AI’s Disruption of India’s IT Industry: Redefining Business Models

Artificial intelligence (AI) is making waves in the IT world, especially with technologies like "agentic AI," which can handle tasks more independently, using large language models (LLMs) and algorithms.

For India's IT services sector, worth around $263 billion, it's unclear if AI will be a good or bad thing. But as Salil Parekh, CEO of Infosys, pointed out, big changes are already happening. C Vijayakumar, CEO of HCL Technologies, believes the traditional business model is outdated and needs to be rethought. He’s pushing for a new approach that uses AI to double revenue with fewer people, a significant disruption in how things were done before.

After the initial rush to adopt cloud computing during the pandemic, many big clients in the US and Europe have cut back spending, and macroeconomic uncertainties continue to affect the market. But the big change isn’t just in the economy—it’s in how companies need to deliver value. Historically, IT companies charged clients based on the time and people involved in projects. Now, they need to focus on delivering results and outcomes, potentially creating entirely new business models.

Some companies, like Infosys, are already creating AI solutions tailored to specific industries, like banking and IT operations, using tools from tech giants like Microsoft, Google, and Nvidia. Similarly, smaller companies are developing their own AI solutions. These companies see AI not just as a tool, but as a way to drive new services and value, especially with the potential to replace certain jobs or tasks traditionally handled by humans.

Infosys, for example, is also exploring quantum computing and using AI to improve its products for industries like banking and insurance. Other companies, like Tata Consultancy Services (TCS), are expanding their portfolios with AI-powered solutions in areas like retail and enterprise IT operations.

The growth of AI in the IT sector is clear, but there are still challenges. AI can handle repetitive tasks well but struggles with complex, emotional, or nuanced situations. For example, AI works well for routine customer service inquiries but often falls short with complicated issues like billing disputes. Companies are also figuring out how to manage risks and legal concerns when using AI, especially in complex projects that involve multiple stakeholders.

The promise of AI in enterprise IT is still in early stages. The full benefits may take longer to realize than expected, but the shift is already underway. As AI becomes more integrated into services, companies in India’s IT sector will need to focus on creating value for their clients and becoming even more essential to their business operations. The future of AI in IT services looks promising, but there’s still a lot of work ahead before it fully transforms the industry.