Tata Consultancy Services’ decision to cut 2 percent of its workforce is not driven by the motive to improve operating margins, chief executive officer and managing director K Krithivasan told Moneycontrol in an exclusive interview.
On July 27, Krithivasan had in an interview to Moneycontrol announced the shock move, which would impact over 12,000 jobs in FY26 at India’s largest software exporter. At the end of the June quarter, TCS had 6,13,000 employees. A cut of 2 percent will impact roughly 12,200 of them.
“While we do this, this is not driven by margins. But once it is visible, I am sure Samir (CFO Samir Seksaria) will call it out at the appropriate time, what will be the impact or what is the charge we are taking. The motivation is not margins, so we have not gone over this,” Krithivasan said.
The job cuts are due to skill mismatch and lack of feasibility in redeploying employees on certain projects requiring advanced emerging technology skills, he said. The layoffs, which will mostly impact mid and senior level employees, have nothing to do with AI productivity gains, Krithivasan said.
“We have been calling out new technologies, particularly AI and operating model changes. The ways of working are changing. We need to be future-ready and agile. We have been deploying AI at scale and evaluating skills we will be requiring for the future. We have invested a lot in associates in terms of how we can provide them with career growth and deployment opportunities. Still, we find that there are roles where redeployment has not been effective. This will impact roughly 2 percent of our global workforce, primarily at middle and senior levels. It has not been an easy decision and one of the toughest decisions I have had to take as CEO,” Krithivasan said.
In June quarter, the company’s operating margins expanded by 30 basis point sequentially to 24.5 percent.
Not just TCS but its IT services industry rivals, too, have been facing challenges in improving and sustaining operating margins in the current macro environment due to US president Donald Trump’s tariffs and AI boom disrupting demand.
TCS’ decision comes only a few weeks after the IT services behemoth updated its HR policy, mandating employees to have 225 days of “billability” in a year and limiting bench time to up to 35 days.
Also read: TCS to cut 2% of workforce, affecting 12,000 employees amid skill gap and tech shift
HCLTech too…
Apart from TCS, HCLTech, too, has hinted at talent rampdown over the next few quarters, as the Noida-headquartered firm plans a restructuring to achieve operational agility and protecting margins amid a shifting technology landscape dominated by AI.
“There will be some talent ramp down that has happened, especially in some of the geographies outside India. So that will also be part of the restructuring plan. More details we will share once we have a concrete timeline and plan agreed,” HCLTech CEO and MD C Vijayakumar said at the company’s Q1 earnings call earlier this month.
The restructuring will occur in phases across the second and third quarters, with some impact extending into the fourth quarter.
Also read: Had to take 'difficult call' to build stronger TCS, says CEO K Krithivasan after cutting 12,000 jobs
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