IT Firms With Good Consulting Practice Will Gain The Most In The AI Era, Says Exfinity Chairman

Indian IT firms are taking the emergence of AI very seriously. AI can be used a productivity tool in the IT industry. Companies can use AI and reduce their dependence on manpower. By doing this, they can be more productive

Uncertainty is there in the global economy. The Russia-Ukraine war is going on. We don’t know what is going to happen in the Middle East. So, there is too much of uncertainty in the world. In this context, IT spending will remain tight for some time

Artificial intelligence has been the most emerging technology area globally in recent time. In this AI era, technology firms including Indian IT firms are betting big on AI by pouring in billions of dollars. However, the flip side of AI technology has come up with several cyber frauds getting committed with deepfake AI audios and videos. Similarly, many have cited concerns with related to AI becoming so powerful that even its developer can’t control it. In this context, how do see upcoming regulations on AI under the new US administration?

Regulations on AI will evolve. Because the contours of the development are not yet clear. Europe is trying to do something. The US is trying to do something. It is likely that Donald Trump will be more leaning towards corporates. So, the regulations may not be that rigid. Regulations will be easier under the Trump era in this regard. However, AI regulations will not have much impact on the industry because everybody is investing in the AI. Most technology companies are building various use cases using AI and generative AI. It will take some time the technology landscape in this regard to evolve. Then, regulations can’t be brought in. On the macro level, Trump administration is likely to be easier on corporates (than Democrats).

How do view the current health of the US economy? Do you think, the Trump administration will come up with measures to prop up the economy, which in turn may support technology spending?

The US Federal Reserve cut the interest rate (by 50 basis points after four years) because they thought they were behind the curve and the US economy was slowing down. Despite this, the inflation rate is not coming down drastically. The job growth is also not up to the level. I don’t think, they will give any surprise to the market. The US Fed is likely to go with its planned rate cuts and see how it evolves.

I don’t think, there will be any change in the business climate. Let’s not take the political rhetorics very seriously. Whenever you are in opposition, you can say whatever you want but when you come to power, the reality hits you.

With Donald Trump coming back as the President of US, do you think, norms with relation to H-1B visa norm will be stricter?

The US government has already done that. I don’t how much more (tightening of H-1B visa norm) they can do. Because the US also needs talent. So, I don’t see anything big happening in the IT industry front. That doesn’t matter. And all the rhetorics are political in nature. Once they come to power, they don’t do anything.

Most Indian IT services providers have reported healthy set of Q2 results ended September. Cognizant has raised its revenue guidance for 2024 after beating revenue estimates for third quarter of this year. Similarly, Accenture’s management commentary is guiding towards uptick in growth. Should we see it as slowdown bottoming out for the IT services industry? Can you provide your perspective in this matter?

Uncertainty is there in the global economy. The Russia-Ukraine war is going on. We don’t know what is going to happen in the Middle East. So, there is too much of uncertainty in the world. In this context, IT spending will remain tight for some time. Inflation is still very high (in developed economies). IT spending is going to be controlled for some more time. I don’t think, it is going to ease off. Secondly, AI is making a lot of impact on the industry on macro level. Look Microsoft (management) said that 25 per cent of the coding is being done by AI today. That is a bread and butter for the Indian IT industry. On the other side, GCCs (Global Capability Centres) are also increasing. These GCCs think that the productivity gain will be higher and they want to capture that in the value chain. So, a lot of macro movements are happening. It is to be seen how this is going to impact the IT spending.

Indian IT firms are betting on AI with upskilling of employees, setting up centre of excellence focussed on AI apart from partnering with global giants. Do you think, such investment will reap dividend for the domestic IT industry? What are your views in this aspect?

Indian IT firms are taking the emergence of AI very seriously. AI can be used a productivity tool in the IT industry. Companies can use AI and reduce their dependence on manpower. By doing this, they can be more productive. On the other side, AI can create more leads for business. Corporates don’t know how to use AI in their environment. Because the data, which corporates have, is not structured. It means, this provides a good consulting opportunity. If IT firms can work with the client, clean up the data, restructure the IT infrastructure, then show how to use AI, then it throws open many opportunities. So, any company, which has a good consulting practice, can be the biggest beneficiaries (of the rising importance of AI). On the productivity side, if IT firms can use all the productivity tools that are available today, and become more productive along with reducing manpower, that will be a big thing. If you look at Accenture, the company has a good consulting practice and they are able to convince a lot of customers about a lot of AI projects. However, many Indian IT services companies have not invested in this space. So, they will struggle for some time.

On the startup space, we have seen a bit of funding uptick in recent quarters. How do you the funding environment in the startup ecosystem? Will it revive in the near future?

Look, investors are sitting on a lot of losses. Some companies were able to do IPO but there also, the market reaction has not been that great. So, startups will take some time as people are still very selective.