Embrace AI or risk irrelevance: A wake-up call for Indian IT

After the successful completion of the India Impact AI Summit in New Delhi, there is growing discussion across the Indian IT industry about the profound impact artificial intelligence will have on future business models.

Leading IT services companies are increasingly acknowledging that AI will, gradually and in some cases rapidly, transform large parts of their existing services portfolio. No company—or country—can remain comfortable without fully embracing AI-led solutions and services.

Senior and middle-level IT professionals must urgently reskill and actively participate in building AI-driven offerings. Merely observing this evolution without hands-on engagement could render many experienced professionals redundant, especially as younger graduates with AI expertise demonstrate a higher propensity to develop innovative solutions, unlock new revenue streams, and win fresh orders.

This urgency was underlined by K Krithivasan, CEO of Tata Consultancy Services (TCS), who has stated that senior management must build AI solutions themselves to truly understand the technology.

According to him, the focus is not on asking questions, but on learning how to build. TCS is not resisting AI-led disruption; instead, it is encouraging employees to drive AI-enabled efficiencies, even if this results in short-term revenue compression.

The IT industry is clearly at an inflection point. Traditional service lines that once delivered steady domestic and global orders now face disruption, as customers increasingly demand AI-based solutions. In the absence of such offerings, Indian IT companies risk losing market share to global AI firms, AI-native startups, and fintech players offering cost-effective, intelligent solutions.

It is therefore fitting that the TCS CEO has advised employees to leverage AI for customer solutions. Employees at all levels, not only juniors but also senior managemen, must “dirty their hands”, and understand how to build using the technology.

This is a timely and appropriate call by TCS, and similar situations are likely to emerge in other IT companies, as AI becomes a reality and its adoption accelerates. No IT services company can afford to lose the domestic and overseas AI-powered services market.

Recently, IBM stock fell 13% in a single day on Wall Street, eroding nearly $30 billion in market value, following an AI-related blog post by Anthropic, which introduced a COBOL modernisation AI tool.

The fear triggered by this development was that IBM’s long-standing reliance on COBOL-based services could face serious disruption, as AI tools could potentially rewrite legacy code at scale. This episode reinforced fears that legacy systems may increasingly be replaced by AI solutions—a trend that is likely to shape the future.

Although IBM made a steady recovery after the stock’s historic plunge, IT industry experts emphasised that Anthropic’s advances in reading and modernising legacy COBOL code are more likely to unlock new opportunities rather than threaten existing business. Nevertheless, similar threats from AI-related companies are likely to challenge the long-established comfort zones of traditional IT services firms.

Globally, AI-related companies continue to gain substantial market value, though some believe that these valuations may face corrections in the short term, over the next six months to two years. The global AI market is projected to experience substantial growth, with some estimates suggesting it could reach $4 trillion by 2033.

Meanwhile, Indian IT stocks remained under sustained pressure throughout February. Concerns intensified following the launch of new AI tools by San Francisco-based firm Anthropic, which fuelled fears about future revenue visibility and order inflows. However, IT stocks later rebounded after a five-day losing streak.

Industry leaders acknowledge these concerns. Cognizant Chief AI Officer Babak Hodjat has warned that large, multi-year IT contracts may become less common due to the pace of AI innovation, even as AI creates new revenue opportunities. Meanwhile, HCLTech CEO C Vijayakumar has described the shift as a “painful transition” that will impact both jobs and workforce structures.

Given the pace of AI-driven change, existing employees will need to quickly deepen their understanding of AI, become fully conversant with the technology, and innovate by building new AI-related solutions, models, and services. This is essential if they are to remain relevant while delivering higher productivity and efficiency.

Indian IT firms are now aggressively pivoting towards AI by moving from pilot projects to live production deployments. This includes large-scale workforce upskilling, strategic partnerships with hyperscalers such as Microsoft, Amazon Web Services, and Google, and the development of vertical-specific AI solutions. AI is also being deployed internally to automate routine tasks, improve productivity, and enable faster scaling.

The traditional labour-arbitrage model, —based on large pools of low-cost manpower—is giving way to an AI-driven productivity model. There is concern that clients may demand significant discounts, as AI enables them to perform the same work in-house or at lower costs, thereby compressing margins for IT companies. The traditional model of hiring large volumes of freshers is also at risk. Autonomous AI agents could allow clients to bypass IT vendors entirely for certain projects.

While clients may seek discounts as AI lowers execution costs, there remains a strong need for experienced professionals to integrate AI into complex, mission-critical enterprise systems without disrupting operations. Companies such as TCS and Infosys are already reporting meaningful revenue from AI-linked deals, as the industry pivots towards high-value, AI-led transformation projects. Trust, governance, security, and compliance continue to make established IT vendors indispensable partners.

Indian IT companies are therefore expected to invest heavily in workforce upskilling and in building their own AI capabilities to remain competitive.

AI is no longer a future concept. It is today’s reality. India’s leadership in hosting the India Impact AI Summit from February 16–21, 2026, should provide fresh momentum for innovation, positioning the country to gain early advantage and emerge as a global leader in AI-led transformation.

(The author is former Chairman & Managing Director of Indian Overseas Bank)