What to Expect from Indian IT in 2024
For Indian IT, the year 2023 unfolded as a narrative of paradoxes and challenges. While luminaries like TCS, Infosys, HCLTech, Wipro, and Tech Mahindra celebrated record-high deal wins, the overarching ambiguity surrounding revenue growth cast a shadow over the sector’s trajectory for the entire year. Industry pundits, reflecting on the incidents of 2023, echoed sentiments of a sector grappling with its weakest performance since the recession of 2008. In the midst of this uncertainty, the beacon of hope for the Indian IT sector emanates from the realm of generative AI. Can 2024 be the year of AI deals? Pareekh Jain, CEO of EIIRTrend, predicts that around 2% of the revenue in the coming year would be through generative AI directly. He also highlighted how AI was one of the positive things in 2023 for Indian IT, and this would influence a lot of partnerships and deals in 2024. On the contrary, the $1.5 billion Infosys AI deal that got cancelled would also play a major impact in the industry. “A lot of companies would realise that moving too fast and investing in technologies would not be ideal. Thus, they would move with a lot of caution,” said Jain. But he believes that deals would definitely be a big focus this year. As industry analysts predict a transformation from Q3 onwards, a nuanced narrative of deal divergence and recalibration unfolds. Large deals are anticipated to derive impetus from vendor consolidation, steering away from conventional digital transformation paradigms. As generative AI emerges as a focal point of interest, its potential impact on revenue is forecasted to crystallise in the third quarter of 2024. Jain said that though in 2023 AI was not the focus of deal in Indian IT, it was one of the biggest factors of the deals. “Generative AI could also be a deal breaker in 2024,” said Jain, highlighting that it would be the focus. That said, direct generative AI focused deals would definitely be the focus. “More than 50% of the deals would be directly influenced by generative AI,” said Jain. For example, HCLTech announced a slew of new deals, where it will be involved in digital and cloud transformation, alongside generative AI initiatives. TCS also predicts that Indian IT firms would be a major focus globally and expects a lot of new deals in the year, along with 12 million more net jobs by 2025. LTIMindtree has expressed its commitment to integrating generative AI into its products and solutions, revealing that they have participated in more than 100 discussions and currently have over 20 active engagements with clients. Wipro has doubled the number of customers as compared to the last quarter, and would focus on large deals in 2024. HCLTech is working with a handful of customers with generative AI projects, while LTIMindtree is engaged in over 20 clients for generative AI. Infosys, along with a few other parties including Elon Musk, AWS and others donated USD 1 billion to OpenAI. TCS and Wipro also announced generative AI capabilities in partnership with Google Cloud. A lot in the pipeline Companies have actively discussed various ongoing experiments and proof of concepts (PoCs) in their pipelines. In the previous month, Accenture disclosed an industry-leading generative AI pipeline valued at $450 million in new bookings, a significant increase from the $300 million reported for the entire fiscal year of FY23. This along with a $3billion investment in AI for three years. The company anticipates a shift from general AI experimentation to more proof of concepts and pilot projects in 2024. Similarly, TCS reported having over 250 generative AI opportunities in its pipeline, Infosys is engaged in over 50 active generative AI projects, and HCLTech is involved in more than 140 generative AI PoCs at various stages. However, the caveat is that these PoCs are still in the pre-production stage and are far from generating immediate revenue. Analysts believe that only 10% of the PoCs will move to production. Considering this, a rapid recovery in the IT services sector in 2024 seems unlikely. Analysts from Kotak note that despite high expectations for a recovery in discretionary spending in 2024, enterprises across most sectors are still focused on cost reduction. Many have set cost-saving targets extending into 2024, and the reprioritisation of spending toward areas of investment is not yet complete. 2023 continued? During the earnings call, CP Gurnani, former managing director of Tech Mahindra said, “Tech Mahindra is now working in about 60 customer locations on actually using generative AI to enhance operations, innovation, and productivity.” On the other hand, Indian IT firms have also largely stopped hiring freshers. This trend might continue this year, along with rampant possible layoffs. In the initial half of fiscal year 2024, the top-tier IT firms collectively shed 39,000 employees, signalling a strategic recalibration in response to evolving market dynamics. Delays in lateral hires and adjustments in compensation strategies underscored a pragmatic approach to talent acquisition. Overall, the Indian IT majors have trained close to seven lakh employees in generative AI, in partnership with companies like Google, Microsoft, Oracle and NVIDIA. The monetary impact of the same would be on the forefront of discussions in 2024.
Analysts predict that around 2% of the revenue in the coming year would be through generative AI directly.
In the midst of this uncertainty, the beacon of hope for the Indian IT sector emanates from the realm of generative AI.
["Indian IT companies", "Infosys", "LTIMindTree", "TCS", "Tech Mahindra", "Wipro"]
["LTIMindTree", "Wipro", "Go", "Tech Mahindra", "API", "Infosys", "AI", "OpenAI", "AWS", "R", "Git", "RAG", "ViT", "generative AI", "Indian IT companies", "TCS"]
["AI", "generative AI", "OpenAI", "RAG", "AWS", "R", "Go", "Git", "API", "ViT"]
Mohit writes about AI in simple, explainable, and often funny words. He's especially passionate about chatting with those building AI for Bharat, with the occasional detour into AGI.