The great AI shake-up: TCS layoffs may be just a start

Indian IT firms may fade into obscurity unless they reinvent their outdated labour-pyramid business models

- SIDDHARTH PAI

Last month, Tata Consultancy Services (TCS), India's largest private sector employer, made a seismic announcement: 12,000 employees would be laid off, mostly from middle and senior management. This was an unmistakable signal of a strategic shift by a company that had prided itself on employee stability and incremental growth for decades. More than a simple HR pruning, the move revealed that the traditional edifice of Indian outsourcing—a pyramid built on human capital arbitrage—was beginning to show its age.

Officially, TCS cited a growing skills mismatch as the reason for its layoffs, saying that such changes were necessary to prepare for the future. CEO K. Krithivasan downplayed automation as the main reason for the decision. However, industry experts might see it differently. A large part of its workforce reduction—about 2% of its global total—is thought to be a response to the increasing impact of generative artificial intelligence (GenAI) on IT processes.

This isn't just about TCS. The entire Indian IT sector, which employs over 5.6 million people and contributes more than 7% to India's GDP, is in the early stages of a potentially massive disruption. As AI agents increasingly handle testing, low-level code writing, infrastructure support and other traditionally secure functions, forecasts suggest that up to half a million jobs could vanish from the industry in the next few years.

Once seen as engines of upward mobility and economic progress, these businesses now face a technological shift that threatens their very operating models.