India's IT services industry is investing heavily in artificial intelligence (AI) to enhance efficiency and competitiveness. However, recent quarterly earnings from major players like Infosys and TCS indicate muted revenue growth and flat margins, despite securing large deals. Clients are demanding significant fee discounts, citing expected efficiency gains from AI. This paradox suggests that while AI adoption is widespread, its integration into existing delivery models may not be yielding the anticipated productivity improvements.
The core issue lies in how AI is being implemented. Instead of reimagining work processes, AI is being infused into legacy systems, maintaining traditional workflows and roles. Middle management often defends established structures, and employees struggle to reskill quickly enough to adapt to new technologies. This approach hampers the realization of AI's full potential and prevents firms from achieving the desired value differentiation that could justify premium pricing.
Industry body Nasscom has acknowledged the need for "workforce rationalization" as companies shift towards product-aligned delivery models in response to rising client expectations around agility and innovation. This transition may lead to the re-evaluation of traditional skill sets and necessitate continuous skilling, upskilling, and cross-skilling to develop future-ready and resilient workforces. Nasscom has also highlighted the importance of deeper collaborations among industry, academia, and government to bridge the AI talent gap.
For AI to drive meaningful productivity gains, firms must rethink their value creation strategies from the ground up. This involves not only adopting AI technologies but also restructuring organizational processes to leverage AI's capabilities fully. Without this fundamental reimagining, the benefits of AI may remain unrealized, and the industry could struggle to maintain its competitive edge in the global market.
