Global businesses are expected to increase their Generative AI (GenAI) investments by 50% in 2025, with spending projected to account for 6.5% of total tech budgets, according to a report from US-based Information Services Group (ISG). This surge underscores the growing prominence of GenAI, even as debates continue over its long-term impact on the $254-billion Indian IT services industry.
GenAI’s Rising Adoption
In 2024, GenAI saw widespread use in customer service applications, particularly through chatbots and business process outsourcing (BPO). This trend is expected to persist in 2025, with enterprises leveraging GenAI for code and workflow efficiencies.
However, alongside its rapid adoption, companies like Accenture, Cognizant, and Capgemini have flagged GenAI as a potential risk in their annual reports, citing concerns about supply-side disruptions and pricing pressures.
Contrasting Industry Perspectives
Industry experts remain divided on whether GenAI will prove disruptive or transformative for the IT services sector.
Deflationary Forces and Pricing Pressure
Toronto-based BMO Capital Markets analyst Keith Bachman anticipates that GenAI’s efficiency gains could lead to deflationary effects. Clients may demand lower prices for services that require less time or fewer resources, potentially impacting hiring in India’s IT services sector, one of the country’s largest job creators.
“In our opinion, the deflationary forces of generative AI will likely occur at the time of renewals when there is generally pricing pressure on IT services contracts,” Bachman noted.
A Catalyst for Growth
On the other hand, analysts from Axis Capital argue that GenAI will fuel innovation rather than reduce business opportunities. “We expect the savings gained through leveraging new technologies to be reinvested towards ambitious tech innovation pursuits,” said Manik Taneja, Saksham Savernya, and Rohit Thorat in a recent note.
Accenture Leads the GenAI Charge
The global launch of ChatGPT in 2022 propelled GenAI to the forefront of corporate strategy. Accenture has emerged as a leader, generating $900 million in GenAI-related revenue in its fiscal year ending August 2024.
The company secured $1.2 billion in GenAI orders in the quarter ending November 2024, bringing its total GenAI-related orders since September 2023 to $4.2 billion. This reflects growing demand for AI solutions across industries.
Indian IT Giants Take Measured Steps
Indian IT firms are embracing GenAI cautiously, acknowledging its potential while refraining from quantifying its business impact.
- Tata Consultancy Services (TCS) reported a surge in GenAI engagements moving into production, with projects increasing from 8 to 86 in a single quarter. CEO K. Krithivasan highlighted this as evidence of GenAI’s mainstream adoption.
- Infosys CEO Salil Parekh noted that almost all large deals now include a GenAI component, though the technology is not yet driving deal sizes independently.
- HCL Technologies chief executive C. Vijayakumar stated that GenAI has yet to influence pricing discussions but expects this to change in the near future.
GenAI’s Accelerated Adoption Curve
While past technologies like the internet and cloud computing took years to achieve widespread adoption, GenAI’s trajectory has been significantly faster. As companies continue to experiment with and deploy GenAI solutions, its role in reshaping industries will only grow.