The recent announcement by Tata Consultancy Services (TCS) to lay off 2% of its employees has sent shockwaves through the Indian IT sector. The move, which affects around 12,000 mid- and senior-level professionals, is part of a strategic restructuring to remain competitive in a rapidly changing industry. While TCS CEO K. Krithivasan emphasized that the layoffs are not directly driven by AI, experts believe that margin pressure and the rapid increase of AI will lead to further layoffs in the industry.
The TCS layoffs have lowered the threshold for other IT companies to adopt similar practices. Forrester’s research director, Ashutosh Sharma, noted that every IT organization has been taking steps to improve margins, which have been declining due to the managed services business offering low margins. HCLTech, for example, has indicated that it will reduce its workforce in certain areas as part of its global restructuring plan to achieve operational agility and protect margins.
Other IT companies, such as Infosys and Wipro, have not made any official announcements about layoffs, but experts suggest that they may follow TCS’s lead. Pareekh Jain, CEO of Pareekh Consulting and EIIRTrend, believes that IT companies have already been laying off employees through various practices and that the trend will continue with the emergence of Gen AI in the coming months.
The use of AI and automation is expected to play a significant role in the restructuring of the IT industry. As companies look to improve margins and remain competitive, they may turn to AI-driven solutions to reduce their workforce. This could lead to a wave of layoffs across the industry, with some experts predicting that headcounts in IT companies will decrease in the coming months.
However, it’s worth noting that TCS has stated that affected employees will be provided with severance packages, outplacement assistance, and extended benefits. This may set a precedent for other companies to follow, and could help to mitigate the impact of layoffs on employees. Overall, the TCS layoffs signal a structural transformation in the IT industry, and it remains to be seen how other companies will respond to the changing landscape.