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TCS Layoffs: AI, Oversupply, Shift In Demand — Industry Experts Decode Reasons Behind IT Sector Job Cuts

"The issues facing the IT industry today are not just about AI but also global slowdowns, tariff-related issues in the US, and overall uncertainty," Mastek Founder Ashank Desai said.

<div class="paragraphs"><p>Indian IT giant TCS has announced a 2% workforce reduction, impacting around 12,000 employees, citing changing technology skillset requirements driven by AI and other emerging technologies. (Photo: Freepik)</p></div>
Indian IT giant TCS has announced a 2% workforce reduction, impacting around 12,000 employees, citing changing technology skillset requirements driven by AI and other emerging technologies. (Photo: Freepik)

Layoffs in the IT sector are reportedly due to oversupply and the shift towards artificial intelligence, said industry experts, following the recent job cut announcements by sectoral giants TCS and Intel.

Harpreet Saluja, president of Nascent Information Technology Employees Senate, said, "Though it is a private limited company, labour laws are applicable to private organisations as well. They currently fall under the ambit of the Industrial Disputes Act and the Shops and Establishment Act."

"The laws are applicable to them. If these layoffs are being carried out without prior permission of the government—whether it's a private company or a government organisation—they need to take permission under this Act from the appropriate labour commission before initiating layoffs. If permission is granted, the company can go ahead with the retrenchment," Saluja explained.

Indian IT giant TCS has announced a 2% workforce reduction, impacting around 12,000 employees, citing changing technology skillset requirements driven by AI and other emerging technologies. This move follows Intel's similar announcement to downsize nearly a fifth of its workforce this year.

The layoffs, as is industry practice, will start with those on the bench, followed by those with lower performance scores.

"On the human aspect of it, 12,000 is not just a number on an Excel sheet. These are 12,000 employees who are human capital to the organisation. If we are talking about mid and senior level staff, these people have spent approximately 5–10 years with the company," Saluja added.

TCS informed employees about the layoffs via the internal portal on July 27, he said.

Ashank Desai, founder of Mastek, noted, "One has to look at the IT industry from a 30–40 year perspective. We have seen several inflection points—post-Y2K and the dot com bubble, the 2008–09 financial meltdown, and then Covid, which also led to job cuts. So, blaming everything on AI may not be fair."

"The issues facing the IT industry today are not just about AI but also global slowdowns, tariff-related issues in the US, and overall uncertainty. The industry is trying to realign itself for the coming era of AI and unpredictable demand," Desai explained.

Ramani Dathi, CFO at TeamLease Services, observed, "We are seeing a significant shift in IT services. To some extent, these companies haven’t invested in upskilling employees or reinventing themselves to move up the value chain."

"During the Covid years, many IT companies expanded their capacities. Some of that excess capacity has been corrected over the last two years. What we are seeing now is part of that larger shift. Many non-IT companies are now setting up their own internal IT teams, which earlier used to be outsourced. At TeamLease, most hiring we’re doing today is for non-IT companies," she said.

Dathi added, "However, GCCs cannot absorb all the people losing jobs in IT services. But for niche skills, there is strong demand, and those who upskill can find opportunities."

Kamal Karanth, co-founder of XPheno, said, "There is a lot of uncertainty around us. Consulting companies have also become competitors to IT services firms, which missed the GCC wave by not focusing enough on them."

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