IT firms never had to confront the question of technology, with their worlds largely revolving around application software. Until now. In an era of proliferating software, including apps, the big IT service companies built a huge business out of system integration. Now for the first time they need to confront technology/technologies but their trajectory or trajectories. It is anybody’s guess which path they will traverse.

According to Reuters, “Industry executives also say they are losing some work entirely as customers use AI to shift tasks ‌in-house, while all the uncertainty that the new technology has brought is resulting in shorter contracts”. The tech-cum-business media has already been reporting that many entry level jobs are being lost to AI. Further, mid-tier IT/software companies who have always played second fiddle to the big guys now see a significant opening created by AI as knowledge rather than skill becomes pivotal, positioning themselves to bid for bigger contracts than earlier.  

A study published by the Economic and Political Weekly titled ‘Artificial intelligence and the future of India’s IT industry’ notes that “AI-driven firms have emerged in financial technology, healthcare diagnostics, language technologies, educational platforms, cybersecurity, and enterprise solutions. The growth of digital payments, e-commerce, cloud services, and government digital platforms has created significant demand for AI-enabled solutions”.

What is new now

From adverse business conditions to technology-enabled environment. What used to be demanded by clients of IT services companies as a result of tough business conditions, is now being driven by foundational changes in the IT services business. Shifting from cost efficiency to value additions, pricing based on outcomes, the reducing importance of just number of people working on a project – none of these is new.

This was exactly the environment created by the 2008 housing mortgage crisis in the US which spread to the global economy causing immense havoc. Today, new developments in technology such as AI is giving clients a lever to make a more compelling case for a change in the way business gets done in the IT services industry. 

Another part of the debate is also not new: whether clients will prefer to work with specialised services providers (which means working with many of them) or will they prefer that a large company deals with such specialised providers on their behalf. This was the best of breed vs the boutique approach that dominated debate when specialised software emerged to address more and more specific requirements. The question for clients is this: can they afford to spend quality managerial time on managing service providers when their own businesses face competitive and technological threats.

Basic question

There is a basic question that is not being asked – do the clients understand AI and AI-based products enough to decide which ones to choose? This is a vital question in any technology product because there is a specific future to every technology and a future shaped based on how it interacts with other technologies. This is the most important question to ask and answer in this AI world.

In a fundamental sense, this question is no different from what was asked of specific software products addressing niche needs – how their future will shape up and how they will work with other such products in an IT system. It was this dimension that made an automatic case for system integrators.  

Will it repeat itself, albeit in a differ manner, with AI?

Ever since automation of monotonous and repetitive tasks became a fact, certain tasks which needed a large number of people felt the stress. Help desk is a classic example. Microsoft was probably the first company to opt for automation for Help Desk since it was a huge expense running into hundreds of millions of dollars.

AI is just dramatic, by itself and also because of the hype surrounding it and the mythology built around it. And, precisely because of this, the challenge becomes different.

New breed of consultants?

Will this changed environment create a different breed of IT professionals: consultants/advisors? Yes, consultants were there even during the early phase of the internet and especially during the advent of ecommerce but AI is not just one but multiple technologies each with its own competitive environment and trajectories.

The IT services industry never really cared about technology advisors because their world revolved essentially around application software, which, as technology, ranks lower in complexity compared to say, operating system or database. But now, the industry needs genuine technology experts like never before because of the sheer range of such products/services, their individual futures and the future of their interaction with other products/services.

Very simply, will they work in tandem or apart, is the question. Compatible or incompatible? Which specific technology will dominate for a considerable period of time which makes it absolutely vital to engage with it. Or is it transient with just hype propping it up? This is a really difficult question to answer – just reflect on the battle between GSM and CDMA, LTE (Long Term Evolution) and Wimax. In the US, Wimax had to be bailed out by the federal government, when businesses shunned it. Telecom companies which made what turned out to be the wrong bet could not acquired sufficient market share to sustain their business. Some eventually closed shop, sold out.

These are now the key questions affecting choice of specific AI technology. And the ability to answer that question, at present, is absent in the IT services industry. We must remember that the answer to this question will drive recruitment also and an investment in training if such skills were not available in the existing educational system.      

So here is my view.

Mirror, mirror what is there in store?

Large IT services companies will still hold their place but with changes in pricing, recruitment. There will be a need for system integration but of a different character altogether. It has to be flexible to disengage one (or more) from the system when it ceases to be relevant or becomes obsolete.     

The business will change in many ways – shorter contracts (happened with CNG too some years ago), defined outcomes within a defined period, stricter adherence to milestones, greater monitoring of both individual technologies and their future together. And risk management, because incompatibility is not just a matter of not working together but one with severe consequences, such as law suits filed by clients.