Majority of the pilot projects on generative artificial intelligence (GenAI) currently being run by IT vendors may not make it to production next year due to the uncertain macro environment, according to analysts.Infosys, which has already trained 57,000 employees in GenAI and is currently working on over 90 GenAI programmes, recently said it lost an AI-related deal having a total contract value of $1.5 billion from a global client.Peter Bendor-Samuel, CEO, Everest Group, said: “We expect that 90% of the POCs (pilots) started in 2023 will not make it to production in 2024. However, the 10% which do make it will still drive a significant amount of business.”Like Infosys, Tata Consultancy Services (TCS) has 100,000 GenAI-ready employees as announced during the Q2FY24 earnings call.
New Jersey-based IT major Cognizant, which has a large number of employees in India, said during the Q3 earnings call that it has already trained about 55,000 of its employees in generative AI this year and has an additional 40,000 from all levels registered and pursuing training in GenAI.Global IT giant Accenture, which also has a significant portion of its workforce in India, recently said it intends to double the workforce deeply skilled in data and AI to 80,000 from 40,000.
As per staffing firm Xpheno, the total number of overall AI professionals in the Indian tech sector, which includes captives and startups, is around 360,000.“We expect a sharp percentage increase in generative AI-related spends in CY2024, though on an absolute basis, it will not be significant enough to move the needle for most large and mid-tier services firms,” Kotak Institutional Equities said in a recent note.Analysts at Kotak further said: “Spending relative to overall tech spends will be low in the experimentation phase. Spending on generative AI may not be a significant growth driver for most services and software firms. Growth projections for CY2024 by major software vendors can provide an early indication. For example, Adobe’s guidance for CY2024 indicated only a modest boost to higher-priced software subscriptions that include generative AI capabilities.”Bendor-Samuel said it is unclear how the tech service firms would make money on the GenAI wave. “It is clear that data science areas are hot and there is money to be made in data. However, it is still unclear where the other areas are that will create significant demand for services.”
Though Accenture earned $450 million (2.8% of revenue) generative AI-related sales in Q1FY24, up from $300 million in the whole of FY23, analysts say the Indian IT sector may not be able to replicate Accenture’s lead in the space in the experimentation phase of the technology because of their low consulting exposure.“It is clear that no one is making money on POCs but as these use cases move to production, it makes sense that we will uncover significant opportunities. Clients are experiencing POC fatigue and are shifting their interest from where would GenAI make a contribution to where is GenAI working. All that said, we expect a slow start to the year for tech services revenue from GenAI potential building as the year progresses.”
(With insights from Cointelegraph)
