Intelligence just got real: IT companies hard-pivot to Generative AI

Technology services provider Infosys has announced it is entering into a framework agreement with one of its existing strategic clients to provide artificial intelligence (AI) and automation-led development.
 

It revealed that the agreement would also entail modernisation and maintenance of services. It is expected to come with a total client spend target of $2 billion for five years.
 

The company, which will announce its results on July 20, clarified that it was a closure of an old deal. It, however, refrained from disclosing the name of the client.
 

What was interesting is that Infosys called out the deal as AI and automation-led.
 

This is perhaps the first time that the company defined the scope of the deal as AI and automation-led. Since the company is in silent period, it could not be confirmed if AI includes Generative AI (GenAI) as well.
 

To put things in context, AI has been around for decades. Information technology (IT) services players, for the most part, have been working on AI for clients, primarily led by automation. However, with the success of ChatGPT (an AI chatbot developed by OpenAI and launched on November 30, 2022), the discussion and implementation of GenAI seems to be gaining ground in IT services.
 

Peter Bendor-Samuel, chief executive officer (CEO) and founder, Everest Group, shares that all technology services companies — particularly India-based ones — are aggressive about riding the AI wave. “We see a lot of AI washing, provider firms claiming they are doing a lot. However, we believe we are at the start of the wave and most enterprise firms (customers) are still getting organised. We think much of the dialogue from the service provider community is early positioning and posturing,” he adds.
 

This resonates with some of the details companies have shared so far.
 

Tata Consultancy Services (TCS) at its first quarter 2023-24 results briefing said that during the quarter, it signed over 50 proofs-of-concept (PoCs) on GenAI. The company also said it has 100 more offers in the pipeline.
 

When asked when GenAI would become a tangible growth parameter, K Krithivasan, CEO and managing director (MD), TCS, said, “It will take a few more quarters for GenAI to make its impact on revenue.” 

At TCS, the company is ramping up its capabilities to cater to this rising demand of GenAI by clients. For instance, it will leverage the deep domain and contextual expertise available in the form of 65,000 contextual masters and domain experts from different industries within the company. It will also tap into 20,000 technical experts within the company.

“Our GenAI approach is built on the significant research we have in the company’s research and development group, which has already filed 710 patents for AI innovations in the past five years, of which 282 have been granted. The company also has 50,000 associates trained in AI/machine learning solutions,” said Krithivasan.

More importantly, the company over the next few years plans to create a talent pool of 100,000 GenAI associates.

While TCS has signed over 50 PoCs, Bengaluru-headquartered Wipro announced an investment of $1 billion to advance AI wherewithal over the next three years. It launched Wipro ai360, an AI-first innovation ecosystem, to integrate AI into every platform, tool, and solution used internally and offered to clients.

“The volume of AI-led deals is just massively growing. There is not one discussion with a client without a discussion around AI. They all have it in mind. Clients may either need help to define their own AI strategy or understand their progress in that area or to develop some PoC or implement certain solutions,” said Thierry Delaporte, MD and CEO, Wipro, in an interaction with Business Standard.

In May this year, Infosys announced the launch of Topaz, an AI-first set of services, solutions, and platforms using GenAI technologies.

Analysts believe that GenAI will take some time to figure in large deals. However, AI is already at the core of several deals.

“I will be surprised if any of the deals signed by IT services players do not have an AI component. At this point, Indian IT players still do not have the capabilities in GenAI. But I will not be surprised to see them catching up with global peers soon enough,” says D D Mishra, senior director analyst, Gartner.

He also believes that comparing the AI revolution with Y2K is unfair.

“Y2K was an incident that needed to be fixed in a certain period. AI, on the other hand, is a natural evolution. We, at Gartner, believe that by 2025, business will be stepping into a phase that we call ‘autonomous’,” he adds.

“The AI wave is large and likely to last a long time. It will not be as abruptly transformative as Y2K but it will last a lot longer and drive changes of a similar magnitude. Like Y2K which validated offshoring, GenAI is validating extreme automation and is likely to deliver very significant cost savings and productivity improvements. The internet service providers are well positioned to ride this wave, as are innumerable start-ups and smaller firms. The need for high-end IT and engineering talent will expand. The largest source for this talent is India,” adds Bendor-Samuel.