India’s largest IT services major, Tata Consultancy Services (TCS), has yet again not made any decision on giving salary hikes to its employees. The company was expected to announce some form of hike, which it had deferred during the Q4 FY 2025 result announcement in April this year.
The announcement has given hints that all is not well in the IT services segment, which is slowing down large deals, and geopolitical conditions are affecting the sector globally, as the majority of revenues for IT services companies come from global markets. The growth rate of the IT services companies is also falling, and it is not at the level it was a decade ago.
Experts say that the IT Services sector is in flux. The rate at which they are growing will decline due to AI and related areas. However, even to service those areas at scale, we need the services companies.
“There needs to be a shift in the way services are thought about and how they will evolve. However, services will exist. Till the clarity comes in, it would be hard for any business to make bold decisions and holding off on salary hikes seems prudent. The same would be true for the whole sector. So, if we look at it objectively companies are in that makeover space and are investing in technology and training to deliver Gen AI projects at scale and unless there is a trend that can be seen, salary hikes may not be too common in the industry,” remarked Sathya Pramod the Founder of KayEss Square Consulting Pvt Ltd.
TCS has lakhs of employees who were expecting a hike. Now, they are likely to be disappointed by the decision to hold the salary hikes yet again. The recent announcement of cost optimisation initiatives by TCS underscores the pressing need for the IT services industry to recalibrate its operating strategy. Experts point out that with the rapid adoption of AI-led automation, IT services firms have begun automating routine tasks and investing in upskilling their workforce.
“The focus is shifting toward enabling employees to better understand clients’ business contexts and contribute through advanced problem-solving, thereby delivering sustained value. This transformation is extensive and affects a large segment of the workforce. While many professionals will successfully adapt to this evolving landscape, some may struggle and need to explore alternative career paths. In light of this uncertainty, companies are exercising caution and striving to keep their operating expenses at minimal levels,” Aditya Narayan Mishra, the MD and CEO of CIEL HR, told THE WEEK.
In parallel, global geopolitical tensions and a volatile macroeconomic environment have compelled organisations worldwide to reassess their IT budgets. “There is a clear trend of breaking down large projects into smaller, more manageable initiatives, and in some cases, delaying or cancelling them altogether. These factors have led major IT players to intensify their cost optimisation efforts not only through technology deployment and automation, but also by controlling fixed costs, especially those related to headcount,” added Mishra.
At the global level, with technology companies laying off people, all is not well with the global IT sector. So, holding off on salary hikes is something which is not unusual in such a scenario.
The recent layoffs by global tech giants, including Microsoft, IBM, and Intel, were a result of a combination of macroeconomic and strategic factors. There is growing uncertainty in the US market, driven by geopolitical tensions, inflation, and signs of slowing consumer demand. As businesses prepare for possible shifts, such as a change in trade policies or tariffs, they’re prioritising profitability and future-readiness through restructuring.