The Indian IT services industry, valued at around $250 billion, is facing one of its most significant transitions yet. For decades, its success has been built on cost arbitrage – leveraging a vast pool of skilled talent to deliver services efficiently to global clients. Today, that foundation is being challenged as AI begins to reshape how technology services are delivered and consumed.
In the past, disruptions such as Y2K, the rise of the internet, and the digital transformation wave ultimately worked in favour of Indian IT firms. These companies adapted quickly by upskilling their workforce and hiring new talent with relevant capabilities. However, the current wave of AI-led disruption is fundamentally different. This time, simply using AI to improve productivity may not be enough to sustain growth or protect margins.
Clients are no longer just seeking efficiency gains – they increasingly expect those benefits to be passed on through lower costs. This creates direct pressure on traditional billing models, which were largely based on team size and hours worked. With AI automating large parts of routine work, there is a growing risk that some existing services could become redundant or significantly less valuable.
The rise of agentic AI – systems capable of managing entire workflows with minimal human intervention – adds another layer of disruption. Companies such as Anthropic and Google are building tools that go beyond coding assistance to handle end-to-end processes. This raises a crucial question: how can Indian IT services firms adapt and create new opportunities for growth?
One clear advantage lies in the deep domain expertise these firms have built over decades. Their experience across sectors such as banking, manufacturing, retail, logistics, and healthcare can be leveraged to develop specialised AI-driven platforms. For instance, firms can create solutions for insurance claims processing, hospital management systems, or supply chain optimisation tailored to small and medium enterprises.
Importantly, the demand for outsourcing has not disappeared, but expectations have evolved. Clients now want faster delivery, better outcomes, and greater flexibility at lower costs. Meeting these demands will require a shift from large teams to smaller, highly skilled groups supported by AI agents. Additionally, many organisations face challenges related to data readiness, security, and complex system integration. This creates an opportunity for IT firms to offer ready-to-deploy solutions that combine tools, frameworks, and customisation.
Some global players have already demonstrated how to adapt. Accenture has invested heavily in AI talent, training platforms, and integrated services to stay ahead. IBM has repositioned its earlier AI efforts through Watsonx, focusing on smaller, domain-specific models that are faster and more cost-effective to deploy. Capgemini is embedding AI into its delivery processes, offering “intelligent operations” that are helping it win large deals.
For Indian IT services companies, the traditional model of operating as large-scale back offices is becoming less relevant. The future lies in building leaner organisations with highly skilled professionals who combine domain expertise with AI capabilities. More importantly, firms must move beyond executing client visions and instead develop products and platforms tailored to specific industries. This shift, while challenging, offers a clear path to sustained relevance and growth in an AI-driven world.
The writer is chairperson, GTT Foundation
Disclaimer: The views expressed are the author’s own and do not reflect the official policy or position of Financial Express