Tata Consultancy Services (TCS), India's largest private-sector employer, has initiated its most significant workforce reduction to date, cutting 19,755 employees in the third quarter. The move comes as the company navigates a weak business outlook and pivots its strategy toward emerging technologies like artificial intelligence.
The reduction brings the company's total headcount below 600,000 for the first time since early 2022. In its latest earnings report, TCS also disclosed it has allocated approximately $128 million (₹11.35 billion) to cover severance costs associated with the layoffs.
Key Takeaways
- TCS reduced its workforce by 19,755 employees in the quarter ending September 30.
- The company's total employee count has fallen below 600,000, a 3.2% drop from the previous quarter.
- TCS has set aside $128 million to cover severance and related costs.
- The company attributes the cuts to a strategic shift towards AI and a mismatch in employee skills.
A Significant Reduction in Headcount
The recent job cuts at Tata Consultancy Services represent a substantial shift for the IT services giant. The departure of 19,755 employees, which includes both layoffs and voluntary exits, marks a 3.2% decrease in its total workforce from the prior quarter. This is the first time the company's employee numbers have dipped below the 600,000 mark since March 2022, signaling a clear change in its staffing strategy.
The financial impact of this decision was also made clear in the company's earnings presentation. The allocation of ₹11.35 billion, or about $128 million, for severance payments indicates a structured and large-scale process. This one-time cost was a primary factor in the company's quarterly profit falling short of analyst expectations.
By the Numbers
- Workforce Reduction: 19,755 employees
- Total Headcount: Below 600,000
- Quarterly Decrease: 3.2%
- Severance Costs: $128 million (₹11.35 billion)
The Drive Towards Artificial Intelligence
Company officials have framed the workforce reduction as part of a broader strategic realignment. The primary driver is the rapid global shift toward new technologies, particularly generative artificial intelligence. According to TCS, the cuts are necessary to reshape the company for a new era of IT services.
Sudeep Kunnumal, the Chief Human Resources Officer at TCS, explained that the company is addressing a “skill and capability mismatch” within its ranks. He noted that the reductions are concentrated at the mid and senior levels of the organization. This move is part of a larger plan to reduce the workforce by 2% by March of next year.
“Our business model will be able to adapt quickly to any changes in immigration policy,” Kunnumal stated, emphasizing the company's focus on hiring personnel with “future-relevant skills.”
This strategic pivot is not just about reducing numbers but about reconfiguring the entire workforce. The goal is to build a team with the expertise required to lead in an AI-dominated market, even if it means letting go of employees whose skills are no longer aligned with that vision.
External Pressures and Market Outlook
The internal strategic shift at TCS is compounded by a challenging external environment. The global IT services industry, valued at $280 billion in India, is facing significant headwinds. Analysts at Citi described the job cuts as a direct reflection of a weak business outlook and reduced IT spending from clients worldwide.
Geopolitical factors are also playing a role. Strained relations with the United States, including potential changes to H-1B visa policies and new tariffs on India, create an uncertain landscape for tech exporters. While TCS has worked to mitigate these risks by localizing a large portion of its US workforce, the overall climate of uncertainty is weighing on the sector.
Navigating Geopolitical Tensions
For years, Indian IT firms have relied on the H-1B visa program to place skilled workers in the United States. However, increased restrictions and a push for local hiring have forced companies like TCS to adapt. By hiring more American workers, TCS aims to reduce its dependency on visa policies, making its business model more resilient to political changes.
Looking Ahead: A Reshaped Workforce
While the job cuts are substantial, TCS leadership has presented them as a necessary step toward future growth. The company is actively investing in training and hiring for roles related to AI, machine learning, and other emerging technologies. The focus is on building a leaner, more agile workforce capable of meeting the evolving demands of clients.
The statement from CHRO Sudeep Kunnumal suggests that hiring has not stopped entirely. Instead, it has become more targeted. The company continues to seek out individuals with what it calls “future-relevant skills,” indicating a long-term commitment to its technological transformation.
The coming months will be critical for TCS as it navigates this transition. The success of its strategy will depend on its ability to effectively integrate new AI-focused talent while managing the morale of its existing workforce and reassuring investors about its long-term prospects in a rapidly changing industry.