[The End of Coding Education] Fallout From the Developer-Training Boom as AI Agents Swallow India’s IT Industry

Indian IT Industry Employing 6 Million Faces Shock
AI Agents Upend the Human-Centric Outsourcing Formula
Hiring Pullbacks and Margin Pressure Drive Global Workforce Restructuring

Generative artificial intelligence (AI) is dismantling the labour-intensive growth model that has long underpinned the global information technology (IT) services industry. India’s IT sector, which employs roughly six million people, is confronting the erosion of its three-decade outsourcing success story amid hiring cutbacks, layoffs and worsening profitability. A hiring chill is also spreading through the United States and South Korea, particularly among junior developers and technical-support staff, narrowing employment pathways for younger workers. Demand for software remains intact, but the employment formula built on mass recruitment of entry-level labour is approaching the end of its lifespan.

Cracks in a Six-Million-Job Ladder

According to the Financial Times on August 11, headcount at India’s leading IT companies, Infosys and Wipro, was 5% to 6% lower in March than in 2023. Combined employment at India’s five largest IT companies—Tata Consultancy Services (TCS), Infosys, Wipro, HCLTech and Tech Mahindra—also fell by 6,981 in fiscal 2026. The trend reversed within a year after those companies had added a net 12,718 employees in the previous year. TCS, the industry leader, employed 584,519 people at the end of March, down 23,460 from a year earlier. Generative AI has begun to replace substantial portions of coding and related work.

India’s IT services industry expanded rapidly after the country’s economic liberalisation in the 1990s, leveraging a large pool of highly educated, low-cost English-speaking workers. Its round-the-clock development model, in which Indian developers took over projects after U.S. employees finished their workday and delivered results by the following morning, also became a competitive advantage. The IT industry accounts for about 7% of India’s gross domestic product (GDP) and generates roughly six million jobs, making it a core sector of the economy. It has served as an employment ladder that lifted millions into the middle class.

AI Rewrites the Growth Formula

The growth formula promoted by India’s IT sector was straightforward: demand for engineers would rise as contracts with overseas clients expanded. Managed services, in particular, generated stable and recurring revenue. AI has overturned that formula. It is rapidly taking over code generation, system monitoring, customer support and data analysis, placing direct pressure on a business model built around manpower.

Anthropic’s “Claude Opus 4.6” and “Cowork,” unveiled in February, enhanced capabilities for navigating large codebases, reviewing code, fixing bugs and performing long-running tasks. They also introduced agent-team functions that allow developers to issue instructions and run multiple tasks in parallel. Work packages once distributed among dozens of employees at Indian outsourcing firms could increasingly be condensed into a small number of experienced specialists working alongside AI agents. The chief executive officer (CEO) of IT services provider Persistent Systems said, “In the past, revenue and headcount had a linear relationship, but that relationship will now break down,” adding that “AI allows companies to do more work with fewer people.”

Employment Cliff Behind Revenue Growth

Employment growth in India’s IT sector is already diverging from top-line expansion. According to the National Association of Software and Service Companies (NASSCOM), revenue in India’s technology industry rose 6.1% year on year to $315 billion in fiscal 2026, but net job additions in the first half of fiscal 2027 are projected to remain below 70,000. That would mark a decline of more than 26% from 95,000 in the same period a year earlier.

Client spending patterns have also shifted. A joint survey by Indian venture-capital firm Z47, OpenAI and consulting firm Zinnov found that 90% of companies with mature AI adoption had reduced spending on some business-process outsourcing (BPO) functions. As contract criteria shift from staffing levels and billable hours to performance metrics such as cases processed, resolution rates and revenue contribution, the manpower-based practice of expanding headcount to increase billings is set to lose ground.

Standard & Poor’s (S&P) expects demand for lower-skilled coding and testing staff at Indian IT companies to decline persistently. The adoption of AI is compressing revenue from existing operations, while clients increasingly channel technology budgets toward AI, slowing growth in general maintenance contracts. Infosys, HCLTech and Wipro generate about 95% of their revenue from existing clients, but long-standing customer bases are becoming more expensive to defend as AI-focused companies begin supplying specialised solutions for individual functions.

Nifty IT Index Plunges 19.5% in ‘Cowork Shock’

The fracture in this revenue base surfaced in a wave of selling across Indian capital markets early this year. Anthropic unveiled 11 plugins for its “Claude Cowork” AI agent at the end of January. The Nifty IT index subsequently plunged 19.5% in February, posting its worst monthly performance and its steepest monthly decline since the September 2008 financial crisis. Listed IT companies lost roughly $59.5 billion in market capitalisation over the same period.

The plugins were not sophisticated standalone software products. They combined AI tools with instructions outlining the sequence in which multiple tasks should be performed. Yet they overlapped substantially with areas from which Indian firms have historically derived revenue, including application development and maintenance, accounting support, legal research, customer service and document processing. Overseas clients can reduce the scale of outsourcing teams that once placed dozens of employees in India simply by building in-house AI agents.

Table 1. AI-Driven Layoffs and Workforce Restructuring in the U.S. Software and IT Industry

U.S. Employment Freeze Follows AI Investment Boom

The AI automation that has shaken the foundations of India’s IT sector is also reshaping workforce management at U.S. software and IT services companies. According to U.S. outplacement firm Challenger, Gray & Christmas (CG&C), technology-sector layoffs announced between January and July totalled 149,023, up 67% from the same period a year earlier. The sector accounted for 31% of all announced layoffs even as total U.S. job-cut announcements declined 41%. The number of employees whose layoffs were explicitly attributed to AI reached 112,713. Companies that have traditionally deployed large workforces across development projects, customer support and system operations are now at the centre of workforce restructuring.

Companies supplying AI infrastructure are also cutting labour costs. According to Business Insider, Oracle eliminated 21,000 jobs, equivalent to 13% of its workforce, in fiscal 2026 and has drawn up plans for further cuts. Oracle’s cloud-infrastructure revenue rose 77%, but its investment in AI infrastructure reached $55.7 billion over the same period. Meta cut 8,000 jobs in May, while Microsoft offered voluntary separation packages to 8,750 U.S. employees. Surging spending on AI and data centres is accelerating efforts to secure cash by reducing payroll expenses.

The shock has been concentrated at the bottom of corporate hierarchies. An analysis of U.S. payroll data by the Stanford Digital Economy Lab (SDEI) found that employment among workers aged 22 to 25 in AI-exposed occupations, including software development, had declined by 13% relative to other groups since late 2022. Oxford Economics data also showed an 8% decline in employment in computer and mathematics occupations among workers aged 22 to 27, while employment among those aged 28 and older rose 0.8%. As AI takes over code revisions, testing, technical support and infrastructure monitoring once handled by entry-level developers, companies are increasingly building teams around experienced workers capable of validating results. The BLS projects employment growth of 33.5% for data scientists, 28.5% for information security analysts and 15.8% for software developers between 2024 and 2034, indicating that new demand is likely to concentrate in highly skilled occupations.

Declining Value of Code Labour

South Korea’s labour market is also feeling the impact. Analysis of Economically Active Population microdata by the National Data Agency showed that employment in professional, scientific and technical services fell by 105,000 in February from a year earlier, marking the largest decline since the industrial classification system was revised in 2013. Employment in information and communications also fell by 42,000, while employment among people in their twenties declined by 163,000 to the lowest level since monthly records began. Weakness in construction and base effects contributed to the decline, but an analysis by the Korea Labor Institute showed that employment of workers aged 15 to 29 at companies adopting AI had stagnated since 2023. As code generation, error detection and customer-query handling shift to AI, system integration (SI) and IT services firms are also taking a more cautious approach to new recruitment.

These changes are undermining the rationale for coding education itself. The expectation that learning programming languages and frameworks would secure a developer job rested on the premise of mass hiring for entry-level roles. AI has dismantled that premise and reduced the scarcity value of coding skills. Companies are likely to concentrate their hiring requirements around problem definition, system design, data interpretation, security and the ability to verify AI-generated outputs. The employment formula that once allowed coding-course graduates to secure stable jobs is reaching the end of its lifespan.