Indian IT sector to benefit from $4 trillion AI boom

India’s technology sector stands on the brink of a transformative opportunity in the GenAI market, with experts highlighting the potential for substantial growth.

Source: TPCI

India’s technology sector is poised to benefit from the US$ 4 trillion opportunity presented by the global market for generative artificial intelligence (genAI), according to experts. To tap into this potential, strategic changes are needed in various areas, as outlined in a report by Nasscom and McKinsey & Company.

The report indicates that genAI is projected to generate an annual economic value ranging from $2.6 trillion to $4.4 trillion, with 75% of this value concentrated in core service lines for technology service providers, which include software engineering, customer operations, product development, research and development, and sales and marketing.

Ankit Bose, the Head of AI at Nasscom, remarked, “The Indian IT sector is sitting on a goldmine; it’s just about how deep we dig.” The addressable market for the IT sector is poised to expand further. The development of over 100 new genAI use cases has the potential to bring an additional 15-20% growth as providers reimagine existing offerings or introduce new ones in the next five years.

According to Bose, tech services providers should develop capabilities to enhance delivery productivity, excel in sales, optimize total SG&A, and expand their current account base. The report predicts that GenAI is likely to boost delivery productivity by up to 30% in the next 2-3 years. It also anticipates improvements across the sales and marketing value chains, encompassing lead generation and faster sales strategy development.

Over the next three years, a significant 40% increase in productivity is expected in finance and accounting (F&A), legal, and HR tasks. Ankur Puri, a partner at McKinsey & Company, emphasized that enterprises utilizing data to harness GenAI also present opportunities for Indian tech service providers. He stated that they are well-positioned to manage data and maintain the necessary technology infrastructure, including risk management.

However, Puri stressed the importance of innovation, experimentation, and the exploration of new use cases. The report highlights seven foundational areas for companies to reorient themselves, including strategy for rapid scaling, technology and partnerships across the tech stack, a data pipeline for model development and fine-tuning, an operating model that supports collaboration and experimentation, talent requirements, risk management, governance, and adoption and change management.

Ensuring an adequate computer infrastructure is crucial, and according to Bose, this requires substantial efforts and investments from the government, private sector, and all stakeholders working together.

GenAI technology is currently in its nascent stage, and the report acknowledges uncertainties in cost economics, customer readiness, and regulatory and legal boundaries. There is no clear “winning strategy” outlined to navigate these uncertainties, but Puri pointed out that early adopters stand to reap the benefits.