TCS has announced massive cuts within the company, representing not only a corporate restructuring but also a significant transition for the entire outsourcing sector in India. This accelerated use of artificial intelligence is profoundly transforming the way companies work, increasingly requiring professionals to adapt quickly to remain relevant.
Historic cuts took place at TCS
Indian outsourcing giant Tata Consultancy Services’ TCS.NSdecision to cut over 12,000 jobs signals the start of a broader AI-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. While TCS pegged the move to shed 2% of its workforce to skill mismatches rather than AI-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 AI 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% 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 AI 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. The most vulnerable employees include pure people managers with minimal tech knowledge, those in charge of testing or identifying bugs and ensuring user-friendliness before delivering software to clients, and infrastructure management staff who provide basic tech support and ensure networks and servers are working well, experts said.
Restructuring with AI and focus on new markets
TCS and other companies in the sector face a dilemma: balancing the growth of disruptive technologies with maintaining their employee base. While AI-driven automation offers some competitive advantages in the market, it also puts pressure on companies to address skills gaps. Therefore, companies have had to create more effective reskilling programs to avoid a massive loss of human capital.
TCS, which had more than 613,000 workers before the layoffs, said in its late July announcement it was gearing up to be “future-ready” by investing in new technologies, entering new markets, deploying AI at scale for its clients and itself, and realigning its workforce model. It did not answer Reuters queries on how many layoffs were tied to AI adoption and why it could not redeploy the affected employees.
Recent internal changes generate uncertainty among employees
Some others who are still at TCS fretted over its mediocre performance bonuses for senior employees in recent quarters, a new “bench policy” that limits the time somebody could be without a project regardless of personal circumstances or past performance, on-boarding delays, and the emotional turmoil caused by the layoffs.
Automation generates impacts on employment and the economic ecosystem
This rapid acceleration of digital transformation in the Indian IT sector may be negatively impacting the economy, affecting everything from suppliers to sectors such as real estate and retail. As traditional functions are replaced by AI solutions, this is changing consumption and income patterns for millions of families who depend on this segment for their livelihoods.
These changes, as with TCS, are likely to impact other companies, which will need to find ways to integrate AI without causing severe social disruptions. Companies need to find ways to invest in continuous training and create policies that mitigate the impacts of unemployment caused by technological development.
GCN.com/Reuters