India’s IT sector is facing a seismic shift as Tata Consultancy Services (TCS), the country’s largest IT services firm, announced plans to lay off 12,000 employees—roughly 2% of its global workforce—in a phased manner throughout FY26. This move, one of the most significant retrenchment drives in the company’s history, has sparked widespread concern and speculation about the future of IT jobs in India.
Why TCS Is Cutting Jobs
According to TCS CEO K. Krithivasan, the layoffs are part of a strategic effort to make the company more agile and future-ready. However, industry analysts point to deeper structural issues:
- Margin pressures due to thinning profitability in managed services
- Skill mismatches between current workforce capabilities and evolving client demands
- Disruption from AI and automation, which is reshaping service delivery models
Phil Fersht, CEO of HFS Research, emphasized that AI is “eating into the people-heavy service delivery model,” forcing firms like TCS to rebalance their workforce to maintain competitiveness.
Impact of AI and Automation
While TCS leadership insists the layoffs aren’t directly tied to AI, experts disagree:
- Generative AI tools are proving highly efficient, reducing the need for mid- and senior-level roles
- Clients are demanding 20–30% rate reductions, pushing companies to deliver more with fewer resources
- Legacy roles are becoming obsolete, especially those that cannot be redeployed or reskilled
Industry-Wide Ripple Effect
TCS’s decision is expected to set a precedent across the IT sector:
- HCLTech has already confirmed a “talent ramp-down” as part of its restructuring strategy
- Other major players like Infosys and Wipro may follow suit, especially after pandemic-era overhiring
- Experts warn that layoffs could extend beyond 2%, affecting companies that hadn’t previously considered downsizing
Who’s Most at Risk?
Staffing experts highlight that the biggest impact will be felt at:
- Mid- and senior levels, where promotions post-pandemic have created bloated hierarchies
- Non-billable roles, which are often the first to be trimmed during margin squeezes
- Employees on the “bench” for extended periods, as TCS tightens its internal HR policies
Cultural and Morale Implications
Citi Research notes that TCS has traditionally enjoyed low attrition due to job stability. However, these layoffs could:
- Dent employee morale
- Lead to execution gaps
- Trigger increased attrition, similar to trends seen at Cognizant between 2020–2022
What Lies Ahead?
Industry leaders believe this is just the beginning of a broader transformation:
- The IT sector is shifting toward leaner, AI-aligned delivery models
- Companies are investing heavily in reskilling, but many roles may still be phased out
- The future of IT services will prioritize sharp, niche skills over volume hiring
