Bl interview. ‘Indian IT should make structural changes to lead the GenAI wave’

The year 2023 has been a year where the headwinds have been quite strong because of the economic slowdown, the global conflict and the sentiment around that. Secondly, the acceleration towards digital and AI has been very profound this year. The way Indian IT has responded, we do not know the results of that yet. Some of the companies, which are future focused, invested in new capabilities and new services to be dominating in the market when the sentiments improve. However, some people, some Indian IT companies which were more conscious about their market valuation, harvested - they reduced costs and investments. So, 2023 was a mixed bag of both these kinds of companies.

Previously, the challenges in 2008, 2013, and during Covid drove cost reduction, which resulted in a tailwind for Indian IT. Going forward we are moving from the back office to the front office, where clients need solutions around digital and AI. The Indian IT’s relevance and competitiveness to the digital market is far lower compared to their stronghold on IT outsourcing.

Cloud giants like Google, Microsoft, and Amazon now influence decisions more, altering the competitive landscape. Some Indian IT firms that adapted to digital services and consulting will thrive, while those that focused on harvesting without investing face tougher times. Expect a varied impact on companies by 2030, with a shift in rankings and market position.

Generative AI needs more onshore, consulting, technical capabilities, and domain knowledge which is very different to the Indian IT model. Therefore structural changes and different approaches will be required to be able to capture the imagination of the customer if companies want to lead the Generative AI market.

As of now, I have not seen enough to have conviction that Indian IT will lead this as they have led the other areas in the past two decades. However, the iron arc is getting hot inside Indian IT and they will figure out how to dominate this field.

The demand is high even today for digital oriented services, while demand is low for traditional services. I believe 2024 is going to be no different. People are going to reduce cost on the traditional back-office services and increase investment in digital services. So, if the portfolio has a larger percentage of digital offerings, there will be a tailwind, and if it has a larger percentage of traditional services, there will be a headwind.