TCS Layoffs 2025: Decoding the AI Revolution and Economic Shifts Rocking Indian IT

Rishabh Gupta
July 29, 2025
TCS Layoffs 2025: Decoding the AI Revolution and Economic Shifts Rocking Indian IT

Questions Answered in the Article:

  1. What are the recent TCS layoffs?

  2. How many employees are being laid off by TCS in 2025?

  3. What are the main reasons behind the TCS layoffs?

  4. Is Artificial Intelligence (AI) the primary reason for these job cuts at TCS?

  5. How do the TCS layoffs impact affected employees?

  6. What is the new "bench policy" at TCS and how does it relate to layoffs?

  7. How has the Indian IT industry reacted to the TCS layoffs?

  8. How does TCS's situation compare to other global tech layoffs in 2025?

  9. What are the long-term implications for the Indian IT sector?

  10. How is AI transforming the IT services industry, beyond just layoffs?

 

The news has sent ripples across the Indian IT landscape: Tata Consultancy Services (TCS), one of the nation's largest IT exporters and private-sector employers, has announced plans to lay off around 12,000 employees over the course of Fiscal Year 2026 (FY26) (The Economic Times, 2025; Livemint, 2025). This significant workforce reduction, impacting approximately 2% of its global headcount, has quickly become a Google trending topic, sparking widespread discussion about the future of jobs in the technology sector.

But why is a giant like Tata Consultancy Services making such a move, and what does it mean for the broader industry? Is Artificial Intelligence (AI) solely to blame, or are deeper economic currents at play?

 

The Unveiling of the Layoffs: Who is Affected?

Announced around late July 2025, the TCS layoffs 2025 primarily target middle and senior management roles (Times of India, 2025). While TCS had a net headcount addition of 5,452 in Q1 FY26, this strategic workforce realignment points to a forward-looking restructuring rather than a direct reaction to immediate hiring needs. Affected employees are promised notice period compensation, severance packages, and other support, though employee unions have raised strong objections (Times of India, 2025).

 

Why Now? Decoding the Reasons Behind the Shift

The decision stems from a confluence of factors, highlighting a pivotal moment for the Indian IT sector:

  1. Strategic Re-alignment for a "Future-Ready" Organization: TCS asserts that these layoffs are part of a broader journey to become a "future-ready organization" (Livemint, 2025). This involves strategic investments in new technologies, market expansion, and a fundamental realignment of its workforce model.

  2. Skill Mismatch and Deployment Challenges: A core reason, as stated by TCS CEO K Krithivasan, is a significant "skill mismatch" (Angel One, 2025). He clarified that the job cuts are not directly due to AI increasing productivity by 20% but rather because the skills of certain employees, particularly at senior levels, no longer align with changing client demands, making their deployment on contemporary projects unfeasible (The Economic Times, 2025).

  3. The AI Imperative and Automation's Role: While the CEO downplays AI as the sole trigger for these specific layoffs, the underlying truth is undeniable: AI and automation are profoundly transforming the IT services industry.

    • Increased Efficiency: AI-driven tools are automating routine tasks, improving productivity, and reducing the need for large human workforces, particularly in traditional, repetitive roles (Financial Express, 2025). This drives a fundamental shift towards roles requiring higher-order thinking and specialized technological expertise.

    • Shift to Outcome-Based Models: The industry is moving from traditional "time and materials" models to "output- and outcome-based pricing" (Times of India, 2025). This means clients pay for results, not just hours worked, which AI enables through more efficient delivery.

    • Demand for New AI-centric Skills & Tool Adoption: The rise of AI necessitates new skills in areas like machine learning, data science, cybersecurity, and cloud computing. Employees without these updated capabilities may find their roles redundant. Simultaneously, companies are increasingly adopting AI-powered tools to boost efficiency and automate processes. For instance, Werbooz AI, a conversational AI calling platform (https://werbooz.com), exemplifies this shift. It automates sales outreach and lead qualification with high-quality, premium calling agents, providing in-depth reports and allowing businesses to fulfill and automate their outreaching needs. This showcases how AI is transforming traditional business functions and influencing the evolving skill requirements across industries, pushing organizations like TCS to implement many more such AI models into their systems.

  4. Stricter "Bench Policy": A newly updated TCS bench policy now mandates employees to maintain at least 225 billable days annually and limits time on the "bench" (between projects) to just 35 days (Angel One, 2025). Failure to meet these stringent utilization targets can lead to performance actions, indirectly contributing to forced exits.

  5. Macroeconomic Headwinds and Profitability Focus: The global economic slowdown, geopolitical instability, and client pressures for cost optimization are compelling IT firms to streamline operations and prioritize profitability (Financial Express, 2025). TCS share price and the broader Nifty IT index saw immediate dips post-announcement, reflecting market anxieties (Times of India, 2025).

 

Impact Assessment: Employees vs. Company

The TCS layoffs have drawn sharp reactions. While TCS assures comprehensive support, including severance and outplacement services, IT employee unions like NITES (Nascent Information Technology Employees Senate) and FITE (Forum for IT Employees) have vehemently opposed the move. They've labeled the layoffs "unlawful" and "unethical," urging employees not to resign under pressure and demanding government intervention (Times of India, 2025). Concerns have also been raised about delayed onboarding for hundreds of lateral hires, despite the layoffs (The Economic Times, 2025).

For TCS itself, the immediate impact was a slight dip in TCS share value. The strategic intent is to enhance agility, efficiency, and competitiveness in an AI-driven market.

 

Broader Industry Context & Comparisons

The TCS layoff is not an isolated incident but rather a symptom of a global tech industry undergoing massive restructuring. In the first half of 2025 alone, global tech giants like Microsoft, Intel, Meta, Google, Amazon, and HP collectively laid off over 76,000 employees (Goodreturns, 2025; Financial Express, 2025). Microsoft, for instance, dismissed over 15,000 staff in 2025 across multiple rounds (Goodreturns, 2025).

While other Indian IT majors like Infosys, Wipro, HCL Technologies, and Tech Mahindra have also faced pressures and seen stock adjustments (Infosys share has also been impacted by broader sector trends), none have announced layoffs on the scale of TCS this fiscal year (Times of India, 2025). This makes TCS removing employees in such numbers a significant indicator for the entire Indian IT sector.

 

The Road Ahead: What This Means for the IT Sector

The TCS news signals the "end of the Sholay days" – an era where headcount was the primary metric of success for Indian IT (Times of India, 2025). As industry veteran CP Gurnani put it, the focus is shifting from "Kitne aadmi the?" (How many people were there?) to "what outcomes were delivered?" (Times of India, 2025).

This paradigm shift, heavily influenced by AI, means:

  • Mandatory Reskilling: Employees must proactively acquire new skills in AI, cloud computing, cybersecurity, and data analytics to remain relevant.

  • Focus on Productivity & Innovation: Companies will prioritize efficiency and value delivery over sheer manpower.

  • New Opportunities: While routine jobs diminish, specialized roles requiring advanced technological expertise will proliferate.

  • Talent Scrutiny: Increased scrutiny on employee utilization and performance, as seen with TCS's stricter bench policy.

In this dynamic environment, adaptability, continuous learning, and a focus on specialized, high-value skills will be crucial for IT professionals in India and globally. The TCS layoffs underscore that the future of work is not about replacing humans entirely, but about transforming human roles to work smarter, powered by AI.

 

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