Fear of AI in IT sector
Investors who were till now considering technology stocks as the safest and strongest part of their portfolio, were deeply disappointed on February 12. The trend of decline in IT shares that started as soon as the market opened, took the form of chaos by the evening. The seriousness of the situation can be gauged from the fact that in just one day, about Rs 1.3 lakh crore of investors’ hard-earned money went up in smoke. This decline of more than 4 percent in the Nifty IT index is not just a figure, but it is a sign of the fear that is now looming over the future of Indian IT companies.
Will the Indian IT sector be blown away by the storm from America?
In the market, companies like TCS, Infosys, Wipro, HCL Tech and Tech Mahindra are considered the pillars of the economy, but on Thursday these giants were seen falling apart like a pack of cards. A huge loss of 4 to 5 percent was recorded in these shares. After all, what happened that the Indian IT sector, which was making waves all over the world, suddenly became a ‘villain’? The biggest reason behind this is a new wave of Artificial Intelligence (AI) emerging from America across the seven seas. At the center of this entire turmoil is Anthropic, an American AI startup company, which has increased the heartbeat of Indian IT companies.
According to market experts, Anthropic has recently launched a new AI tool to ease legal work. This may sound like a normal technical news, but in reality it is an alarm bell for Indian IT companies. This new tool is capable of completing complex tasks like contract review and legal briefing in a jiffy and that too without any human error. The matter of concern is that a large part of the revenue of Indian IT companies comes from these functions i.e. BPO and KPO services. If AI can handle these tasks so efficiently and cheaply, why would foreign clients hire Indian companies?
Is the era of mass hiring coming to an end?
This problem is not limited to the stock market only, but it has a direct impact on jobs. AI is no longer limited to just answering questions. New ‘Agentic AI’ tools can now do all the work on computers that software engineers used to do till now. Coding, fixing bugs and managing complex software is now becoming the game of AI’s left hand.
Reports suggest that in the last few quarters, the number of employees of TCS, the country’s largest IT company, has declined by about 30,000. This is happening for the first time in history that the number of employees is decreasing in consecutive quarters. New recruitments i.e. hiring of freshers has also slowed down considerably. The era when IT companies used to do thousands of campus placements seems to be coming to an end. Experts are naming this situation as ‘SaaSpocalypse’, which means time of doom for software and service companies. The work which earlier used to be done by 10 engineers together, can now be done by maybe 2 people with the help of AI. Therefore, instead of ‘mass hiring’, the demand for ‘specialized skills’ is going to increase.
tough fight for survival
The report by Kotak Institutional Equities explains this crisis in more depth. According to him, it is not so easy for Indian companies running on old technology (Legacy Systems) to adopt AI. It is not just like installing any new software on the computer. Fitting new AI technology into old systems, making it understand the context and getting the right results is a very complex and expensive process.
The market is now worried that new AI-based tools and plug-ins like Anthropic’s ‘Claude Cowork’ will pose a tough challenge to the old giants. These tools can do the work themselves for which IT companies used to charge huge fees till now.
