Costly middle layer faces the axe amid India's IT sector layoff drill

According to data from specialist staffing firm Xpheno, more than 7,700 senior professionals with over 15 years of experience have exited India's IT services firms over the past 12 months

Mid- and senior-level employees at India’s top seven IT services companies are facing unprecedented pressure as slowing growth and the rise of artificial intelligence (AI), including agentic AI, push firms to trim the costly middle layer. 

According to data from specialist staffing firm Xpheno, more than 7,700 senior professionals with over 15 years of experience have exited India’s IT services firms — TCS, Infosys, Wipro, HCLTech, Tech Mahindra, Cognizant, and LTIMindtree — over the past 12 months. That’s roughly 4 per cent of the total senior talent pool of 205,000. 

Of these, 43 per cent joined another Tier-I or mid-tier IT firm, 48 per cent moved into senior roles at global capability centres (GCCs), and the rest shifted to non-GCC multinational companies or other tech and non-tech Indian firms. While it’s unclear how many of these exits were voluntary versus layoffs, industry watchers said some departures were likely nudged out. 

The pressure has intensified after TCS announced plans to cut 12,000 mid- and senior-level roles — mainly at the C5 level and above, including employees in their late 40s and 50s. This segment typically has more than two decades of experience, often with the same company, and once expected to retire from the industry within the next decade. 

The road, experts say, is not easy any more. 

“The TCS’ announcement is a surprise, because it is about the mid and senior management. Most AI-related conversations are about fresher talent, but this highlights the skills and agility all of us will bring. It puts pressure on each of us to show how relevant I am,” a senior Nasscom official, who did not wish to be named, told Business Standard. 

The pressure for senior managers to perform is now more than ever. TCS’ firings are mainly restricted to its C5 level and above, according to people familiar with the matter. That includes people who are close to 50 years.

 

The grade level at TCS starts with Y for trainees, followed by systems engineer at C1, C2, C3 (A & B), C4, C5, and CXOs. Employees from the C3 band upwards are usually classified as seniors.

 

While companies are open about campus hiring, none of them discuss lateral hiring or attrition at senior levels. A senior executive at a large IT services firm pointed out that over-hiring in FY22 was a “big mistake” driven by pandemic-led growth. “We are in the process of correcting it,” the executive said, on condition of anonymity.

 

Companies hired mid- to senior-level employees with high salaries when they grappled with the pandemic-led growth.

 

“Companies have been laying off staff over the last two to three years. TCS has now openly stated the numbers. With TCS, the problem is scale and, hence, the numbers look larger,” said Pareekh Jain, founder Pareekh Consulting and ERIIT.

 

IT firms have stated during recent earnings calls that many senior employees resist change and prefer to work with younger engineers who are nimbler and more eager to pick up AI skills to adapt to the shifting software development landscape.

 

Ramkumar Ramamoorthy, partner at tech growth advisory firm Catalincs, said the subdued growth environment of the past three years, coupled with AI disruption, means companies must reinvest in reimagining their financial, operating, and business models.

 

“If you are growing at low single digits for multiple years, the only way to realise growth is to reinvest. That will help you attract talent, provide wage hikes, offer promotions, and meet career aspirations. A lot will fall into place when organic growth in constant currency returns,” he said.

 

In the past 10 years (excluding the current one), IT firms have reinvested in growth and expansion only around 13.5 per cent of the cash flow generated from their operations, according to an analysis by Business Standard. But, on average, nearly 73 per cent of cash profits have been returned to shareholders by way of dividend and share buybacks.

 

TCS, Infosys, Wipro, HCLTech, and Tech Mahindra have cumulatively generated cash profits worth around ~8.9 trillion since FY16 but they put only around ~1.2 trillion in gross block investment in the period.

 

With slower growth, the talent pyramid that top players have built is now under question. “If there is no growth, how will you move people within the model? That’s why backfilling is now highly selective,” said Jain.

 

Another factor is the large deals and rebadging of employees that have taken place in the past two years. Many major contracts included rebadging as a component. This happens when employees are transferred to another organisation.

 

“In rebadging, the majority of time the employees that get transferred are in the higher mid-level to senior level. The current layoffs will also impact these executives,” added Jain.