TCS layoffs hint at broader job cuts as IT ditches scale hiring for skills-based model
TCS layoff: Several IT workers from both big and small firms told Storyboard18 that the pace of AI advancement has outpaced humans adaptability in many job roles
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Tata Consultancy Services (TCS) has announced its decision to downsize 2% of its workforce across geographies, a move expected to reshape hiring trends in the IT sector. From larger peers like Infosys and Wipro to smaller tech firms, organizations are now reassessing workforce model and cost structures.
Neeti Sharma, CEO, TeamLease Digital, stated that the era of "scale-based" hiring in the IT industry is coming to an end. "Companies will prioritise a 'skill-first' approach and move towards leaner organizational structures," she said.
TCS Chief Executive Officer (CEO) K Kirthivasan wrote to all employees on Sunday, stating that the company plans to deploy AI at scale--for both clients and itself--to become 'future-ready,' organization. The transition, he said, will affect 2% of company's workforce, primarily in mid-and senior-level roles.
"TCS is on a journey to become a future-ready organization. This includes strategic initiatives on multiple fronts, including investing in new tech areas ( AI and Data, Cybersecurity, Cloud, IoT, and enterprise solutions), entering new markets, deploying AI at scale for our clients and ourselves, deepening our partnerships, creating next-gen delivery and innovation infrastructure, and realigning our workforce model".
Further, the mail read, "As part of this journey, we will also be releasing associates from the organization whose deployment may not be feasible".
"This will impact about 2% of our global workforce, primarily in the middle and senior grades over the course of the year," TCS's mail mentioned.
Media reports later quoted quoted Kirthivasan clarifying that the job cuts were a result of 'skill-mismatch' rather than AI substitution.
However, Harpreet Singh Saluja, President of Nascent Information Technology Employees Senate NITES, which is an IT union body, said TCS' move has created deep anxiety across the IT sector.
"Other companies may now feel emboldened to follow the same path under the garb of 'AI transition' or 'workforce realignment;," Saluja warned.
'Who will AI impact?'
As AI becomes integrated into day-to-day operations, fears of job cuts have emerged across all employee age groups. Several IT workers from both big and small firms told Storyboard18 that the pace of AI advancement has outpaced humans adaptability in many job roles.
"We are constantly living in fear now. I don't know when I will be kicked out," said an IT employee who wished to remain anonymous.
Another tech professional from a leading IT firm stated, "It's not just about AI. Companies are under margin pressure due to global uncertainties. Project inflow has slowed, our 'bench' time is increasing--a clear signs that layoffs are coming".
Anil Ethanur, co-founder of specialist staffing firm Xpheno, explained that AI-led job displacement is role-specific rather than age-related.
"Repetitive and rule-based job roles are most vulnerable to automation and AI takeover. Mid-level complexity roles may face disruption in the medium term, while high-complexity roles with high cognitive loads remain relatively insulated for now," Ethanur said.
The most vulnerable cohort in the IT sector is the 35-50 age group when it comes to job loss, especially if they haven’t kept pace with evolving digital or AI skill sets, said Sharma.
"Replacing experience with automation might seem efficient on spreadsheets, but in reality, it’s short-sighted and deeply unfair. This displacement is not just a professional loss, but a personal crisis for thousands of families," the IT union body president added.
'Campus hiring impact'
Experts believe that TCS's mass layoff decision will have a cascading effect on campus hiring. "IT firms will be shifting focus from mass fresher onboarding to hiring fewer but more job-ready graduates with niche tech capabilities", Sharma said.
Saluja noted a growing trust-deficit among tech students towards IT firms. Many students, he said, are increasingly opting for GCCs or startups over traditional IT firms.
Global Capability Centers (GCCs) hiring has outpaced that of the IT services sector since the hyper-hiring phase in early FY2022. According to Xpheno, GCC-related job creation has grown from 16 lakh to nearly 21 lakh since FY22. GCCs are entities owned and operated by multinational corporations (MNCs).
"Campus hiring may continue on paper, but young professionals are beginning to doubt the long-term value and stability of an IT job," Saluja said.
In contrast, Ethanur pointed out that freshers hiring is largely influenced by macroeconomic realities rather than enterprise specific layoffs or optimisation.
Notably, campus intake has been subdued over the past three years due to tight margins, weak revenue visibility, and limited budget buffers across the IT industry.
"Hiring fresher involves significant upfront investment with no immediate returns, which many firms are currently unable to absorb," Ethanur said.
Campus hiring is expected to pick-up when broader market conditions improve, including revenue growth, strong order books, and stable margins.
'Cost-efficiency push IT sector'
IT firms have scaled down broad-based training budgets and shifted focus on learning in GenAI, cloud, data engineering, and cybersecurity to control cost. Besides, the firms curtailed spending on classroom-based and non-core training and travel-related programs. According to the FY25 annual reports of the country's Big-3 IT giants--TCS, Infosys, and Wipro--all reported a collective 9% average reduction in 'other expenses'.
TCS slashed travel and facility cost expenses by 7% to Rs 30,481 crore in FY25. Infosys cut spending on branding & marketing, consumables, insurance, and other categories by 2.5% year-on-year to Rs 3,497 crore. Wipro reported a 17.8% reduction in other expenses, down to Rs 2,452 crore in FY25.
Ethanur also noted a significant slow down in replacement hiring. "Rather than immediately backfilling positions lost to attrition, many companies are choosing to go slow to better manage headcount-related costs".
