Generative AI is a technological breakthrough that is making sweeping changes across the globe. Right from content generation to coding, Gen AI is changing the traditional business models across sectors. No wonder, all IT services companies are trying to position themselves as Gen AI-first companies. They all are aggressively upskilling their employee base on Gen AI skills. The top three Indian IT firms- Tata Consultancy Services (TCS), Infosys and Wipro – have collectively trained over 7.75 lakh employees in GenAI capability by the end of 2023-24. TCS, India’s largest IT services company, has trained around three lakh employees in GenAI skills, while Infosys has trained around 2.50 lakh employees and Wipro 225,000 staffers. Not only large firms, even mid-tier IT services and engineering services companies are upskilling their employees on a priority basis. Such skilling investments by IT firms indicate that unless they upskill their employee base, the possibility of losing out new businesses are rather high. Currently, many companies have indicated that their clients are asking for GenAI component in every deal. Towards this, IT firms are embedding some Gen AI components in every outsourcing contract.

This is more with customers who are keen to know about the possible savings from using new technology. That is the reason that most companies have started highlighting the number of GenAI engagements in their quarterly results. Some companies, including Accenture and TCS, have given the monetary value of their GenAI engagements. Against this backdrop, it is noteworthy that GenAI is bringing in several disruptions to the existing business models of IT firms, which, traditionally would charge for the number of human resources they deploy in a project. As GenAI is likely to reduce manpower deployed for projects, it could have a monetary impact on IT firms. That is the reason IT services firms are keen to provide value-added GenAI services to their clients.

In the current scenario, whole startup ecosystem is also gearing up to provide GenAI-based solution to customers. We have seen many pure-play GenAI firms in recent quarters. They will not only accelerate adoption of GenAI-based solutions but they will also pose significant competition to IT firms. In this perspective, IT firms have to accelerate the pace of innovation in this space in order to protect their top line.

It is widely believed that once digital spend comes back, a significant portion of this spend will go to GenAI-based services. Therefore, IT firms have to be ready with innovative solutions to serve the clients better. It has now been established that foundational GenAI models, which generate text, content, picture and codes, may not be sustainable in business terms. Hence, companies have to come up with offerings that provide specific business solutions. This way, they can provide enterprise-based solutions that have higher margins than the usual AI offerings. Gen AI is both an opportunity and risk for the IT services industry and companies have to create solutions that provide them the winning edge in new game.