A new wave of AI innovation is forcing India’s IT services industry to rethink how it delivers and prices work, as investors question how much value traditional outsourcing models can retain in an AI-first enterprise landscape.
The concern intensified after a sharp global selloff in software stocks last week, triggered by Anthropic’s announcement of legal plug-ins for its AI assistant. The development raised fears that tasks such as documentation, legal research, and compliance — core components of large outsourcing contracts — could increasingly be handled by autonomous systems. More than $300 billion was wiped off global software valuations, a move analysts described as an overreaction but one that highlighted deeper unease about the future of services-led revenue models.
Indian IT firms have increased investments in generative AI, but analysts say the real test lies in execution speed. As enterprises turn to AI-native companies designed for faster, outcome-based delivery, traditional vendors face growing competition from players such as Anthropic and Palantir, which are now seen as direct partners for complex AI-driven transformation programmes.
“There is a growing view that Indian IT companies missed an early opportunity when it comes to AI applications,” said Faisal Kawoosa, chief analyst at Techarc. He said the challenge is not capability but execution. With decades of domain knowledge in sectors like banking and financial services, Indian firms had access to the data advantage early on. “Since the foundation of any AI model is the data it is trained on, these firms could have taken the lead much earlier. Delivery models, however, did not evolve to capture that opportunity,” he said.
Analysts say firms now face twin pressures: rapid technology change and the need to redesign long-standing commercial models. “AI is evolving faster than previous technologies, which demands agility,” said Pareekh Jain, chief executive of EIIRTrend. “At the same time, business models have not yet caught up with AI-led delivery.”
Industry executives caution against assuming an abrupt decline in services demand. Rajsekhar Datta Roy, chief technology officer at Sonata Software, said AI adoption will be gradual, with reliability and compute costs acting as constraints. “It’s not that services will suddenly vanish,” he said, adding that selective AI use can improve margins by balancing compute and human effort.
Nitin Rakesh, CEO of Mphasis, echoed the focus on speed. “New AI tools have revived investor fears that automation could displace traditional IT services, exposing how quickly Indian IT must adapt. The challenge is not technology but speed – shifting from labour-led delivery to AI-first models, while using partnerships with AI-native firms to stay relevant and competitive,” he said.
Mid-sized firms may adapt faster due to agility, while partnerships are gaining importance. In December, Accenture and Anthropic announced a joint group to scale AI deployments for clients.
For India’s IT sector, the signal from markets is clear: AI adoption is unavoidable, and value retention will depend on how quickly delivery economics are reset.
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