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IT slowdown not AI-induced, macroeconomic factors at play: Achyuta Ghosh

"One is more automation, much more than what it was, much more complexity can be handled. Acceleration in terms of efficiency and then augmentation, able to do more new activities, more new capabilities which were not possible earlier," says Achyuta Ghosh, Nasscom. Given that we have seen the AI picking up, what does the kind of growth numbers really suggesting in the Indian context? Achyuta Ghosh: GenAI overall the technology will be a net positive for the tech sector. We did some work last year with McKinsey where we found that from annual economic value perspective, USD 2.6 to 4.4 trillion dollars is the global economic impact of GenAI possible. And most of it will be in functions such as sales and marketing, software engineering for product development, corporate IT, customer operations and R&D as such. And the main verticals that will have the highest impact is high-tech BFSI retail. And why this is important is because these three or four verticals constitute more than 50-60% of the tech sector revenues that we know from India. Now, there are different ways in which the technology is impacting. One is more automation, much more than what it was, much more complexity can be handled. Acceleration in terms of efficiency and then augmentation, able to do more new activities, more new capabilities which were not possible earlier. And the expansion, the impact would not only be in expansion of the addressable market, but also make us deliver our work better, have better sales operations and productivity gains. New expansions such as LLM fine-tuning, generative AI chatbots, legal contract management, etc. These are all expansions that are happening. Auto-code generation, auto-test generation. So, these are all new services that are created. If you look at some of the recent phenomenon, I think Accenture has committed to almost $3 billion kind of bookings for generative AI. Even TCS has said revenue pipeline is up to 900 million as of Q1 and later on. Capgemini has said there are more than 2,000 projects that they are dealing with deals that they are working on and more than 350 production cases. Genpact has got 80 plus live cases going on with their clients. So, across the entire technology landscape, whether it is IT services, BPO, engineering, you see an impact of GenAI in a large manner today. AI is bad for IT services. AI means death of IT services. The coders who code will be replaced by machines and then the whole business model in a sense of Indian IT services, which is based on manpower per hour, etc, etc, fades away. Is that true? Achyuta Ghosh: I do not think so. We feel that, of course, GenAI will be writing code, but the people at the bottom they will rise up. There will be more demand for code checkers, for code validators. And we see a world where human-machine collaboration is the way forward when it comes to development of code writing. I think that is the way forward in terms of how the pyramid will shape up. So, that could mean, emergence of new skills. In fact, we have done some work on recently on what is happening in the BPO space and most people thought that BPO would be impacted. But what we see is that GenAI tools, whether it is for the contact centres or whether it is for back office transformation, has actually created new opportunities. In fact, some of the recent results, Genpact was a good example of how they said that the increasing amount of data engineering work that is coming as they prepare organisations for this GenAI related world is actually creating more opportunities and driving industry revenue and this will be an ongoing phenomenon. There is no end to it because there will be a lot of industries who will be the first movers. Then, there will be other companies who would come in later and so on and so forth and this work will continue. So, at an overall piece, this is something to be positive for India also. GenAI is so good, then why IT companies post 2022, ever since GenAI became mainstream, they have struggled. I mean, growth has contracted from double digit to somewhere in single digit and that is industry wide phenomenon and that is even the Nasscom's forecast also projected forecast. So, if AI is so good, then why IT companies have slowed down by 20% to 30%? Achyuta Ghosh: It is not Indian IT companies' phenomenon, I think overall demand has not been that strong, the kind of demand that happened post COVID for one year, one-and-a-half years. People really jumped into the digital bandwagon and really went ahead with a lot of deals, a lot of partnerships. Maybe some of those did not turn out as well as they would have thought. Maybe they were not clearly thought out. Even overall markets, overall economy slowed down. GDP was growing at 4.5-5% and then suddenly it came down to below 3% and interest rates went up. Interest rates going up actually impacts your ability to go ahead and spend on technology. At an overall economic level, there was a slowdown. I do not mean the slowdown would be attributed to AI in any way. I think AI would only accelerate it for the time. So, I think that is a point that we would like to specify. It is not AI led slowdown.

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