Onus on Indian tech leaders to overcome the AI challenge
The Indian IT industry has been one of the key drivers of the domestic economy for over two decades now. Not only does the $280 billion industry employ more than six million people, but it has also created lakhs of other jobs in other sectors like real estate, hospitality, banking and retail. It has propelled rapid urbanisation of the country’s economy apart from integrating the domestic economy to key nations. Such is its importance that many experts view Indian IT industry as one of the key drivers behind creation of a strong middle-class population.
Even while being so, the IT industry has its own share of ups and downs. From cloud to digital, the industry has evolved over time and has emerged as one of the key technology centres for the world. However, things are changing fast. This week, global IT services companies, SaaS firms and data provider companies saw a stock market rout. Indian IT companies were not spared. Many lost more than 10 per cent of their market capitalisation in just five trading sessions. So, what has changed now? AI-led solutions and platforms have been there for quite some time now. So, what is new?
This week, Anthropic launched 11 AI-plugins across domains including legal, finance, process management and others. These plugins have raised fears of redundancy rising in the IT services, & SaaS space going ahead. Why? Earlier, there was a notion that AI would assist IT companies to make processes faster and efficient through automation. But fundamentally, enterprises would require the help of IT companies to implement these AI-led solutions for them. However, Anthropic’s new AI plugins have shattered that notion.
These plugins can talk to the enterprise data directly and execute the work seamlessly with less human intervention. It means, it has the potential to make key offerings of IT services companies’ less relevant. If businesses can do their work by deploying plugins, then there is a fear that outsourcing to IT firms would be reduced. Similarly, SaaS companies may face the heat as domain specific plugins will replace SaaS subscriptions. Currently, these are mere conjectures. There is no hard evidence to prove that this will happen. But analysts fear that this may happen. This fear-psychosis is driving the market reaction for now.
Though there is no proof that enterprises’ adoption of such plugins will adversely impact outsourcing, there is a likelihood that the nature of IT outsourcing will change in the coming quarters. It has already changed a lot in the last two years with more automation kicking in. IT firms are implementing more AI-led automation in clients’ projects. More projects are also becoming outcome-based than running on time and material (T&M) pricing models. So far, IT companies globally are adopting well. But the disruption led by AI is far from over, though the fears of job loss are rising. One should note that many global tech companies have laid off thousands of workers in the last two years.
The Indian IT industry, so far, has been insulated from mass scale job losses. Indian IT professionals are upskilling aggressively and the GCC ecosystem in the country seems to be one of the major job creators as of now. However, this can change suddenly unless Indian IT firms keep adapting fast; transition due to AI is shifting traditional models. Therefore, the onus lies on the Indian technology sector leaders to put the country in the AI driver’s seat.
