2 hrs ago
AI Reset Could Reshape India’s IT Services Industry Rankings
Artificial intelligence is changing how IT companies do their work.
Experts do not expect India’s IT industry to disappear, but they do expect some companies to fall behind.
Large companies have money, technology and major customers to help them adapt.
However, their size and older contracts may make change more difficult.
Mid-sized companies may move faster because they have fewer layers of management.
Thousands of smaller companies could struggle because they often have low profits and limited money for AI tools.
AI is already automating some coding, testing and support work.
In the future, investors may focus less on employee numbers and more on how much useful work each employee helps generate.
AI is expected to reshape, rather than eliminate, India’s IT services industry.
Experts estimate that 20-25% of IT services companies could be left behind.
Mid-tier firms such as Persistent Systems and Coforge may benefit from greater agility.
More than 20,000 smaller firms face pressure from AI automation and limited investment capacity.
Revenue per employee and service-line margins may become more important performance measures.
- Who
- India’s IT services companies, including large, mid-tier and smaller providers, along with analysts and brokerages.
- What
- The shift to AI-led delivery could reorder the industry, benefiting some mid-tier firms while putting smaller companies at risk.
- Where
- India’s IT services industry.
- When
- The divide between likely winners and losers is expected to become clearer over the next two to three years.
- Why
- AI is changing delivery models, pricing, talent needs and the economics of services such as coding, testing and support.
Potential AI Beneficiaries
Companies Facing Greater Disruption
Ability to adapt
Potential AI Beneficiaries
Mid-tier companies may benefit because they have enough scale and enterprise relationships to invest in AI while carrying less organizational complexity.
Companies Facing Greater Disruption
Smaller companies often operate on thin margins and may lack the resources to build dedicated AI capabilities.
Industry position
Potential AI Beneficiaries
Persistent Systems, Coforge, Mphasis and LTIMindtree are cited as potential winners because of strengths in software engineering, industry specialization, cloud and application modernization.
Companies Facing Greater Disruption
Businesses focused heavily on testing, basic product-engineering support, BPO, infrastructure or outsourced support could see their offerings weakened as AI automates more work.
Large-company outlook
Potential AI Beneficiaries
Large providers have financial resources, major enterprise relationships and technology investments that can support an AI transition.
Companies Facing Greater Disruption
Their legacy contracts, large workforces and complex delivery structures could make the transition slower, while traditional measures such as headcount may become less meaningful.
Key facts
- Estimated companies at risk
- Nasscom president Rajesh Nambiar estimated that 20-25% of players could ultimately be left behind.
- Smaller-company population
- India has more than 20,000 smaller IT services companies, according to Gaurav Vasu.
- Potential mid-tier beneficiaries
- Persistent Systems, Coforge, Mphasis and LTIMindtree are identified as companies with room to invest in AI and less complexity than the largest providers.
- Brokerage moves
- UBS upgraded Tech Mahindra, Coforge and Mphasis while retaining neutral ratings on Tata Consultancy Services, HCL Technologies and Wipro.
- CLSA view
- CLSA downgraded Tata Consultancy Services, Infosys and Tech Mahindra while favoring Coforge and Persistent Systems.
- Emerging performance metrics
- Revenue per employee, service-line margins and revenue less directly tied to headcount may become more important.
Quotes
Phil Fersht
Founder and CEO of HfS Research
“The 20-25% figure is entirely plausible, and the divide will become much clearer over the next two to three years”
financialexpress.com
Sources
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