Why TCS’s 12,000 layoffs could backfire badly on India’s top IT giant

Dubai: Tata Consultancy Services (TCS), India’s largest IT services firm, is laying off 12,000 employees—about 2% of its global workforce—in what may become one of the most expensive cost-cutting experiments in its history.

On paper, the decision looks clinical: TCS says the layoffs are tied to skill mismatches and a shift in business models, not AI-driven automation. But under the surface, industry analysts and former insiders warn this could backfire hard—hurting the company’s execution, morale, and long-standing reputation for job stability.

Layoffs aren’t just a number

According to a report by Jefferies, this is the third cost-saving move by TCS in three months. It follows a wage hike deferral in April and strict new benching rules in June that limit non-billable status to just 35 days.

But these changes challenge what TCS was once known for—a haven of job security in a volatile sector. “TCS hasn’t historically paid the most, but it kept attrition low by promising stability and long-term careers,” said the report. That social contract is now under strain.

Morale, attrition, execution slippages

While cost-cutting may preserve margins short-term, the real costs may emerge in slower delivery, higher attrition, and poor morale. Jefferies draws a comparison with Cognizant (2020–2022), where similar moves led to a damaging cycle of talent drain and execution failures.

The layoffs are being phased across FY26, and mostly target mid-to-senior-level professionals—precisely the talent layer companies rely on to maintain delivery quality and train younger teams. “This could erode internal capability and cause slippages in client execution,” warned Jefferies.

Reskilling isn’t reemployment

Despite reskilling over 550,000 employees in basic AI and 100,000 in advanced skills, TCS CEO K Krithivasan admitted that many, especially senior staff, struggle to adapt. “Some people, especially at senior levels, find it difficult to transition to tech-heavy roles,” he said.

The firm is also shifting from traditional project-based roles to agile, product-centric delivery—a model that requires fewer layers of management. In short, the old middle layer is being flattened, but without a clear replacement pipeline.

Structural shift, not short-term move

Industry experts warn that what’s unfolding is not a temporary correction—it’s a systemic restructuring. “This isn’t about AI alone. It’s about moving to leaner, faster delivery models,” said Praveen Joshi, Managing Director at RSK Business Solutions. “Over 100,000 tech jobs have been cut in 2025 so far—mostly in mid and entry levels.”

And it’s not just TCS. From Microsoft to Infosys, tech giants are trimming roles that involve repetitive, rules-based work: QA testers, manual customer support, documentation staff, and project managers.

“Gartner estimates middle management in IT will shrink by 50% by 2026,” said Yogesh Virmani, CEO of BayOne Solutions. “What’s happening at TCS is part of a larger wave.”

But not all is doom and gloom

Despite the disruption, demand for new-age tech roles remains strong. Cloud computing, cybersecurity, data engineering, MLOps, and DevOps are still hiring—and at 28% higher salaries on average. Soft skills like empathy, judgment, and creativity are also in demand, especially when paired with technical know-how.

Bottom line?

TCS may see short-term cost wins from these layoffs, but the long-term bill could be far steeper—with potential fallout in delivery, innovation, and employee loyalty. As the IT sector transitions to AI-first models, how companies treat talent today may define their performance tomorrow.

For TCS, a brand long associated with stability, this layoff round may mark a cultural inflection point—and one it may end up paying for more than it expects.