GenAI shadow over IT Inc.'s app, client support businesses

Generative AI that stormed the technology world with the launch of ChatGPT two years ago may be about to make its mark on India's $254 billion IT services industry.

- Jas Bardia & Varun Sood

The industry will see pricing pressure beginning next year as contracts heavy on coding and phone support come up for renewal, multiple analysts and industry executives said. The first to take the hit will be the businesses of making and maintaining software apps, and providing customer support.

The two businesses-applications development and management (ADM) and business process outsourcing (BPO) fetch an estimated 40% of the industry's revenue.

"We think the IT services industry is experiencing pricing pressure in many lines of business, consistent with the past few quarters. For CY25, we think BPO and application development and maintenance will continue to experience pricing pressure as well as incremental deflationary forces driven by generative AI," Keith Bachman, an analyst with BMO Capital Markets, wrote in a note dated 5 December. "In particular, we believe that renewals will be challenging since customers will seek, and likely get, lower renewal prices than historical norms as the power and capabilities of generative AI increase," said Bachman.