Indian IT industry to emerge stronger from Gen AI-induced disruptions

• Emergence of Gen AI is expected to give rise to new service lines, including AI-driven customer service, fraud detection, predictive maintenance, and knowledge processing.
• Rather than posing a threat, GenAII represents a significant opportunity to innovate, grow, and continue its legacy of excellence in service delivery.

The advent of generative artificial intelligence (Gen AI) has sparked a robust debate regarding its implications for various industries, particularly the Indian IT sector.

Contrary to the prevailing narrative that portrays Gen AI as a potential threat, a recent report by Nuvama Wealth Management underscores the transformative opportunities it presents for this sector.

While acknowledging the initial disruptions that AI technology may cause in business operations and billing models, the report emphasises that the long-term advantages significantly outweigh these risks.

The report posits that the Indian IT industry is poised to emerge stronger from the Gen AI-induced disruptions.

Modernisation of core banking systems

As enterprises increasingly adopt AI technologies, there will be a growing demand for services related to the modernisation of legacy systems and the preparation of data for AI integration.

The shift opens new revenue streams for Indian IT firms, particularly in the realm of upgrading outdated systems. A notable example highlighted in the report is the modernisation of core banking systems (CBS).

Many financial institutions continue to rely on legacy mainframe systems and programming languages such as Cobol, which are increasingly becoming obsolete.

Gen AI facilitates automated code modernisation, thus creating substantial demand for Indian IT services to upgrade these critical systems.

Moreover, the report points out that many non-Indian firms, particularly in Europe, lack the scale and resources to hire specialists proficient in Cobol. Consequently, they have ceded this lucrative opportunity to Indian IT service providers, who are well-equipped to address these challenges.

Potential is undeniable

The emergence of Gen AI is also expected to give rise to new service lines, including AI-driven customer service, fraud detection, predictive maintenance, and knowledge processing.

These advanced solutions will enable Indian IT firms to offer higher-value services to their clients, thereby enhancing revenue and profit margins.

Historically, Indian IT companies have demonstrated a remarkable ability to adapt and reposition themselves to meet evolving customer needs. This adaptability has been a cornerstone of their sustained success over several decades, and there is little indication that this trend will change in the face of Gen AI.

The report likens Gen AI to “a hammer looking for a nail,” suggesting that while the technology’s applications are still being explored, its potential is undeniable.

Looking ahead, Nuvama Wealth Management forecasts a promising outlook for the Indian IT sector in the upcoming fiscal year, driven by optimistic projections for the Banking, Financial Services, and Insurance (BFSI) sector, increased technology spending, and the ramp-up of large deals.