"The cost of intelligence will be on a path towards zero" - Sam Altman, CEO, OpenAI
Strange kind of growth
While AI is the fastest growing segment for IT giants, it is not significantly expanding total revenues. Experts suggest these technologies improve efficiency while cannibalizing current revenue streams instead of creating fresh spending at this juncture. BMO analysts believe the technology is simply replacing other sources of revenue. So a fundamental shift is underway.
Revenue cannibalization challenge
Accenture and TCS report massive rises in AI bookings. However, this growth often comes at the expense of traditional backend work like customer support and maintenance as automation replaces mundane human tasks and billable hours. This has led to a kind of deflationary pressure on billings.
Development life cycle
Software development is seeing productivity gains of 40 percent through automated code generation. This efficiency compresses revenue across the industry. As hours for mundane work shrink, it creates deflationary pressure on traditional IT contracts that previously relied on large teams.
Agentic AI services ahoy!
Firms like HCL Tech are pivoting toward agentic AI to find new value. They are transforming offerings despite disruptions to existing revenue bases, moving beyond classical analytics and data services into more complex and autonomous AI integrations for their clients to offset traditional declines.
New age services
Leadership at TCS believes demand for new age services will eventually offset the drag in traditional services. Heavy investments in data centers and new global partnerships are being made to prepare for this fundamental and necessary shift in the outsourcing industry.
Summary
Big IT firms face a paradox where AI boosts productivity but shrinks traditional revenue. While Accenture and TCS show impressive growth, efficiency gains lead to lower billings for routine tasks. The industry must now pivot to advanced services to find sustainable growth.
Food for thought
Can the traditional hourly billing model survive if AI reduces the human effort required for software development by half?
AI concept to learn: Agentic AI
Agentic AI refers to autonomous systems that can plan and execute complex tasks independently. These systems use reasoning to make decisions and achieve specific goals without constant human intervention. These are systems that can autonomously plan, decide, and execute
multi-step actions toward a goal using tools, APIs, memory, and feedback
loops. Unlike prompt–response models, agents maintain state, decompose
tasks, coordinate with other agents, handle errors, and operate under
constraints, requiring orchestration, permissions, and robust governance
mechanisms.
[The Billion Hopes Research Team shares the latest AI updates for learning and awareness. Various sources are used. All copyrights acknowledged. This is not a professional, financial, personal or medical advice. Please consult domain experts before making decisions. Feedback welcome!]
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