IT majors look beyond backend ops to AI strategy advice

Summary

HCL Technologies, Wipro, and Tech Mahindra are doubling down on advising clients on AI deployment

India's information technology (IT) companies, who have traditionally built and managed backend software systems for clients, are now looking to also take on an advisory role, helping shape technology decisions as growing adoption of artificial intelligence (AI) and the falling cost of using it open up new business opportunities.

Following Accenture's lead, four of India's largest IT companies -- Tata Consultancy Services (TCS) Ltd, HCL Technologies Ltd (HCLTech), Wipro Ltd, and Tech Mahindra Ltd -- have started advising clients on AI model selection, headcount utilization and ways to lower AI costs.

TCS, the country's largest tech services firm, is looking at providing cost-related advisory services to clients. "We help clients manage AI token costs through benchmarking, model and architecture selection, token economics, and FinOps advisory. Our focus is to deliver the right level of intelligence at the right cost," said Aarthi Subramanian, chief operating officer of TCS, during the 8 October post-earnings conference call.

She said the Mumbai-based company is also using AI to redesign clients' IT systems. "AI is playing a key role in process mining, which helps us understand existing workflows. Redesigning processes with a human and AI approach by default is enabling upfront identification of agentic opportunities."

Changing dynamics

HCLTech, the country's third-largest IT firm, provided a broader view on AI advisory. "AI advisory is gaining traction. This enables us to help our clients at the start of the AI journey and then extend into helping clients transform their operating model and change management for an AI native world," said C. Vijayakumar, chief executive of HCLTech, during the 15 October post-earnings conference call.

For the Noida-based firm, this contributes to advanced AI revenue, which rose 28.4% sequentially to $219 million in the September quarter.

While TCS and HCLTech highlighted emerging consulting opportunities, Wipro, India's fourth-largest IT firm, highlighted some of the consulting-led deal wins.

At its 15 October post-earnings analyst call, Wipro's management attributed many of the deal wins to its consulting-led approach. Chief executive Srini Pallia cited the example of a tech modernization deal win with an unnamed global financial institution, which "reflects growing impact of our consulting-led strategy in originating larger opportunities".

The company has outlined AI-led consulting and advisory as one of its key AI-led service lines under the Reimagine AI offering. It won a large deal with an unnamed financial institution by providing its consulting services through Capco, a London-based consulting company that Wipro acquired in 2021 for $1.45 billion.

Tech Mahindra, the country's fifth-largest IT firm, highlighted areas where demand for AI-led consulting was strong and others where it remained relatively weak.

"Probably the one business that has been relatively weaker compared to the others has been our experience design and our consulting businesses. But we're very much in growth mode in these businesses," said Mohit Joshi, CEO of Tech Mahindra, during the company's 15 October post-earnings analyst call.

The management also stressed the need for clients to better understand the economics of AI pricing. "This (pricing) requires maturity also in our client organizations to understand how this will work, how the token economics will work, because we are pricing the tokens as well when we are looking at agent pricing along with the human in the loop," said Atul Soneja, COO of Tech Mahindra.

TCS, HCLTech, Wipro, and Tech Mahindra reported revenue of $7.64 billion, $3.72 billion, $2.61 billion and $1.69 billion, respectively, for the September quarter.

Following the lead

Indian IT firms' optimism about AI consulting follows that of Accenture, which started as a consulting company and whose consulting business accounts for roughly half of its $74 billion revenue. Earlier this month, the world's largest technology services company also stated that clients are looking to increase AI adoption as deployment costs fall.

To be sure, while homegrown IT services companies have consulting units, they don't disclose revenue from them.

They steered clear of scaling their consulting offerings because they were focused on managing clients' IT workloads already defined by larger consultants, say experts.

"The whole industry was built on a pyramid of labour arbitrage, where the money was made in delivering large volumes of work at a predictable cost, and advisory work sat upstream with the Big Four, Accenture and McKinsey, who shaped the agenda and then handed the execution down the chain," said Phil Fersht, CEO of HFS Research.

Another expert attributed Indian IT companies' reluctance to hunting for longer-duration contracts. "Historically, Indian firms looked for long-duration managed services relationships. Consulting is short-duration. Hence the reluctance to build consultancy," said Peter Bendor-Samuel, founder of Everest Group, a global research and consulting firm.

But for now, there is an opportunity. "The more interesting question now is whether any of them can build an advisory brand that clients will pay a premium for, or whether the upstream role simply migrates to a new set of AI-native players who never had a pyramid to protect," said Fersht.