Generative AI Brings Big Opportunities for Indian IT Sector
Report by Nuvama Wealth Management
A recent report by Nuvama Wealth Management highlights that generative AI offers significant opportunities for the Indian IT sector, contrary to the belief that it poses a threat. Although AI technology may initially disrupt business operations and billing models, the long-term benefits far outweigh the risks.
The report states, “We, on the contrary, expect the Indian IT industry to come out stronger from the Gen AI-led disruption. We dig deep into various facets of Gen AI adoption for enterprises and find that Gen AI would create a mammoth incremental opportunity for Indian IT services.”
As more enterprises adopt AI, the need for services such as upgradation of legacy code and data readiness for AI integration will increase, offering Indian IT firms new streams of revenue. One of the most significant opportunities lies in the modernization of legacy systems, particularly core banking systems (CBS). Many financial institutions still use mainframe systems and outdated programming languages like COBOL. Gen AI enables automated code modernization, driving major demand for Indian IT services to upgrade these systems.
The report notes, “Since most non-Indian (read European) do not have the scale to hire and deploy employees with the ability to code in COBOL (not to mention supply crunch)–they have ceded this opportunity to Indian IT Services companies.”
Gen AI is expected to create new service lines for Indian IT companies, including AI-based customer service, fraud detection, predictive maintenance, and knowledge processing. These AI-driven solutions will allow IT firms to offer higher-value services to clients, boosting revenue and profit margins.
“Indian IT companies have always repositioned themselves to continue to do what they do best–service customers. That has provided them with the longevity they have commanded for multiple decades now. We do not see that changing this time as well,” the report added.
Comparing Gen AI to “a hammer looking for a nail,” the report suggests that the technology’s applications are still being discovered, but its potential is undeniable. Looking ahead, the report forecasts a strong start to FY25 for Indian IT companies, with growth driven by an optimistic outlook for the Banking, Financial Services, and Insurance (BFSI) sector, increasing technology spending, and large deal ramp-ups.
Doubts Revealed
Generative AI -: Generative AI is a type of artificial intelligence that can create new content, like text, images, or music, by learning from existing data. It’s like a smart computer that can make new things based on what it has learned.
Indian IT Sector -: The Indian IT sector refers to companies in India that provide technology services, like software development, IT consulting, and tech support. These companies help other businesses with their technology needs.
Nuvama Wealth Management -: Nuvama Wealth Management is a company that helps people and businesses manage their money and investments. They provide advice on how to grow and protect wealth.
Legacy Systems -: Legacy systems are old computer systems or software that are still in use, even though newer technology is available. These systems often need to be updated or replaced to work better with modern technology.
Core Banking -: Core banking refers to the essential services provided by a bank, like managing accounts, processing transactions, and handling loans. It’s the main part of a bank’s operations.
Revenue Stream -: A revenue stream is a source of money for a business. For example, selling products or services can be a revenue stream for a company.
AI-based Customer Service -: AI-based customer service uses artificial intelligence to help answer customer questions and solve problems. This can include chatbots or virtual assistants that talk to customers online.
Fraud Detection -: Fraud detection is the process of identifying and preventing dishonest activities, like stealing money or using fake information. AI can help find patterns that might indicate fraud.
FY25 -: FY25 stands for the financial year 2025. A financial year is a 12-month period that companies use for accounting and financial reporting. FY25 would be from April 2024 to March 2025 in India.
Technology Spending -: Technology spending is the amount of money that businesses or governments spend on technology, like computers, software, and internet services. It helps them improve their operations and services.
Deal Ramp-ups -: Deal ramp-ups refer to the process of increasing the scale or scope of business deals. This means getting more business or bigger contracts over time.
