TCS Cuts 12,200 Jobs Amid AI-Driven Industry Shift

Tata Consultancy Services (TCS), a leading technology giant in India, has announced a significant reduction in its workforce, with over 12,000 employees being laid off. This move is seen as a harbinger of a broader trend driven by artificial intelligence, which is expected to reshape the 283 billion dollar outsourcing industry over the next two to three years, potentially eliminating around 500,000 jobs.

While TCS attributes the layoffs to a mismatch in skills rather than increased productivity due to AI, industry experts view this as a sign of impending changes in the labor-intensive sector. The layoffs will primarily affect middle and senior management positions, totaling approximately 12,200 employees.

This industry has played a pivotal role in the formation of India's middle class. AI is now being widely applied across various functions, from basic coding and manual testing to customer support. By March 2025, the industry is expected to employ 5.67 million people, contributing over 7% to India's GDP. Through direct and indirect job creation and stimulating consumption from automobiles to housing, the industry has had a significant multiplier effect in the world's fifth-largest economy.

Historically, the industry has absorbed a large portion of India's engineers. However, with the increasing application of AI, efficiency is improving, and the demand for new skills is surging, leaving many existing employees lacking the necessary competencies. This shift is expected to alter the industry's dynamics significantly.

“We are in the midst of a massive transformation that will change the nature of white-collar work as we know it,” said the founder and CEO of a Silicon Valley-based research firm. Other experts have issued similar warnings, suggesting that more layoffs could be on the horizon.

Those most at risk include pure managers with limited technical knowledge, personnel responsible for testing, identifying bugs, and ensuring software is user-friendly before delivery to clients, and infrastructure managers who provide basic technical support to keep networks and servers running smoothly.

“Over the next two to three years, approximately 400,000 to 500,000 professionals may face layoffs due to their skills not meeting client demands,” said the founder of a tech market intelligence company. He added that about 70% of the layoffs will impact employees with 4 to 12 years of experience.

“The concerns raised by TCS's layoffs could dampen consumer demand in areas such as tourism and luxury shopping, and even delay long-term investments like real estate,” he said.

Several IT companies, including TCS, Infosys, HCLTech, Tech Mahindra, Wipro, LTIMindtree, and Cognizant, collectively employ over 430,000 individuals with 13 to 25 years of experience. “Currently, they may appear as a large and redundant middle layer,” said a co-founder of a recruitment firm. All these IT companies did not respond to requests for comment.

“As cost optimization becomes a key driver for winning new deals, clients are increasingly demanding higher productivity — a trend exacerbated by the rising adoption of AI. This requires IT companies to do more work with the same number of employees or achieve the same output with fewer employees,” said an analyst in a research report.

Before the layoffs, TCS had over 613,000 employees. In a statement released in late July, the company stated that it is preparing for the future by investing in new technologies, exploring new markets, deploying AI on a large scale for clients and itself, and adjusting its workforce. The company did not respond to questions about how many layoffs are related to AI adoption and why affected employees cannot be reassigned to new positions.

“This is very disheartening news,” said a 45-year-old TCS employee in Kolkata affected by the layoffs. “People of my age will find it difficult to secure new jobs.”

Other employees still working at TCS expressed concerns about the lackluster performance bonuses for senior employees over the past few quarters, the new “bench policy” that restricts employees from being idle without projects regardless of personal circumstances or past performance, delayed onboarding, and the emotional toll of the layoffs.

“All these factors have demoralized mid-career employees like me,” said a TCS employee in Pune.

Since the 1990s, the Indian outsourcing industry has been a significant employment engine, providing advancement opportunities for millions of engineers. However, recent slowdowns in revenue growth, driven by clients delaying discretionary spending due to inflation and uncertainty over U.S. tariffs, have led to better cost management demands from clients.

“The technology industry is at an inflection point as AI and automation become central to business operations,” said an industry organization. “In previous technology revolutions, the impact of change was primarily organizational. In the age of AI, individuals are, for the first time, responsible for their own reinvention or relearning of skills,” said a former CEO of an IT company.