IT firms to intensify investments in GenAI this year

Information technology (IT) services companies are likely to intensify their investments in generative artificial intelligence (GenAI) this year as clients allocate budgets to explore the technology and are willing to conduct paid proof of concept (POC).

Clients in the Asia-Pacific (APAC) region are expected to treble their investments in GenAI, although they currently lag behind their North American counterparts.

According to the latest Infosys Knowledge Institute research, GenAI spending in APAC is likely to increase by 140 per cent in the next year, translating into an estimated $3.4 billion to be invested across Australia, New Zealand, China, Japan, India, and Singapore.

While Indian IT services companies have not quantified their revenues from GenAI yet, global counterpart Accenture said it has secured deals worth $450 million in GenAI during the first quarter ended November, a 50 per cent jump from the $300 million it recorded in the previous six months.

Accenture follows a September-August financial year.

Accenture’s investments in AI seem to be paying off. Last year, it announced a $3 billion investment over three years in its data and AI practice to help clients accelerate the use of AI.

Accenture also plans to double its AI talent to 80,000 people through hiring, acquisitions, and training as part of the investment.
Analysts believe IT services companies are scaling up their investments in GenAI for several reasons.

“Clients are increasingly demanding a proven track record in implementing GenAI use cases. Building this track record requires investments. Then, IT services companies are building credibility in GenAI by implementing internal use cases to improve productivity or employee experience. This is also an area of investment,” says Abhisek Mukherjee, partner at YCP Auctus, a management consulting firm.

Infosys won large deals worth a total contract value of $3.2 billion, 71 per cent of which were net new, during the October-December quarter (2023-24).

“This includes one mega deal. We are seeing strong traction for GenAI programmes leveraging our Topaz capability. We have integrated our GenAI components into our service line portfolio, creating an impact for our clients. We have 100,000 employees trained in GenAI, and we have developed a range of use cases and benefit scenarios across different industries for our clients,” says Salil Parekh, chief executive officer (CEO) and managing director (MD) of Infosys, in the recent third-quarter earnings.

However, Parekh clarified, “We are not at the stage of publicly sharing what the GenAI revenue is, but we have tremendous capability, a good leading market position… GenAI is becoming more and more important in all discussions; while it is not a big revenue component, it is still becoming more and more important in all discussions.”

Tata Consultancy Services (TCS) said it is seeing strong interest levels and engagement from customers on GenAI.

“Exploration in the form of POC is underway in several areas across the value chain,” says K Krithivasan, CEO and MD, TCS, in an after-earnings analyst call.

Last year, Wipro said it would invest over $1 billion in its AI capabilities over the next three years and also launched Wipro ai360, an AI-first innovation ecosystem. The investments are only expected to increase as Wipro continues to focus on GenAI.

“Every business line is working to launch new offerings that use AI. That’s the way it is at the moment. For example, in our full-stride Cloud business, an area that’s particularly hot when it comes to the use of GenAI is digital workplace services,” says Thierry Delaporte, MD and CEO, Wipro, in an after-earnings analyst call.

Happiest Minds Technologies has created a separate business unit for GenAI as part of its investments in the technology.

“Most of the management team for this is in place. We have already trained about 100 people who are working on various customer and internal projects,” says Joseph Anantharaju, executive vice-chairman, Happiest Minds.

During the October-December quarter, Happiest Minds had about 30 discussions with customers, of which about six to seven of them have resulted in projects and POCs.

“Over time, we expect these to grow into larger implementations in 2024-25,” Anantharaju said.

LTIMindtree has also launched a separate horizontal practice on GenAI.

“The idea is that GenAI has to be infused in all the service lines we have. We have completed our target of training 10,000 associates in GenAI, and the eventual goal is to have the entire organisation trained on it,” says Debashis Chatterjee, CEO and MD, LTIMindtree.

Analysts at BNP Paribas concluded in a recent note, “The GenAI debate in 2023 was mostly academic and long-term in nature. We expect 2024 to start showing data to add weight to the debate.” Business Standard