No visible Gen AI-led spend in IT space so far

Light At The End Of The Tunnel Still Blurry

♦ Generative AI is more hype with less revenue generation at this stage

♦ Despite all the talks, IT firms not witnessing significant investment from clients

♦ More experimental projects are underway

♦ IT firms, however, see big boost to earnings in coming years from gen AI

Bengaluru: Despite all the hype around generative AI, Indian IT firms are yet to see any big spending coming in this space, which will be able to push up revenue growth. Experts and management of different IT firms are of the opinion that though clients are keen to implement generative AI tools in project execution, many of such generative AI projects are experimental in nature with big investment commitments are yet to flow.

They also said that low discretionary spend is one of the reasons for slow flow into generative AI space.

“We have seen discretionary spend reduced significantly driven by a pause to allow the tech abstention after the Covid boom and economic uncertainty. Although there is a lot of talk about generative AI, this has not translated into significant spending yet,” Peter Bendor Samuel, CEO of global consultancy firm, Everest Group, told Bizz Buzz.

Generative AI tools like ChatGPT have created waves in the technology industry in recent quarters with most leaders of the industry saying this innovation is going to drive a lot of transformation in coming years. IT firms have started large scale upskilling of their employees in generative AI domain. Clients have also shown keenness in adopting these tools for cost savings.

In its second quarter earnings, Infosys’ management said the company is working on more than 90 generative AI programmes.

“The adoption of Topaz, our generative AI capability set, is helping us deliver more value and to increase market share. We’re currently working on over 90 generative AI programmes. We continue to make investments in generative AI as we look to help our clients navigate the way forward with deep capability. We have trained 57,000 employees in generative AI,” CEO of Infosys, Salil Parekh has said during analyst call.

Similarly, all big and mid-tier IT firms are preparing big to cash in the emerging opportunities in generative AI space.

“Of course, a lot of projects are going on, but they are more in the experimental phase now. So, it will take time for translating into revenue,” said a senior official of a large engineering services company.

In the second quarter, the outsourcing market is more skewed towards cost optimisation deals with very less number of digital deals up for grabs.

“Right now, we are seeing delays in signings. Another factor is that a material portion of these deals are vendor consolidation, and not new scope. When taken as a whole, firms often lose as much as they gain,” Bendor Samuel of Everest Group said.