The AI disruption has rattled the global tech sector, with software and services stocks taking a sharp hit in recent months. VK Mathews, founder-chairman of IBS Software Services — an enterprise SaaS company whose clients include Emirates, Singapore Airlines, Lufthansa, and Delta, and which holds over 50% of the global air freight software market — spoke to Anees Hussain about what this means for Indian IT and his own business. Excerpts:
Q. Software and services stocks have taken a beating globally. Is this the beginning of the end for Indian IT services?
A. The street is sceptical about the capital going into AI. The world spent about $500 billion on AI compute infrastructure last year. This year, committed investment is over $520 billion. When Sundar Pichai confirmed his intention to invest $175 to $185 billion, the market tanked. Then there is the anxiety about code generators — 60 to 70% of people in the tech sector are involved in generating code. Will these companies be able to charge the same when customers realise they can do it much cheaper? In reality, we are yet to see productivity gains at scale.
Q. There is a growing feeling that AI tools will no longer help software companies but begin replacing them. What is your view?
A. Take the central reservation centre of an airline employing thousands of people across 10 countries. They are servicing requests from a queue — a wheelchair, a bassinet. An AI-native player will go to the operations manager and say, give me the last eight hours of your 200-person shift. Then have AI agents do the same work in 10 minutes. The manager is amazed, the board gets excited, and the incumbent vendor looks obsolete. But that is only scratching the surface. The deeper enterprise logic layers — business rules built over decades — require enormous effort to crack.
Q. How can Indian IT companies navigate this?
A. They have to move up the value chain. Previously, you were doing something with 100 people, now you do it with 70 — that is not good enough. They have to advise the customer on how to do their business better. Instead of the customer telling you what they want, you should be telling them. It is not just a productivity tool. It is a survival tool.
Q. Over 5.6 million employees work in Indian IT. How worried should they be?
A. They should not worry, but they must stay at the forefront. At least 30 to 40% of the work we do in the next five years will be very different. If you are unable to work side by side with this technology, you will be replaced. But I do not believe employment is going to reduce. The nature of jobs will shift.
Q. As a SaaS company, do you foresee pricing pressure on IBS going forward?
A. Our business runs as long as airlines carry more passengers, and projected growth is about 5%. We have been profitable since inception. We should be able to reduce our cost of operations thanks to AI — our majority cost is people. For FY27, we are telling teams that in many areas they don’t need to hire. We expect an even better bottom line in the medium term.