'The choice is clear: We either embrace this transformation and cement our global leadership, or hesitate, lose ground, and fade into irrelevance.'
Kindly note the image has been posted only for representational purposes. Photograph: Kind courtesy Gerd Altmann/Pixabay.com
India's IT enabled services (ITeS) industry is at a defining crossroads. While generative artificial intelligence (GenAI) could be India's next trillion dollar opportunity, Indian developers have to adopt it for this to happen.
According to a study, despite over 80 per cent of developers recognising GenAI's benefits, adoption lingers below 40 per cent.
According to the latest Boston Consulting Group report The GenAI Adoption Conundrum, over 80 per cent of developers acknowledge its advantages, citing increased productivity and efficiency.
But even with all-pervasive benefits, proficient adoption of these tools is still at paltry figures.
"This is the GenAI adoption conundrum -- where the benefits are visible, but proficient adoption still remains below 40 per cent," said Sambhav Jain, MDP at BCG.
"It's like being handed a Formula 1 race car -- but choosing to walk instead. Contrary to further belief that GenZ is the GenAI generation, we observed that proficient adoption among GenZ dipped even further to 31 per cent," Jain added.
What ails this adoption is integration issues and inadequate enablement. Jain said while every company says it is training employees, this training is not focused on GenAI.
"Training today is broad but lacks depth -- almost half the developers reported being unaware of how to fully utilise the tool's capabilities in their workflow.
"Clients are sceptical too and require clear value proposition & security measures," said Rajiv Gupta, managing director and senior partner, BCG, in a conversation with Business Standard.
At a time when AI and GenAI have been the focus area for clients, the Indian developers' inability to be prepared can cost the industry a big opportunity.
"This conundrum represents a missed opportunity for Indian IT services. It's not just about access -- scaling is about behaviour change, process transformation, and leadership.
"Many companies have begun their AI journey -- running POCs, experimenting, and seeing early success.
"Organisations that are getting this right are leveraging a structured adoption playbook," he added.
To break free from this conundrum, India's IT firms must move beyond experimentation and into full-scale adoption.
BCG's report outlines a five-part playbook for success; it asks organisations to train for impact, not just awareness -- GenAI adoption jumps from 16 per cent to 48 per cent when developers receive five or more targeted training sessions.
Two, 92 per cent of enterprise clients are willing to pay a premium for AI-driven services, but they need proof of tangible return on investment.
Three, firms must track productivity gains scientifically -- measuring AI's impact across efficiency, quality, and output.
Change management is a huge part of this adoption. Addressing psychological resistance among developers is also important.
Finally, setting up centres of excellence (CoEs) is impactful. Almost 80 per cent of firms with GenAI COEs have seen marked improvement in training, better resource access & regular scientific tracking.
"GenAI's momentum is at the bottom of the hockey stick effect -- what we do next will define our trajectory," said Gupta.
"We are at a critical inflection point where Indian ITeS must lead with conviction, scale GenAI with urgency, and earn the right to shape the future of AI-powered services.
"The choice is clear: We either embrace this transformation and cement our global leadership, or hesitate, lose ground, and fade into irrelevance."
AI vs Jobs: CEOs Divided
Avik Das
Global executives are divided on the impact of generative artificial intelligence (GenAI) on jobs.
While some feel that the all-pervasive, revolutionary technology is already making employees redundant at various levels, others say AI and automation will not replace human intelligence.
For instance, DBS Group expects its workforce to shrink by 10 per cent, or 4,000 employees, over the next three to four years as the Singaporean bank's operations become more automated and less human-intensive.
"This year, my current projection is that in the next three years, we are going to shrink our workforce by 4,000, or 10 per cent," DBS Bank's CEO Piyush Gupta said at a Nasscom event on Monday.
While the bank later clarified that those jobs would be temporary, it shows that many operations may not need any human intervention at all.
Gupta added that AI is different from any other technology adopted in the past, and for the first time in his over 15-year stint, he is struggling to create new jobs.
Unlike a decade ago, when many roles in the bank were repurposed due to digitisation, this time, the scenario is different.
That means employees need better training and higher skill sets -- especially in GenAI, data analytics, and cybersecurity -- to stay relevant and move up the value chain or risk being made redundant.
"GenAI has fast-tracked automation by eight years, and the talent gap is intensifying," Nasscom President Rajesh Nambiar said on Monday.
The IT industry body's data shows that while more than 400,000 engineers in India are trained in AI, only 73,000 have advanced AI skills, highlighting the skill gap and the upskilling efforts companies must undertake to keep employees updated and relevant.
Sindhu Gangadharan, chairperson of Nasscom and managing director of SAP Labs India, however, said that AI and automation will not replace human intelligence.
Nasscom's data also shows that India will create 2.7 million new AI jobs by 2028.
"AI will not replace humans. Those who do not use AI will be replaced by those who do.
"The technology will act as a bridge, a force for good, and an enabler.
"What we need is large-scale upskilling. There will be a 45 per cent increase in the productivity of IT companies by 2030," Gangadharan said.
Many believe the segment most impacted will be the business process outsourcing (BPO) business model, which is vulnerable to AI because of its legacy structure.
'We believe there is a clear opportunity with AI to productise and unbundle the BPO.
'This is exciting for several reasons. From a technical perspective, there's a clear 'why now': Modern AI has become exceptionally good at handling work that couldn't previously be done adequately with software,' venture capital firm Andreessen Horowitz said in a blog this month.
'Core foundation models are rapidly improving at data extraction, deep research, and complex reasoning, while voice AI agents are mature enough for large-scale production, with browser agents soon to follow.'
GenAI Disrupts IT Business Model
Avik Das
The business model of India's IT services industry, built on a symbiotic relationship between revenue and higher employee addition, is out of date and needs to change as new-age technologies such as generative artificial intelligence (GenAI) disrupt the models, said C Vijayakumar, CEO, HCLTech.
GenAI has threatened to upend the model established for decades, mainly used for operations support and maintenance of large IT infrastructures, by focusing more on faster output and using a fraction of the workforce that was previously needed.
"The time is out for that model," Vijayakumar said at the Nasscom Technology & Leadership Forum in Mumbai, adding that the aim of clients is to double the revenue with half the existing headcount.
"There has been a lot of linearity in revenue growth for the last 30 years. So, that should start changing.
"Instead of more input and number of people, there should be more output and outcome, a shift from people-based to platform services.
"Instead of services, it should be IP-infused solutions as GenAI offers a lot of productivity possibilities," he told Business Standard in an interaction later.
Vijayakumar explained that unlike cloud and digitisation, which were the main topics of discussion a decade ago, the conversation around AI is different.
"The changes that AI is assuring are very different, and we need to be more proactive to even categorise our revenues to create completely new businesses," he said.
Analysts and experts have been saying that revenue growth and headcount addition in IT services companies will no longer move in the same trajectory, and HCLTech CEO's comments are one of the clearest indications to that change.
"The decoupling will happen and in the next few years, it will be much more pronounced," he added.
The top five IT firms saw a headcount reduction of 2,587 for the three months ended December 2024, compared to an addition of 15,000 employees in the previous quarter.
Vijayakumar also said that this shift will also mean change in the way skills are hired.
"We will hire more people at the entry level but need specialised skillsets. But the expectations from them will be higher.
"We need to train them more, put them through some simulations, so that they can validate code written by coding assistants rather than just writing code; GenAI gives us higher automaton depending on what we do," he said.
For software services, one can get about 30 per cent automation, in BPO it is about 40-50 per cent while for IT operations, it gives you 10-12 per cent more, he said.
"We will also do external hiring, we will be looking at about 100-200 people with highly specialised skillsets," he added.
Vijayakumar said that India should build its own LLMs to reduce dependency on other countries.
"We should not assume that these (language) models will continue to be open source. I think these are going to be the coins on which geopolitics is going to be played off," he said.
Feature Presentation: Ashish Narsale/Rediff.com
