TCS layoffs herald AI shakeup of $283 billion outsourcing sector

Indian outsourcing giant Tata Consultancy Services' decision to cut over 12,000 jobs signals the start of a broader Al-fueled trend that could end up eliminating around half a million jobs over the next two to three years from the $283 billion sector, experts said.

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While TCS pegged the move to shed 2 per cent of its workforce to skill mismatches rather than Al-related productivity gains, experts viewed the largest-ever layoffs by India's top private employer as the beginning of things to come in the labour-intensive sector. Roughly 12,200 TCS middle and senior management jobs will be lost.

The industry, which has played a crucial role in creating a middle class in India, is increasingly seeing Al being used for everything from basic coding to manual testing and customer support. The sector employed 5.67 million people as of March 2025 and accounted for over 7 per cent of India's GDP. It has a huge multiplier effect due to the direct and indirect jobs it creates and the cars-to-homes consumption it drives in the world's fifth-largest economy.

It has historically absorbed a majority of India's engineers but that will change as rising Al use ekes out more efficiencies and demands newer skills that many current employees lack, according to half a dozen industry veterans, analysts, and staffing firms. “We are in the midst of a massive transition that will transform white-collar work as we know it,” said Silicon Valley-based Constellation Research founder and chairman Ray Wang, echoing other experts who warned that more layoffs are likely on the cards.