What to Expect from Indian IT in 2025
Indian IT has had a fruitful 2024. When it comes to generative AI, practically all of them announced billions of dollars of investment in the field with bookings throughout the year, even though the revenues grew mostly in single digits. In the latest quarterly results, TCS posted $1.5 billion in bookings with AI and Infosys has started building small language models and multi-agent frameworks for its clients. The case was similar for Wipro, HCLTech, and Cognizant. The same upward momentum is expected to continue for the next year as well. Speaking with AIM, Mohandas Pai, founder of Aarin Capital and former CFO of Infosys, said that there would be an increase in vertical AI projects, focused on specific industries. “Instead of generic models, Indian IT companies are interested in building specific models for their clients that can be used in their own environments for protecting their data,” Pai said. He added that Indian IT’s generative AI spending will also increase, mirroring the momentum in the US since both are correlated. Mrinal Rai, assistant director and principal analyst at ISG, told AIM that there will be an increased focus on translating the generative AI PoCs into actual projects and scaling them. This will involve transforming smaller use cases into larger transformation projects. “There will also be a focus on enhancing professional services to ensure rapid technology adoption,” Rai said. What’s in the Pipeline? Last year, analysts predicted that Indian IT would see a surge in deals and partnerships in 2024. They also said that many of these IT giants’ revenue would come from generative AI. Though many partnerships were announced, none of the IT giants have actually reported about their revenue through generative AI. On the bright side, TCS has reported that 600 AI and generative AI engagements were successfully deployed in production in various phases of development. The company noted that while discretionary spending was affected, clients continued to invest in AI and generative AI, yielding better outcomes. Similarly, in the latest quarter, Infosys yet again emphasised its dedication to generative AI but shied away from revealing the revenue from it. However, the company has finally revealed that it’s working on small language models for its clients for various applications. In the same quarter, Wipro chief Srini Pallia revealed that the company had won two large deals. One of them was with a software technology company that chose Wipro to support its end-to-end product development and IT operations. Speaking of Wipro’s AI strategy, Pallia said, “There are three categories of AI projects that we do: AI-led projects, AI-infused projects, and AI-powered solutions,” adding that these solutions target industry-specific challenges. AI-powered solutions, for instance, are cross-industry and prepackaged, leveraging generative AI as a core element. He noted that Wipro’s large deal pipeline is also benefiting from its GenAI initiatives, contributing to an impressive $1.5 billion in large deals—the highest in 10 quarters. Last year, Wipro announced that it would invest $1 billion over the next three years. HCLTech is also on a partnership spree for AI. Over the past few months, it partnered with Google Cloud, AWS, GitHub, and IBM to train its workforce with generative AI and also has use cases and POCs for its clients. The company said in its last earnings call that it would focus more on specialised skills for recruitment for FY26. In the coming year, such investments will continue to increase, and according to estimates, they might increase multifold. India IT’s partnerships with GCCs are also increasing substantially, which will help it expand its capabilities as well. Service providers will try to leverage the growth in GCCs for more partnerships while co-creating and collaborating with them. “There will be specialised GCC-focused services carved out of their portfolio. This will include strategic advisory on setting up GCCs with AI-related talent and expertise,” Rai told AIM. Rai added that as enterprises reduce the total number of providers they work with, India will see an increasing number of deals with multi-tower scope. Many providers specialising in traditional business process services will also enter the domain of traditional IT services. Besides, providers with stronger portfolios in both domains will see more internal integration. What About Hiring? According to previous estimates, AI coding tools will have a huge impact on the Indian IT workforce as the size of the teams will decrease. The job market is already seeing a decline. It is probably one of the most difficult years for tech jobs in a very long time. The same is the case with Indian IT. Vaibhav Domkundwar, founder and CEO of Better Capital, predicted that the size of the Indian IT companies will shrink in the coming years. “IT services companies in India will shrink every year for the next many years as they adopt AI to improve their engineers’ productivity… IT services might start with a 2:1 reduction and get better over time,” he said, adding that it is inevitable. The fact that Indian IT is reluctant to hire freshers is not new; it continued throughout 2024. But things might change next year as it remains one of the biggest concerns for many. All this while, Indian IT has been manically upskilling its employees with generative AI to prepare for this change. Agreeing with Domkundwar, Meghana Jagadeesh, founder and CEO of GoCodeo, said that this is a pivotal moment for IT services in India. “Companies that proactively upskill their workforce and embrace AI as a complement rather than a replacement will lead the transformation,” she said. According to a recent report, about 20-25% of fresher hiring in the IT sector is now targeted towards AI skills. This is an uptick from a dismal 5-10% over the last three years. This might result in an upswing of hiring for talent freshers, but a downswing for others without the skills. TCS aims to onboard 40,000 freshers this fiscal year, while Infosys plans to hire 15,000-20,000. Wipro and HCLTech are targeting 10,000-12,000 and approximately 10,000 fresh graduates, respectively. Including mid-tier IT and engineering services firms, around 1 lakh freshers have received offer letters in the ongoing placement season. This was also resonated by Pai when he told AIM that the hiring will also be affected because around 200,000 people will start retiring early next year in India. “If Indian IT is going to fill all these positions and they haven’t hired freshers, they will have to start poaching from the same lateral from different companies, be it smaller or bigger,” Pai said. He added that the hiring of freshers will also finally increase as the companies are already working on only 85% of their capacity. “More fresher hiring will happen because companies will have to build up system capacity,” he added. A Break Through? Possibly, Indian IT might also finally make a breakthrough after a decade. Currently, the IT industry is focused on maintaining existing projects, rather than building something revolutionary, which is slowly changing. “Creating an LLM or a big AI model requires large capital, time, a huge computing facility, and a market – all of which India does not have,” Pai told AIM earlier. He added that even though Infosys, TCS, and others might have the funds, their focus is on providing vertical solutions, and not horizontal ones like ChatGPT. Along similar lines, Viswanathan K S, former NASSCOM VP (industry initiatives), told AIM that what we are currently witnessing is merely a lull before the storm when it comes to Indian IT building AI products as it requires a large amount of data to build something tangible. “Let’s not get obsessed with services as of now, but build productionisation of services, as the data is only going to grow several times five years from now,” he said. “We are just waiting for the adoption to take place. The next big thing in AI for the global market would come from Indian IT as we wait for the productionisation of the existing services,” added Viswanathan, saying that Indian IT should currently focus on collecting data necessary for the models.
Hiring of freshers will finally increase as the companies are already working on only 85% of their capacity.
When it comes to generative AI, practically all of Indian IT announced billions of dollars of investment in the field.
["AI in Indian IT", "AI in Software"]
["AI in Indian IT", "Go", "ChatGPT", "GenAI", "AWS", "AI", "RAG", "Aim", "generative AI", "AI in Software", "small language models", "R"]
["AI", "generative AI", "GenAI", "ChatGPT", "Aim", "small language models", "RAG", "AWS", "R", "Go"]
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.