The tech sector remains in the eye of the storm. The selloff seen in IT stocks due to concerns about AI-led disruption has started to influence company-client relationships. A Kotak Institutional Equities report noted that while there is no immediate impact on the deals, clients are scrutinising the impact of AI automation and how agentic AI could change services.
According to Kotak, the Agentic AI remains a developing theme, with implications still being debated rather than operationalised at scale.
Early signs of pressure
Despite limited agentic AI applications, clients are demanding clarity on agentic AI architecture, implementation, and outcome delivery in ongoing industry-client conversations.
While the deal-signing pace remains stable, there have been selective renegotiations. Kotak Institutional Equities report states that some clients are beginning to factor in GenAI‐led productivity gains into renewal discussions, leading to rate pressure or tighter scopes in traditionally run business engagements.
While there is no immediate large-scale deal fallout, some clients are also considering future gains as they negotiate deals with the IT industry. The Kotak report states that the biggest challenge companies face is leakage in their existing businesses, even as new revenue streams are emerging.
Long-term effect
Kotak Institutional Equities states that, despite the hype and stock fallout, the current AI implementation environment remains uncertain and lacks a clear inflection point. In the short term, it generates cautiousness among the clients, leading to a much longer decision cycle and selective pressure on the base business.
In the long term, it could contribute to a broader reshaping of value pools. That means if the Indian IT industry’s agentic AI push automates high-volume, low-complexity work, it will lead to headcount reductions and smaller teams using AI tools, or to the revenue pool shifting to large-scale AI companies such as Anthropic and Microsoft. However, the Kotak report points out, the timing and magnitude of these shifts remain unclear at the moment.