moment-of-reckoning-for-tech-industry

The golden era of mass campus hiring by tech companies has virtually come to an end. The present mood is one of gloom and anxiety as the global tech sector is undergoing a major churn amid questions over the disruptive potential of artificial intelligence.

 

Like weather bulletins, news about layoffs is now a daily feature in the media. The swelling numbers fuel further uncertainty about the industry’s future. Much of the blame for job losses is placed at the AI doorstep. But, the reality is more complex and multi-layered. 

 

No doubt, the emerging AI tools replace certain job roles. At the same time, AI is also going to create a lot of new jobs. Employees who can leverage artificial intelligence and help the companies innovate and create new products and services are going to be the ones that are in high demand.

 

The ongoing broad restructuring is driven by factors, including sluggish revenue growth and global economic instability, apart from the rapidly growing adoption of artificial intelligence, which is transforming traditional job roles. 

 

The tech firms—big and small—are feeling the pinch in the face of the boundaries of work being redrawn across industries. The recent announcement by Tata Consultancy Service (TCS) to lay off around 12,000 employees in the coming years, amounting to 2 per cent of its global workforce, is a rude wake-up call for the industry. The impact could be huge. TCS, a dream company for India’s youth seeking upward economic mobility, employed over five million people in 2024, contributed to around 7 per cent of the GDP and accounted for 50 per cent of India’s services exports.

 

One lakh lose their jobs

 

According to industry estimates, nearly one lakh employees in the tech sector have lost their jobs since the start of this year. The US-based companies account for roughly 72 per cent of the total layoffs around the world.

 

No one is an exception in this great churning. Global tech giants like Microsoft, Google, Amazon, and IBM have slashed thousands of jobs. Microsoft has let go several employees, particularly in sales, as the tech major streamlines its workforce amid increased investments in artificial intelligence.

 

On his part, Microsoft CEO Satya Nadella told employees last month that the layoffs were “weighing heavily” on him but also positioned them as an opportunity to reimagine the company's mission for an AI era.

 

Though TCS CEO K Kirthivasan clarified that the lay-offs in his company stemmed from “skill-mismatch” and not AI, it is not going to quell fears of further job losses due to the inevitable domination of AI in the tech sector. Long considered one of the most stable employers, TCS is now aligning itself with a global trend of replacing roles in software development and IT support with AI-powered systems.

 

Large-scale layoffs are now a global trend. From January to mid-July this year, 169 tech firms shed over 85,000 workers, according to Layoffs.fyi, a jobs-tracking website.

 

Fear of the unknown

 

Contrary to the fact that job cuts are an outcome of low financial performance, many of the affected tech giants are also cutting jobs despite strong earnings. Microsoft reported $70.1 billion in revenue and $25.8 billion in net income in the first quarter of the current financial year but laid off 8,840 employees, including senior staff.

 

The companies worldwide are grappling with unknown variables that AI technologies bring in. They are constantly reimagining how work gets done, and the increasing demand for AI has the potential to drive a new era of growth for them. The tech firms are also trying to signal to Wall Street that they are making themselves more efficient as they prepare for broader changes wrought by AI.

 

Also read: Artificial intelligence: Aladdin's lamp or Frankenstein's monster

 

The challenge before them is to find the right balance between maintaining an appropriate headcount and also allowing artificial intelligence to come to the forefront. They need to justify huge amounts of capital spending to pay for the data centres, chips and other components required to power AI technology.

 

All-pervasive power of AI

 

The AI tools can do nearly everything that fresh hires in the IT sector are expected to do. So, there is very little reason for IT companies to keep hiring tens of thousands of fresh graduates a year. In the near future, the recruitments in these companies will no longer reach the levels seen in the last couple of decades. At the same time, it would be unfair to project AI as the heartless villain out to devour jobs. Many argue that large layoffs are freeing up capital for enormous outlays in AI to boost both competitive advantage and operational effectiveness.

 

While traditional tech roles shrink, AI is not eliminating jobs across the board but is reallocating them where opportunity lies. For TCS employees and others in the IT sector, the key lies in moving towards roles that combine domain expertise with AI fluency.

 

From marketing to HR, finance to education, companies are hiring workers who can blend human judgment with AI tools. Since 2022, demand for generative AI skills in non-tech roles has jumped 800 per cent. Employers are looking for candidates who know how to use AI platforms, not just to automate tasks but to create business value.

 

Moment of reckoning for Indian IT firms

 

For too long, the Indian IT sector relied on the cost advantage provided by fresh engineering graduates but did not adequately invest in R&D. This business model is now coming into question and the software companies are finding it tough to navigate the current turbulent times.

 

With India becoming synonymous with servicing the tech industry, domestic IT companies like TCS, Infosys, Wipro, HCL, and Tech Mahindra rode on the wave of cost advantage and cheap labour for at least three decades. 

 

What they have failed to do is to invest their profits into R&D or product development. As a result, no global-level innovations have come from India. Experts have warned that any industry built exclusively on the basis of arbitrage will sooner or later face existential crisis.

 

This is what is happening now. We are at a point where AI tools are good enough to replace knowledge work and disrupt the service industry.