As news of Tata Consultancy Services (TCS) laying off its 12,000 employees hit the market, an uneasiness has grappled the IT sector. The Tata Group-backed IT firm is all set to let go of 2 per cent of its global workforce over the next year. Since TCS is considered a safe haven for IT professionals in the ever changing job market, the move has sent shockwaves down the rest of the industry. And now, experts suggest that this is only the beginning of a major shift in the IT industry in India.
TCS CEO K Krithivasan confirmed officially about the phased job cuts, with the company promising to do itas compassionately as possible in compliance with all HR guidelines. Amidst popular belief, TCS clarifies that AI isn’t the reason behind the mass layoffs.
Industry analysts believe that TCS’s decision will make similar layoffs more acceptable across the board. “If TCS is doing it, it becomes more acceptable,” noted Ashutosh Sharma, VP & Research Director at Forrester. “Every IT organisation has launched margin improvement initiatives. Margins are falling as managed services offer thinner profitability,” Sharma told moneycontrol.
A macro industry shift
The layoffs are seen as a macro concern, according to Pareekh Jain, CEO of Pareekh Consulting. “After TCS, more companies who weren’t even considering layoffs may now see it as a viable option to manage headcount. It won’t stop at just 2%,” Jian told moneycontrol. Even HCLTech has indicated a ‘talent ramp-down’ as part of its restructuring in the coming months.
Mid-senior roles affected the most
Staffing expert Sriram Rajagopal from Diamondpick believes mid- and senior-level employees will be hit hardest. He explained that while many were promoted post-pandemic, the efficiency of generative AI tools means companies now need fewer people in these layers, especially in non-billable roles when margins are squeezed.
Citi Research warned that the layoffs could “dent employee morale” and potentially lead to “increased attrition” in the long term, similar to trends seen at Cognizant.
Despite Krithivasan’s assertion that the cuts aren’t directly tied to AI or margin pressures, analysts largely disagree. Phil Fersht, CEO of HFS Research, stated that “AI is eating into the people-heavy service delivery model.” He says that TCS’s move is a sign of a broader industry shift, where firms are “forced to rebalance their workforces to protect margins and offer competitive pricing.”
Krithivasan did acknowledge that “Some roles are no longer feasible to redeploy” due to new technologies and changing operating models, primarily affecting mid and senior levels.
TCS’s Chief Human Resources Officer Milind Lakkad admitted that “Hiring should not be linked to quarterly growth. We had hired heavily early on and then faced business challenges, which created a mismatch.”
