Why Nandan Nilekani thinks IT services have a large opportunity in AI but…
Why Nandan Nilekani thinks IT services have a large opportunity in AI but…
Nandan Nilekani, Chairman of Infosys, believes that AI presents a significant opportunity for IT services, despite the rapid transition and execution risks. He emphasises that the challenge lies in modernising existing systems rather than creating new ones, as companies aim to shift their IT spending from maintenance to innovation.
With the pace of AI evolution far outpacing its adoption rate, the Infosys Chairman believes AI brings a huge opportunity for IT services companies in clearing accumulated technical debt faster, however the risk remains in execution.
At the company’s AI investor day, shrugging aside the opportunity threat posed by AI, Nandan Nilekani, Chairman, Infosys, said that for IT services companies the opportunity has gotten bigger than ever before. Sharing his views with analysts in Bengaluru on ‘Tech transitions – Why is the AI transition different?’ at the company’s headquarters, he said, “My view is there is no opportunity gap. If anything, the opportunity is bigger than ever before. So don't get distracted by that”.
However, as companies define their path navigating the AI transition, “I'm sure everybody will not execute the same way. So, there is an execution risk in doing that. So, it is not an opportunity risk; it's an execution risk,” he added.
On Indian IT stocks which have been battling investor fear over lack of certainty on how artificial intelligence changes the industry and global triggers, Nilekani argued that while AI transition has been much faster than earlier transitions - fundamentally changing the way businesses will operate, for IT companies, this change is where the opportunity lies. “Many large companies are spending 60-80% of their IT spend on maintaining systems. There's no business value out of that. They want to go from 60% or 70% maintenance and 30% new systems to 30% or 40% maintenance and 60 -70% new systems. They want to flip the way they spend money,” he said.
While cost is one of reasons why enterprises continue to work with legacy systems, the technical debt accumulated over years now is a cusp where its discharge can no longer be deferred. “This is a huge requirement and obviously it's a huge opportunity for us,” he said.
At a time when trillions of dollars are being spent on foundational frontier models, but enterprise deployment is not going up, and where companies have trillions of dollars invested in their systems and technical debt exists, “taking brownfield systems and modernising them is a hell of a lot more difficult than doing green field development, and a lot of us get biased because all the guys who talk about productivity are talking about greenfield development,” Nilekani said.