Domestic IT firms have likely witnessed a slight increase in the number of generative artificial intelligence (GenAI) deals in the March quarter, analysts said. However, they remain far behind in securing significant contracts in the space compared to global giants like Accenture. Cognizant, Tata Consultancy Services (TCS) and Infosys were among the top IT companies with increased number of GenAI deals in Q4, analysts said.
However, the total number of deals remains subdued in Q4 due to constrained discretionary demand as enterprises continue to be cautious about the macroeconomic outlook, a recent report by BNP Paribas Exane Research said.
In March, Nasdaq-listed Cognizant bagged eight deals, followed by TCS with seven and Infosys five.
March also witnessed heightened activity with companies announcing major collaborations and set up platforms for GenAI. Notable developments include HCLTech and TCS receiving Amazon Web Services’ GenAI competency partner status, and Cognizant collaborating with Microsoft to integrate GenAI in healthcare administration.
However, despite these efforts, Indian IT companies are still far from securing large GenAI deals that could significantly impact their revenue. While exact figures are not available, some analysts said it could be contributing anywhere between 1-3% to the total revenue of the companies.
“Domestic IT firms have definitely seen a sequential growth in GenAI deals in Q4, but since the technology is new and also disruptive to other verticals, it alone is not enough to see any meaningful changes in the earnings,” an analyst at Kotak Institutional Equities (KIE) said. “Right now, it probably contributes to less than 2-3% of their total revenue,” he added.
One of the reasons for this lag is the cautious approach of enterprises towards GenAI investments, given the uncertain economic climate, the analyst said. Also, the lack of a robust ecosystem for GenAI development in India compared to the West further hampers the ability of Indian IT firms to secure big-ticket deals, he added.
In contrast, Accenture has been outperforming Indian IT companies in bagging GenAI deals. The global IT giant won GenAI deals worth $1.1 billion, which it bagged and disclosed only in the last two quarters. This is worth more than the combined total of the top 10 Indian IT firms’ GenAI deals, going by unofficial numbers.
Nonetheless, Indian IT companies will likely gain market share in the GenAI space in the second half of 2024, the analyst at KIE said.
Further, KIE in a report said, “CY2024 is likely to be a year of GenAI experimentation by enterprises. The source of funding will determine the growth — funding through higher overall IT spend will aid all.”
Management of Indian IT companies also remain optimistic about the potential of AI and GenAI deals.
Infosys CEO Salil Parekh, during last quarter’s press conference, said, “We see significant opportunities in AI and are investing in building capabilities to leverage this technology for our clients.”
Similarly, TCS CEO K Krithivasan had said in January that GenAI is generating tremendous interest among clients. “We are taking an early lead in GenAI capabilities. We are focused on strengthening our expertise and evolving our capabilities further.”
To secure more GenAI deals, Indian IT firms are taking proactive steps such as training their employees in technologies and forming strategic partnerships with global tech giants. For example, TCS has partnered with SymphonyAI to develop predictive and GenAI business applications, while HCL Technologies has teamed up with AWS to enhance its GenAI capabilities.
Further, TCS recently said it has trained 350,000 employees in GenAI skills, which is over half its headcount.
