By now, the realization that artificial intelligence has a monumental impact on company structures, spending, and hiring should be apparent to everyone. Arguably akin to the rise of SaaS and even the emergence of the internet, AI has been and continues to be a remarkable disruptor. The perfect oxymoron.
After witnessing the trend of AI-centered tech layoffs continue this year, it’s clear to see the particular impact of AI. However, with Oracle now laying off 10% of its Indian workforce in its latest AI restructuring effort, it throws offshoring – a somewhat polarizing work practice in itself – into question for perhaps the first time.
What’s Happening at Oracle?
Longstanding CRM leader Oracle has laid off 10% of its Indian workforce, as reported by India Today. This totals approximately just short of 3,000 people, likely spread over some of the company’s most prolific Indian bases. Reportedly, positions in software development, cloud services, and customer support have been hit the hardest.
Once again, these layoffs have been attributed to organizational “restructuring”, but at a scale this large in one of the company’s busiest hubs has sparked discussion over the deeper reasons behind the cuts.
In a financial filing in June, the company admitted that it periodically adjusts its workforce for a variety of reasons, including strategic changes, reorganisations, or performance, which is not uncommon. However, Oracle also has plans to invest $5B in the UK over the next five years to meet “rapidly growing demand” for cloud services fuelling AI developments, and invest $500B into 10 gigawatts of AI infrastructure in the US over the next four years – a notable spending chunk.
These Indian layoffs also come at a pertinent time – mere days after Oracle Chief Executive Larry Ellison met US President Donald Trump to discuss domestic hiring, national data security, and technology partnerships, according to sources close to the matter.
Not long after, Oracle announced a critical deal with OpenAI, where substantial volumes of AI data will be processed utilizing Oracle’s infrastructure.
Evidently, Oracle is eager to get its slice of the AI pie through heavy investments and partnerships, but why? And what’s this got to do with India?
Why Is This Such a Big Deal?
The Indian tech industry is sitting on a precipice – especially in the world of SaaS and AI – and the disconnect between the two sides is becoming more apparent by the day.
On one side, Indian IT spending is expected to grow 11.1% to $161.5B by the end of the year, according to research and consulting firm Gartner, but IT sector hiring is down 1% YoY – a seemingly small percentage, but monumental for a region as plenteous as India.
Firms are shifting their hiring focus to domain specialists, and are after professionals who are cross-functional and can operate across teams – especially as AI is already performing many L1 and L2 tasks.
That’s why the timing of these layoffs is so crucial here. Many tech industry professionals speculate that Oracle is realigning resources towards the US market in line with Trump’s push to reduce offshoring and H-1B visa reliance, according to India Today.
India is unlikely to be the only region affected either; concerns about a wider global downsizing are growing as numerous international employees report being summoned to unannounced meetings with their managers.
Even Offshored Workers Aren’t Safe
Offshored workers have historically not had the best rep; however, long been considered as an economical solution for businesses looking for talent at potentially lower price point, offshoring has been a rising trend – one that now might also be facing its own interplay with AI.
As the cost of labor has risen and companies have faced tightened budgets or shifting priorities, offshoring and outsourcing have been favorable business practices for many companies. In fact, Forbes reported that the average IT department allocates 13.6% of its budget to offshored roles, and roughly 37% of IT tasks are outsourced. Additionally, working with offshore developers can reduce development costs by up to 90%.
However, a low-cost alternative doesn’t remain the best alternative forever, and AI may have very well begun pushing offshoring out of the way.
According to McKinsey’s 2023 State of AI report, 33% of businesses use generative AI tools to cut costs, and according to data from the Boston Consulting Group (BCG), just under half of C-suite leaders expect AI to contribute significantly to their cost optimisation goals within the next 18 months.
Businesses are already leaning into AI prioritization, with considerable chunks of budget being dedicated to the cause. We’ve seen a slew of AI-driven layoffs affect some of the biggest players in the game, such as Microsoft, Intel, and Meta, and earlier this month, Salesforce’s data revealed that CFOs report dedicating 25% of their current total AI budget to AI agents, and 64% of CFOs say AI agents/digital labor is changing their perspective on how their business spends money.
AI vs. Offshoring
Forbes author Emelien Coquard wrote in 2023 – just a year after ChatGPT exploded onto the scene – that nobody knew how big AI was going to get, so it was almost impossible to know how it would affect offshoring. However, he did also speculate that AI is likely to fall short where it always does: not having the human touch.
However, there is evidence that although that will also be a disadvantage of AI, companies are instead intent on lowering costs, increasing automation, and streamlining processes, no matter what. For one, Gartner predicts that countries with low-cost labour pools will face significantly reduced competitive advantage, and that by 2027, the economic benefits of AI productivity will have enough impact to encourage companies to move away from inexpensive offshore solutions and instead adopt technology-driven efficiencies.
This has the potential to change the offshoring industry as we know it, at a time when jobs are more difficult to obtain and competition is already so high. One of the main drawbacks of offshoring has always been that the Western job market suffers. Now, it is likely that professionals across all regions will feel the sting.
Summary
What makes artificial intelligence so interesting to write about is that virtually nothing is certain. It will continue to transform the way many tech businesses operate, and it will keep on getting more intelligent, but the way it will influence the labor market is something that we will likely see change frequently over time.
Offshoring is not likely to be rendered obsolete anytime soon, but if Oracle’s mission is to reduce headcount – no matter where – then we will see offshoring as a practice questioned further, especially if other companies follow suit.
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