Indian IT services companies currently employ millions of Indians, but they might not need as many people with the advent of AI.
This stark prediction comes from Aravind Srinivas, the CEO of Perplexity AI. In a recent podcast with Zerodha co-founder Nikhil Kamath, Srinivas discussed the potential impact of artificial intelligence on Indian IT giants like TCS, Infosys, and Wipro. His assessment, while potentially unsettling for many, offers a glimpse into a future where AI plays a more significant role in software development and other IT services. He suggested a fundamental shift in the industry, questioning the very premise on which these outsourcing giants were built.
“What about the Indian outsourcing giants,” Kamath asked, “like Infosys, TCS, Wipro. What happens to them (in the AI era)?”
Srinivas replied: “Yeah, I think they’re just going to use AIs. They’re not going to hire as many people going forward.”
But Kamath pushed back on the prediction. “The use case for an American company outsourcing to an Indian company was, if one were to assume, cheaper cost of labor. And now, maybe an AI agent does what people did. Then what happens to these companies in that world?
Srinivas said that their business could be impacted. “Certainly, less..they’ll have to charge less,” he said.
But Srinivas added that the relationships these companies had developed with their clients would mean that they wouldn’t be replaced entirely. “Some of this is actually based on relationships. So, as a company, I know that AI can do these things, but I would still trust (IT services companies like Infosys and TCS) to do it without any bugs or errors.”
However, he believes this advantage is temporary. “Until AIs are at a point of reliability where you just have no arguments not to use them,” Srinivas argued, “I feel like humans will still trust other human businesses to do stuff for them. But they’ll just push them to, ‘Hey, now that there’s AI, why do you guys need three months to get it done? Get it done faster.'”
Srinivas’s comments paint a challenging picture for the Indian IT industry. The traditional cost arbitrage advantage is rapidly eroding as AI becomes more capable and affordable that even the cheapest programmers. OpenAI CEO Sam Altman has said that the world’s best programmer will be an AI in 2025, and in India, Inmobi CEO Naveen Tewari has said that 80 percent of their coding will be automated, and engineers will lose jobs. It’s extremely likely that these job losses will spill over to the Indian IT space.
But this shift isn’t unique to the Indian IT sector. Globally, industries are grappling with the implications of AI. While some fear widespread job displacement, others see an opportunity for increased productivity and innovation. The future likely lies somewhere in between, with businesses needing to strategically integrate AI while also investing in human capital to navigate this evolving landscape. The Indian IT giants, with their vast resources and talent pools, have the potential to lead this transformation — but they’d need to act decisively and quickly if they want to succeed.