Ever since news broke out about Tata Consultancy Services (TCS) reducing its global workforce by approximately 2%, chaos followed among the company’s employees as well as the Indian IT industry in general. The layoff, which is set to impact around 12,261 employees, has put people in senior and middle management levels under worry. Since the industry got concerned about the reasons, the company’s CEO K. Krithivasan has furnished reasons behind the move and how AI isn’t the primary cause.
In an interview with Moneycontrol, Krithivasan clarified, “This is not because of AI giving some 20 per cent productivity gains.” Instead, he attributed the decision to “where there is a skill mismatch, or, where we think that we have not been able to deploy someone.”
The layoffs will not be sudden:
“It will be coming through the year. We won’t do it in a hurry. We will first talk to the people that could be impacted. We will provide them an opportunity. When we are not able to provide the opportunity, then we will do what we need to do,” said the CEO.
The layoffs will not be sudden but will be implemented gradually throughout the fiscal year 2026. Krithivasan emphasised a humane approach to the layoff. TCS plans to adhere to its well-established HR policies for affected employees, which include notice-period pay, additional severance benefits, extended insurance coverage, outplacement support, and counseling services. “We will do it in a very, very compassionate way,” he assured.
The decision to rebalance the workforce comes years after the introduction of ChatGPT in the mainstream professional space. With AI models promising to revolutionize the way we work and live, companies are now considering new business models for ‘future-proofing’ their setups.
The impact of AI is eating into the people-heavy services model:
In a response to Hindustan Times, Phil Fersht, chief executive of HFS Research, suggests that “The impact of AI is eating into the people-heavy services model and forcing the large service providers such as TCS to rebalance their workforces to maintain their profit margins and stay price competitive.” He further anticipates this trend will continue for a year as companies prioritise training junior talent for AI-driven solutions and managing employees who struggle to adapt to the evolving “services-as-software” model.
The TCS layoff follows the massive layoff practised at Microsoft, which saw almost 9,000 employees being asked to leave.
