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Tata Consultancy Services (TCS), India's largest software services provider, has announced a significant workforce reduction, planning to let go of 2 percent of its global employee base, translating to roughly 12,000 employees, over the course of fiscal year 2026 (April 2025 to March 2026). This decision is driven by the company's strategic imperative to become more agile and future-ready in the face of rapidly evolving technological landscapes and a widening skills gap. The layoffs will affect employees across various countries and domains in which TCS operates, marking a substantial restructuring effort within the organization. CEO K Krithivasan acknowledged the difficulty of the decision, stating it was "one of the toughest decisions I have had to take as CEO," during an interview with Moneycontrol. He emphasized that the move is not primarily driven by AI-led productivity gains or macroeconomic demand fluctuations, but rather by the need to address skills required for the future and ensure effective deployment of resources. The company intends to provide impacted employees with a severance package, extended insurance benefits, and outplacement opportunities, aiming to make the transition as compassionate as possible. This restructuring move by TCS, a major employer in the Indian private sector, could potentially trigger similar actions by its smaller rivals, creating a ripple effect across the IT services industry. The announcement follows closely on the heels of TCS's revised employee bench policy, which mandates a minimum of 225 billable days annually and restricts time spent on the bench to less than 35 days. This new policy, coupled with the layoffs, signals a significant shift in TCS's workforce management strategy, aimed at enhancing efficiency and adaptability. Insiders report that TCS is actively encouraging employees on the bench for extended periods to resign, offering severance packages in exchange for immediate departures. Those who refuse to resign may face termination without severance pay, according to an impacted employee who spoke to Moneycontrol anonymously. Industry analysts suggest that the layoffs reflect a broader trend in the IT sector, where traditional skills are becoming less relevant due to the rise of AI and automation. Some senior employees may be resistant to adapting to these changes, leading to their departure from the company. Furthermore, client projects are becoming smaller and shorter, requiring fewer staff and pushing software providers to leverage AI for greater efficiency. Saubhik Bhattacharya, General Secretary of AIITEU, noted that TCS has also delayed the onboarding of at least 500 lateral hires who were issued offer letters and were due to join in June-July 2025. This delay underscores the company's cautious approach to hiring in the current environment. Earlier in the month, CEO Krithivasan had mentioned delays in decision-making by clients during the April-June quarter, which he anticipates will be resolved in the coming quarters. He clarified that these delays primarily involved postponements or scope reductions, rather than outright cancellations of projects. He also addressed concerns about the new bench policy, stating that it is not intended as an efficiency drive, but rather as a means to ensure that employees are actively seeking projects and remaining productive throughout the year. The new billability policy, announced by the Resource Management Group (RMG) on June 12, requires employees to proactively engage with the RMG to secure project assignments and maintain the required billability target. Failure to meet this target may result in disciplinary action, including termination of service. This emphasis on billability and productivity reflects TCS's commitment to optimizing resource utilization and enhancing profitability. In March, it was reported that top IT services majors have been reducing average bench time and sizes to defend margins and improve utilization rates. Bench time has decreased to 35-45 days currently, compared to 45-60 days in FY20 and FY21. This trend is expected to continue in FY26, according to data from UnearthInsight. Overall, TCS's workforce reduction and policy changes highlight the challenges and opportunities facing the IT services industry in the era of rapid technological advancements and evolving client demands. The company's strategic response involves a combination of workforce restructuring, skills development, and process optimization, all aimed at ensuring its long-term competitiveness and success.
The ramifications of TCS's decision to reduce its workforce extend beyond the immediate impact on the affected employees. The move signals a significant shift in the IT services industry, where companies are increasingly prioritizing adaptability and specialized skillsets in the face of rapid technological advancements. The emphasis on AI, cloud computing, and other emerging technologies necessitates a workforce that is not only proficient in traditional IT skills but also possesses the ability to learn and adapt to new technologies quickly. TCS's CEO, K Krithivasan, has explicitly stated that the layoffs are not primarily driven by a need to reduce headcount due to AI-driven automation but rather to address the skills gap and ensure that the company has the right talent in place to meet future demands. This perspective suggests that TCS is proactively reshaping its workforce to align with the evolving needs of its clients and the broader technological landscape. The impact on the affected employees is undoubtedly significant, as they face the challenge of finding new employment opportunities in a competitive job market. However, TCS's commitment to providing severance packages, extended insurance benefits, and outplacement services can help to mitigate the financial and emotional burden of job loss. Moreover, the demand for skilled IT professionals remains relatively strong in certain areas, particularly those related to AI, cloud computing, cybersecurity, and data analytics. Employees who possess these in-demand skills may find it easier to transition to new roles. The broader implications for the Indian IT services industry are also noteworthy. TCS's decision to reduce its workforce could prompt other companies in the sector to follow suit, leading to a potential increase in unemployment and heightened competition for jobs. However, it could also serve as a catalyst for companies to invest more heavily in employee training and development, equipping their workforce with the skills needed to thrive in the new technological landscape. Furthermore, the emphasis on adaptability and lifelong learning could foster a more dynamic and resilient IT workforce, capable of navigating the challenges and opportunities of the future. The government also has a role to play in supporting the IT sector and its workforce. Policies that promote skills development, innovation, and entrepreneurship can help to create a more favorable environment for the IT industry to flourish and provide opportunities for its employees to succeed. In addition, the government can work with industry stakeholders to identify and address the skills gaps that exist in the IT sector and develop programs that help to bridge these gaps. Ultimately, the success of the Indian IT services industry in the face of rapid technological change will depend on the ability of companies, employees, and the government to work together to create a more adaptable, skilled, and resilient workforce.
The evolving nature of client projects is also a contributing factor to TCS's decision to reduce its workforce. As client projects become smaller and shorter, the demand for large teams of IT professionals diminishes. This trend is driven by the increasing adoption of agile methodologies and DevOps practices, which enable companies to develop and deploy software more quickly and efficiently. Moreover, the rise of cloud computing and Software-as-a-Service (SaaS) solutions has further reduced the need for traditional IT infrastructure and support services. As a result, IT services providers are facing pressure to deliver more value with fewer resources. To address this challenge, companies like TCS are increasingly leveraging AI and automation to streamline their operations and improve productivity. By automating routine tasks and processes, IT services providers can free up their employees to focus on more strategic and value-added activities. However, this shift also requires a significant investment in training and upskilling to ensure that employees have the skills needed to work with AI-powered tools and technologies. The impact of AI on the IT services industry is likely to be profound. As AI becomes more sophisticated, it will automate a wider range of tasks and processes, potentially leading to further reductions in the workforce. However, AI will also create new opportunities for IT professionals who have the skills to develop, deploy, and manage AI-powered solutions. The key to success in the AI era will be the ability to adapt and acquire new skills continuously. IT professionals who embrace lifelong learning and stay abreast of the latest technological developments will be well-positioned to thrive in the future. In addition to AI, other emerging technologies, such as blockchain, quantum computing, and the Metaverse, are also poised to transform the IT landscape. These technologies have the potential to create entirely new industries and business models, but they also require a workforce with specialized skills and knowledge. As a result, IT services providers will need to invest in training and development to ensure that their employees have the skills needed to capitalize on these opportunities. The challenges and opportunities facing the IT services industry in the 21st century are significant. However, by embracing innovation, investing in skills development, and adapting to the evolving needs of clients, IT services providers can continue to thrive and contribute to the global economy.
TCS's updated bench policy further underscores the company's commitment to maximizing resource utilization and improving profitability. The requirement for employees to maintain a minimum of 225 billable days annually and limit time spent on the bench to less than 35 days reflects a focus on efficiency and productivity. This policy is intended to ensure that employees are actively engaged in client projects and contributing to the company's revenue. However, it also raises concerns about the potential for increased pressure on employees and the risk of burnout. The emphasis on billability could lead to a situation where employees feel compelled to take on projects even if they are not a good fit or if they are already overloaded with work. This could ultimately have a negative impact on employee morale and productivity. Moreover, the limited time allowed on the bench could make it difficult for employees to pursue training and development opportunities or to take time off for personal reasons. It is important for TCS to strike a balance between maximizing resource utilization and ensuring the well-being of its employees. The company should provide employees with the support and resources they need to meet the billability targets without sacrificing their health and well-being. This could include providing access to training and development programs, offering flexible work arrangements, and promoting a culture of open communication and collaboration. The emphasis on efficiency and productivity is a common trend in the IT services industry. As competition intensifies and clients demand more value for their money, IT services providers are under increasing pressure to optimize their operations and improve their profitability. However, it is important for companies to remember that their employees are their most valuable asset. By investing in their employees and creating a supportive work environment, companies can improve productivity, reduce turnover, and attract and retain top talent. The IT services industry is constantly evolving, and companies that are able to adapt and innovate will be the ones that thrive in the long run. This requires a commitment to lifelong learning, a willingness to embrace new technologies, and a focus on creating a culture of continuous improvement. By fostering a culture of innovation and empowering their employees to reach their full potential, IT services providers can position themselves for success in the years to come.
Source: TCS to cut 2% of workforce, affecting 12,000 employees amid skill gap and tech shift