The speed at which Indian IT firms reshape delivery and pricing models will determine how much value they retain in the next phase of enterprise technology spending, as new AI tools reignite investor concerns that automation could erode traditional services revenue streams.
The renewed anxiety followed a sharp selloff in global software stocks last week after Anthropic announced legal plug-ins for its AI assistant, fuelling fears that tasks such as documentation, legal research and compliance — work that underpins large outsourcing contracts — could increasingly be handled by autonomous systems. More than $300 billion was wiped off global software valuations, a move analysts said was an overreaction but one that exposed underlying unease around the durability of the services-led model.
While Indian IT firms have stepped up investments in generative AI, the concern is whether they can move fast enough as enterprises gravitate towards AI-native players built for speed and outcome-based execution. Companies such as Anthropic and Palantir are increasingly being seen as direct partners for complex AI-led transformation programmes, intensifying competitive pressure on traditional vendors.
Execution over Innovation
“There is a growing view that Indian IT companies missed an early opportunity when it comes to AI applications,” said Faisal Kawoosa, chief analyst at Techarc. The issue, he said, is not technological capability but execution. Indian IT firms have accumulated deep domain knowledge across sectors such as banking and financial services over decades. “Since the foundation of any AI model is the data it is trained on, these firms could have taken the lead much earlier. Delivery models, however, did not evolve to capture that opportunity,” he said.
Industry analysts say the challenge for IT services firms lies in responding to both the pace of technological change and the need to rework long-established commercial structures. “AI is evolving faster than previous technologies, which demands agility,” said Pareekh Jain, chief executive of EIIRTrend. “At the same time, business models have not yet caught up with AI-led delivery.”
Calibrated Adoption
Executives, however, said that AI tools will not immediately make services redundant. Rajsekhar Datta Roy, chief technology officer at Sonata Software, said productivity gains from AI had been visible for some time and would be adopted in a calibrated manner. Output reliability and compute costs, he said, remain key constraints. “It’s not that services will suddenly vanish,” Datta Roy said, adding that selective use of AI could improve margins by allowing firms to balance compute and human effort more efficiently.
A similar view was echoed by Nitin Rakesh, CEO of Mphasis, which said the industry’s ability to respond would hinge on execution speed. “New AI tools have revived investor fears that automation could displace traditional IT services, exposing how quickly Indian IT must adapt. The challenge is not technology but speed – shifting from labour-led delivery to AI-first models, while using partnerships with AI-native firms to stay relevant and competitive,” Rakesh said.
Mid-sized IT firms may be better placed to respond because of their smaller scale and faster decision-making, executives said, while partnerships with AI-native players are increasingly seen as a way to stay relevant. In December, Accenture and Anthropic announced a joint business group to train consultants to deploy and scale AI for clients.
For Indian IT, the message from markets is clear: AI adoption is inevitable, but retaining value will depend on how quickly firms reset delivery economics for an AI-first world.