With 12,000 job cuts, TCS signals end of old IT playbook in AI era

India’s largest IT services company, Tata Consultancy Services (TCS), has confirmed plans to reduce its workforce by about 12,000 jobs—approximately 2% of its employees—as part of a strategy to better align with AI-powered transformation and market demand challenges.

TCS has emphasized that the layoffs are due to skill mismatches rather than AI-driven productivity gains.

Most affected are mid- to senior‑level staff who have remained on the project "bench" for extended periods. The company stated that service delivery to clients will not be disrupted and affected employees will receive outplacement support and counselling.

Industry experts note that the move marks the end of the traditional labor‑intensive IT model, referred to as the “Sholay era,” signaling a shift toward outcome- and automation-focused operations.

Despite TCS downplaying AI as a cause, the restructuring is seen as symptomatic of broader AI and automation adoption in the sector.

In contrast, Infosys, India’s second-largest IT services firm, has taken a different path by ruling out layoffs, continuing to hire over 20,000 graduates this year, and investing heavily in AI reskilling for over 275,000 employees. The company has raised its growth guidance to 1–3% for FY 26.

CEO K Krithivasan clarified that the decision is not driven by productivity gains from AI, but due to a skills mismatch and under‑utilisation of staff.

He emphasized that the company would execute the transition “in a very compassionate way,” including providing severance packages, health insurance extensions, counselling, and outplacement assistance.

This marks the largest mass layoff ever in India’s IT sector, signaling a departure from the traditional workforce pyramid to a leaner, efficiency-driven model shaped by AI integration. Analysts note the shift was inevitable, as TCS expanded its headcount by 36% since 2020—outpacing revenue growth and raising per-employee costs by 25%.

The move has intensified concerns about the future of India’s middle class, which often relies on IT sector stability for upward mobility.

Independent industry observers have cautioned that 40–50% of white‑collar jobs in sectors like IT and BPO may be at risk in the coming years due to AI automation, potentially undermining consumer spending and economic growth.

Meanwhile, Infosys—another major IT player—has reinforced its commitment to no layoffs, while allocating resources to retraining and fresh graduate recruitment, aiming to hire 20,000 new graduates and upskill over 275,000 employees this year.

However, according to experts TCS’ decision could trigger similar actions across other IT firms. Industry bodies estimate that 2–5% of the workforce—translating to 100,000–270,000 jobs—may face layoffs as companies realign to AI‑led models and declining utilization continues.

Despite growing anxiety, industry and analysts advise tech professionals to upskill immediately, diversify income streams (e.g. freelance work), and pivot to emerging AI‑oriented roles.

A Mumbai software engineer popular online under the moniker “moonlighter” has urged techies to proactively manage their careers rather than wait for institutional support.

Employees must upskill, particularly in AI, automation, and domain-specific capabilities to remain relevant. Roles that now command higher pay often combine domain expertise with AI fluency.