For 39-year-old Samir Kumar (name changed on request), a software architect, April this year was a roller coaster. In the first week, he and his wife joyfully welcomed their second child, a daughter. Less than a fortnight later, he was laid off by the leading electronics system design and manufacturing firm he was working at for the past seven years, as part of a “global restructuring of operations”.

Kumar says, in the regular scheme of things, he would have found another job within days. But nearly six weeks after he was “let go”, things have been tough and he blames it on the aggressive adoption of artificial intelligence (AI). He believes that a huge chunk of his erstwhile role has been automated. To a large extent, his suspicions are not unfounded, say experts.

Earlier this year, in February, Bangladeshi-British tech entrepreneur Emad Mostaque, founder of Stability AI, had warned of the impending destruction of Indian IT and business process management (BPM) sector due to AI. He said at an event that economies such as India would be impacted due to large-scale adoption of AI. Some of this is already playing out in the IT sector, but at a much smaller scale for the present, experts says.

A time for recalibration

Facing headwinds and fierce competition, India’s IT services industry is undergoing a strategic recalibration — balancing short-term caution with long-term bets on AI, innovation, and global expansion. As discretionary tech spending remains tight and service commoditisation (interchangeability between providers) intensifies, experts say firms must double down on workforce upskilling, digital transformation, and the creation of IP-led, AI-driven offerings to stay relevant and resilient in a rapidly evolving global market.

According to Nasscom, the Indian IT industry was projected to close FY25 with revenues of $282.6 billion, reflecting a 5.1 per cent year-on-year increase. Growth hotspots include sub-sectors like engineering R&D and global capability centres (GCCs). This follows a four per cent revenue growth in FY24, with an anticipated acceleration to over six per cent in FY26.

Rajesh Ranjan, managing partner, Everest Group, acknowledged that IT services were grappling with macroeconomic pressures and uncertainty, tightening discretionary spending, attempts to leverage in-house models via GCCs, and demand for AI-led higher productivity.

DD Mishra, VP Analyst, Gartner, observed that as automation spreads, reliance on manual labour decreases, enhancing operational efficiency. This leads to cost reductions and creative disruptions in existing businesses.

During Wipro’s Q4FY25 earnings call, CEO and MD Srini Pallia noted that the global industry environment remained largely uncertain throughout the year, compounded by recent tariff announcements. “We are speaking to clients across sectors to understand how things are playing out on the ground. Even though the underlying demand for tech reinvention remains strong, clients are approaching it more cautiously. They are focused on cost, speed, and AI-led efficiency,” he commented.

“Leading IT firms are investing in building AI capabilities to enhance efficiency and client value,” Mishra said.

Muted growth ahead

Joseph Anantharaju, co-Chairman and CEO of Happiest Minds Technologies, remarked that Indian IT services is recalibrating, as growth is expected to be muted in the short term. “The industry must focus on delivering business outcomes, helping customers automate their processes and workflows, leveraging AI and GenAI to create new revenue streams and optimise costs, and proactively use code automation tools to reduce IT costs and accelerate roadmaps.”

He said IT firms are investing in AI research, talent, and platforms, embedding AI across the service stack — from intelligent operations to AI-powered software engineering. “To truly reinvent, the industry must move from being service providers to strategic AI partners — helping clients reimagine business models, not just processes.”

Ashutosh Sharma, VP and Research Director, Forrester, added that firms can stay competitive by delivering cost-efficient solutions, meeting immediate client needs, and guiding them toward future opportunities. A similar shift played out during the early days of the digital era, when global players like Accenture, IBM, and Deloitte gained an edge by acquiring digital firms early. A deeper understanding of client requirements eventually demanded a broader transformation of systems, operations, and processes. Indian IT service providers caught up and grew significantly as digital became mainstream.

“We are in an AI-driven phase. Accenture has done fairly well because they were among the first to spot the trend. Indian IT services tend to be more cautious in catching up. Sometimes, a lack of vision may hold them back,” he said.

Salil Parekh, CEO and MD, Infosys, reiterated this, saying AI is part of all discussions on new deals. During the company’s Q4 earnings call, he highlighted that Infosys is embedding AI across several existing initiatives. “We see AI bringing new opportunities and projects... we saw a 4.2 per cent increase in revenue... We are seeing a growing demand from clients, who are moving from a use-case approach to an AI-led transformation approach.”

K Krithivasan, CEO and MD of Tata Consultancy Services, also noted that the company’s pipeline of AI and GenAI engagements has grown, with a notable rise in deal wins across both ‘AI for IT’ and ‘AI for business’ segments.

Focus on outcomes

FY25 witnessed a noticeable shift in the cloud market with a significant growth in sovereign cloud requirements (ensuring data is stored, processed, and governed within national borders), AI infrastructure investments, and accelerated upgrading of outdated IT systems, he observed. These trends are driven by privacy, the need for instant AI-driven decisions from live data, and demand for technological currency.

“There is evident maturity in the request for GenAI pilots, with a sharper focus on business outcomes rather than mere experimentation. We try to deploy AI in every project,” commented Krithivasan during TCS’ Q4 earnings call.

Everest Group’s Ranjan said that while a full reboot will take time, IT service players will focus on developing an AI-trained workforce, creating more IP-led solutions, moving into tier-2/-3 locations, developing GCC-specific offerings, and targeting geographies beyond the US and UK.

“Investment in AI is increasing but is uneven and conservative compared to publicly announced GenAI commitments by global heritage providers. While there is growth in IP platforms, most are still tools to accelerate services, not standalone revenue generators. Further, most are largely undifferentiated. With agentic AI expected to play a significant role in the future, the big opportunity is to help organisations become ready to adopt the future defined by ‘systems of action’ (AI-driven, context-aware actions with little human intervention),” he concluded.

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Published on June 8, 2025