rising by about 25%. Coupled with a slowdown in global tech spending and project delays from key clients, TCS is now shifting towards a leaner, more technology-enabled delivery model.
The company’s internal handling of the layoffs has come under scrutiny. Several affected employees allege that TCS used coercive tactics, including the threat of blacklisting, to encourage resignations. The firm’s human resources policies, especially regarding employees placed “on bench” without active assignments, have drawn criticism from labor unions and sparked protests in states like Karnataka.
In a parallel development, TCS has moved to restore confidence among the broader workforce by announcing a delayed salary hike for 80% of its employees. The increment, originally due in April, will now be effective from September 1. This covers junior to mid-level staff up to the assistant consultant grade. However, clarity is still awaited regarding raises for senior-level staff, who remain uncertain about their compensation outlook amid the restructuring.
This transition underscores a growing polarization within the IT job market. Entry-level roles and lower-cost tasks are increasingly automated, while high-value, specialized skills are being prioritized. Industry observers note that reskilling and upskilling have become urgent imperatives, particularly for mid-career professionals looking to remain relevant in a changing digital ecosystem.
The developments at TCS are likely to ripple across other major Indian IT firms such as Infosys, Wipro, HCLTech, and Cognizant, many of which are also facing similar structural challenges and contemplating shifts in workforce strategies.
Beyond the IT sector, this shift may have broader economic consequences. With the IT industry serving as a key driver of middle-class employment and consumption in India, widespread layoffs could impact real estate markets, domestic tourism, retail spending, and other sectors tied to urban income growth.
The current wave of changes marks a pivotal moment for India’s outsourcing sector. What was once a labor-intensive model is now undergoing a transformation into a technology-first paradigm, with artificial intelligence reshaping not only how services are delivered but who delivers them. The decisions taken today by companies like TCS will likely define the contours of India’s tech employment landscape for the next decade.