Bengaluru/New Delhi: The $250 billion Indian IT industry is at a crossroads, with automation, artificial intelligence (AI), and shifting global policies forcing companies to rethink their business models. Industry leaders, including HCLTech CEO C Vijayakumar and Infosys CEO Salil Parekh, have emphasized the need to move away from traditional headcount-based growth towards an output-driven model.
Decoupling Growth from Headcount
For decades, IT services firms have followed a linear growth model, where revenue scaled proportionally with workforce expansion. However, the rise of AI-driven automation, generative code development, and service-as-a-software models is now breaking this equation.
“The time is already out for that model,” said HCLTech’s Vijayakumar. “We are challenging our teams to deliver twice the revenue with half the people.” This shift towards platform-based and automation-led services will redefine how IT firms operate, he added.
Infosys CEO Salil Parekh echoed these concerns, stating that AI is not only a productivity enhancer but also a creator of new opportunities that were previously impossible.
Geopolitical Uncertainty and Potential Tariffs
A major wild card for the sector is the potential impact of tariffs on IT services under the Trump administration, should he return to office. The industry heavily depends on the United States for 60-62% of its revenues, making it vulnerable to any new trade restrictions.
“The biggest unknown will be the tariffs and their impact on the US market,” said Nasscom President Rajesh Nambiar. If Trump enforces reciprocal tariffs, Indian IT firms could face a significant cost increase for operating in the US.
At the same time, the rise of Global Capability Centers (GCCs) is reshaping IT exports. Nasscom’s Sindhu Gangadharan noted that GCCs and Indian IT service providers now contribute equally to export revenues, reflecting a shift in demand towards in-house technology operations by global firms.
AI: Opportunity or Threat?
AI adoption presents both opportunities and challenges for IT companies. While agentic AI offers a clear revenue stream, it could also lead to redundancies in traditional IT services.
DBS Bank CEO Piyush Gupta recently announced that AI advancements would result in a 10% workforce reduction at the bank over the next three years, despite no job cuts in the last decade. “We will shrink our workforce by 4,000 people, but most impacted employees will be upskilled and repurposed,” he said.
Similarly, TCS CTO Harrick Vin highlighted the shrinking half-life of skills in the AI era, warning that professionals must reskill every five years to stay relevant. “Organizations need to be designed for change, not just functionality,” he added.
Future of AI in India: Build or Adapt?
A key debate emerging in India’s AI strategy is whether to develop foundational AI models or build applications on existing open-source platforms.
“We cannot assume open-source models will remain open forever,” cautioned HCLTech’s Vijayakumar. “Geopolitical factors will determine access to AI tools. What is available today may not be tomorrow.”
Industry Outlook: A $300 Billion Future with Challenges
Despite these challenges, India’s IT sector is projected to reach $300 billion in revenue by FY 2026, growing at 5.1% in FY25 to $282.6 billion, according to Nasscom’s strategic review report.
However, the industry’s growth trajectory will increasingly depend on:
- AI and automation adoption
- Geopolitical developments, including US trade policies
- The rise of GCCs and changing outsourcing trends
- Reskilling efforts to keep pace with technological disruptions
As Indian IT firms brace for a transformational shift, the next few years will determine whether they lead the AI revolution or struggle with disruptive headwinds in an evolving global landscape.
