Disrupting the disruptor

With AI automating code, IT services firms must redefine their role. The pivot to AI-driven models marks a structural shift — one that is fundamentally changing the $285 bn industry

- SHELLEY SINGH

India's $285 billion tech services sector, employing 5.8 million, is facing its biggest threat, and that comes from technology itself - artificial intelligence (AI).

Anthropic's Claude Cowork, Microsoft Copilot, Google's Project Mariner, Palantir and a growing cohort of AI-native tools can write code, test software and generate documents. And the machines are getting more sophisticated at delivering code.

Market reaction to the shifts have been brutal. Despite easing tariff tensions with the US, the largest market for tech services, accounting for around 70 per cent of the business, and improving India-US ties, Indian IT stocks were hammered. Roughly ₹5.7 trillion in market value was wiped out in seven trading sessions to February 13. The Nifty IT index declined 19 per cent. Infosys, TCS, HCLTech, Wipro and Tech Mahindra fell 13-21 per cent.

According to Reuters, the IT sector logged its worst week in more than 10 months, with nearly $50 billion market cap erased in February alone.

Nitin Bhatt, technology sector leader, EY India said, "AI-led disruption is fundamentally different. For the first time, technology is collapsing work itself. Reinvention is therefore critical." Automation has compressed low-value work - the repetitive coding, application maintenance, documentation and support tasks that once required large teams of engineers.

AI shrinks tasks & manpower

Acknowledging the shift, Vic Gupta, CTO, Coforge, said, "We believe that AI will shrink the unit cost of code ... It will massively expand the surface area of opportunity and value in AI-led transformation."

In December 2025, Noida-based mid-tier IT services company Coforge acquired US-based AI and digital engineering firm Encora for $2.35 billion, marking a major shift toward AI-native engineering. This was the largest AI acquisition by any Indian IT company.