Editorial: TCS layoffs ring alarm bells
Global technology companies, such as Microsoft and Intel, have been on an employee layoff spree in recent years.
Tata Consultancy Services (TCS)
When one of the country’s largest IT and software services companies is going to issue pink slips to 2% of its workforce, or about 12,000 employees, alarm bells are bound to ring. That the company’s head honcho had to clarify that it was not directly due to Artificial Intelligence points to the prevalent fear of potential job loss likely to be caused by the disruptive technology. The main reason behind TCS’s decision to lay off middle- and senior-level professionals is due to “skills mismatch”.
Global technology companies, such as Microsoft and Intel, have been on an employee layoff spree in recent years. There was over-hiring due to optimism regarding growth or expectations of a surge in demand. The global business environment changed upsetting calculations and belying hopes. Secondly, at an enterprise level, they were adopting AI across operations and functions. In the case of large conglomerates with multiple divisions and verticals, a change in strategy would shift emphasis from one to another or downsizing or shutting down units that are not performing as expected. All these are reasons for layoffs.
Besides some of the above, Indian IT and software services companies are facing additional problems due to their business models. For long, they thrived on low-cost labour and cost arbitrage (profiting from the difference in prices in two different markets). This aspect came under pressure as other countries got into the game. Secondly, the rising employee costs and tightening of visa regulations are impacting them.
Moreover, automation and Artificial Intelligence began to threaten both the size of contracts and the profit margins.
Indian IT companies are now waking up to the new realities and trying to address them. TCS said that it was “on a journey to become a future-ready organisation. This includes … investing in new-tech areas, entering new markets, deploying AI at scale for our clients and ourselves”. In this process, there will be collateral damage in the form of layoffs.
The government is reportedly watching the developments and would want the educational institutions and the industry to address the issue through skilling and reskilling. According to the IT industry organisation NASSCOM, over 10 lakh employees have undergone AI and GenAI training. TCS, for instance, gave AI training to half a million employees. But critics say that giving foundational skills can only be the beginning. It will take a longer time to create a workforce with advanced AI skills which could be used in projects.
If the current trend of layoffs is not stopped, it could snowball into a major crisis with ramifications beyond the IT sector. Until now, the relatively higher salaries given by IT companies (in comparison to other industries in India) have been fueling the real estate and automobile markets in cities, besides boosting the growth of lifestyle markets, including food and beverages, travel, leisure, fashion, etc.
Another issue to be flagged is the impact of layoffs on the employees and their families. Even with prudent financial planning, many would struggle to meet their financial commitments. Those who splurged on a luxurious lifestyle will be hit harder. The situation for now may not be very bleak, and there is no need to panic, but it may go downhill with time.
