Impact of Generative Artificial Intelligence on the Indian IT Industry
The rise of Generative Artificial Intelligence (GenAI) is fundamentally altering the $254-billion Indian IT services industry by potentially decoupling workforce additions from revenue growth and increasing emphasis on specialized skills.
Key Industry Shifts
- For the first time, top executives from major IT companies like TCS and Wipro have acknowledged that GenAI-driven efficiencies are changing the traditional link between workforce size and revenue.
- The top six outsourcing companies in India reported a net decline of 225 employees in Q3 FY2024, despite optimistic demand forecasts.
- Saurabh Gupta from HFS Research notes that the focus is shifting towards talent reskilling and AI enablement, which could stabilize hiring trends in the near term.
- Medium-term challenges include navigating attrition by offering growth pathways in AI-led roles.
Specialized Skills and Workforce Changes
- Investments in AI transformation projects are driving demand for specialized skills, such as AI/ML, data engineering, and cloud modernization.
- Firms are prioritizing upskilling existing talent and strategically hiring for AI-driven roles, rather than bulk hiring.
- Companies like LTIMindtree are passing on GenAI benefits to customers, leading to reduced hiring targets as AI pulls down the need for fresh recruitment.
- While junior roles are evolving, firms focus more on specialized mid and senior-level roles, with freshers being upskilled.
Future Prospects and Services Evolution
- As GenAI reduces the need for certain services, it simultaneously demands more service-oriented work of different forms.
- According to Jimit Arora from Everest Group, although GenAI is a productivity amplifier, its full impact on client benefits is yet to be realized.
- Somnath Chatterjee anticipates that GenAI applications in software will create greater nonlinearity in business opportunities.
