Tata Consultancy Services Ltd was long revered as one of the safest private-sector employers. But layoffs driven by an artificial intelligence-powered upheaval and deep cuts to variable payouts have shaken confidence, sparking an unprecedented exodus at the top.
At least 300 of 1,800 senior executives have quit India’s largest software services provider in eight months through 31 March, representing at least 16% churn among senior ranks, the highest since the company went public in 2004, according to three executives familiar with the exits. This category witnessed 4-5% annual churn earlier, they said.
Executives with over two decades of experience, including principal consultants, vice presidents, and senior vice presidents, have resigned during this period, said the people who didn’t want to be identified.
Mint could not independently determine how many of these 300 executives were among those laid off. TCS had kicked off its largest job cuts, removing 12,000 executives or 2% of its workforce, as AI disrupted India’s $297-billion technology services outsourcing industry.
TCS has been undergoing significant restructuring and has also started to edge away from its lifetime employment commitment, said Peter Bendor-Samuel, founder of Everest Group, a Texas-based consultancy. “The combination of these effects has created increased uncertainty and some dissatisfaction. Some specific clients may feel the impact as their favoured consultants and engineers are no longer with the account.”
Queries emailed to TCS went unanswered until press time.
“The thing top-most on the minds of the people is why we are doing this (layoffs). We do not pay the best. Yet we managed to attract some of the best minds because of brand Tata. We always promised the best opportunities to people, a wide variety of projects in which they could work,” said one of the executives cited earlier. “That trust has been broken.”
‘Sense of instability’
TCS, which saw 13.5% attrition in the December quarter, once had the lowest exit rate among peers. However, that gap has narrowed. Cognizant Technology Solutions Corp, Infosys Ltd, and HCL Technologies Ltd ended the quarter with voluntary attrition of 13.9%, 12.3%, and 12.4%, respectively.
A high exit rate among senior executives raises questions about the company's future, as these executives are the cornerstone of its flawless project execution. “No AI bots or automation tools can replace this talent pool,” said another executive. “Obviously, it does not bode well for the company.”
Amit Chandra, vice-president at HDFC Securities, said, “TCS’s growth has been impacted despite strong TCV (deal) wins because of higher leakages. The layoffs have created a sense of instability (at the leadership level) which was not there earlier.”
Uncertainty over variable pay
TCS lost some work from its large customers, including Zurich Life Insurance to DXC Technology last year and the UK insurance giant Phoenix Group to Wipro Ltd. In October, TCS lost a $585 million contract from Paramount Global, the New York-headquartered entertainment company, to LTIMindtree Ltd, the IT services firm of L&T.
The firm reported $22.4 billion in revenue during April-December, implying it needs 3.65% dollar revenue growth in January-March to match its FY25 full-year revenue of $30.18 billion. Achieving this sequential growth is particularly difficult during a seasonally weak quarter, increasing the possibility that TCS may report a full-year revenue decline on 9 April.
A weak macro environment adds to the uncertainty, prompting large firms to hold back on tech spending. In such times, companies are forced to bag deals at low operating margins.
"If you look at TCS and other large caps with larger legacy portfolio contributions, they are in a cost-takeout environment with weak discretionary demand. TCS either has to reduce margins to bag deals or let go of mid to senior-level talent that cannot be upskilled to protect margins," said Sushovon Nayak, lead IT analyst, Anand Rathi Institutional Equities.
A second reason for departures is that the senior leadership pool has not received more than 10% of variable pay over the past two years, according to three executives. Many of these 300 executives subsequently joined startups, Fortune 500 companies, or smaller firms like Genpact, offering higher compensation.
“For more than two years, none of this senior leadership has received any variable pay, even as the company has paid hikes and variable pay to the junior staff,” said another executive.
Structural shift
Some analysts said the shift is structural. “This is less about layoffs and more about a structural reset. When firms move from labour-led delivery to AI-led execution, you simply need fewer layers of senior oversight,” said Phil Fersht, chief executive of HFS Research, an outsourcing research firm.
According to Thomas Reuner, principal analyst at Pierre Audoin Consultants, the direction of travel is toward fewer middle layers and more senior positions that can handle both execution and coordination.
High churn in the senior leadership ranks, along with declining growth, came at a time when TCS shares hit a six-year low late last month. Its shares closed at ₹2,451.65 a share on Thursday, with a market cap of $95 billion.
Since K. Krithivasan took over as the chief executive in June 2023 from Rajesh Gopinathan, the stock has fallen 26%. During this period, Infosys and Wipro have also declined, while HCL Technologies Ltd and Tech Mahindra Ltd rose.
A loss of confidence from employees, clients and investors is not making it easy for Krithivasan, who is three months short of completing three years at the helm.
TCS’s performance is also crucial for parent Tata Sons, the holding company of the Tata Group. The IT major accounted for a little over ₹30,000 crore or 84% of Tata Sons’ ₹36,149 crore in dividend income in the year ended March 2025.
Under chairman Natarajan Chandrasekaran, Tata Sons has used this cash from TCS to start new businesses, including aviation, e-commerce, assembling iPhones for Apple and building a semiconductor business.
The cumulative losses from Air India, Tata Electronics, and Tata Digital totalled ₹15,539 crore, according to Tata Sons’ latest annual report.