IT CEOs push back against AI disruption fears, warn of tough transition phase
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The IT sector expects an AI-driven investment surge from enterprises, prompting companies to revamp their positioning and business models to capture rising demand.
The Nasscom Technology & Leadership Forum (NTLF) 2026 ended with a clear message from India’s top IT services industry leaders and experts: Fears of AI-fuelled disruption are overdone, and the market’s anxiety around the sector’s future is misplaced.
Well, partially.
While the IT sector is projecting AI-led surge in investments from enterprise customers aligning with services opportunities, this is also the time that IT companies would have to revamp their positioning and business models to capture the growing demand.
This sentiment was perfectly captured by HCLTech’s CEO and MD C Vijayakumar during a chat with McKinsey’s senior partner Noshir Kaka at NTLF. Vijayakumar called the Street’s reaction to the Indian IT sector stocks “overblown”.
Although he went on to say that the industry will be going through a “painful” transition phase, before it becomes more relevant to customers.
“This transition is different from the other transitions (referring to Y2K, cloud and digital transitions). It’s going to be a painful transition, painful reinvention, but this time the inflexion is really making a lot of what we do, a lot more efficiently and with significant speed,” Vijayakumar said.
He added, “We have amazing talent, amazing leaders, very, very differentiated companies. So I feel very confident that as an industry, we would emerge much more stronger and, relevant to clients.”
K Krithivasan, CEO and MD of India’s largest software exporter Tata Consultancy Services (TCS) indicated that the company expects short-term cannibalising of revenues as it implements AI internally in its path to become the world’s largest AI-led services provider.
“I am encouraging you to ensure that the solution you provide to your customer is AI-first, even if it means that we are cannibalising the revenue,” Krithivasan said at NTLF on February 25.
This is a significant shift for the IT services sector as traditionally their revenue growth have been linear to headcount addition.
This divergence was very visible in Nasscom’s strategic review for FY26, as the industry body projected that the overall technology industry will grow by 6.1 percent this fiscal year. The net addition on a year-on-year, however, stood at only about 2,000 – growing from 133,000 in FY25 to 135,000 FY26 (E).
Cognizant’s AI officer Babak Hodjat echoed similar views, cautioning that markets are underestimating the complexity of deploying AI inside large enterprises.
He told Moneycontrol that integrating AI into legacy systems requires deep engineering and domain expertise rather than plug-and-play tools, adding that productivity gains from AI are likely to expand the scope of IT services work rather than reduce it.
These industry comments come at a time when market sentiments are showing up on Indian and global exchanges, triggered by breakthroughs from AI research firm Anthropic, intensified fears of AI-led disruption to outsourcing.
Nevertheless, IT shares have rebounded since then.
AI driving investments
McKinsey’s Kaka sees enterprises globally continue to double down on technology spending. Even the AI-focused spending is going towards enterprise-use cases that get enabled by IT services companies.
Citing a recent McKinsey survey of 600 chief information officers (CIOs) of large enterprises globally, Kaka shared around 72-73 percent of the CIOs surveyed of “very large companies are actually doubling down on their tech spending between 2026-2027.”
“Now if you look at the areas they’re spending on including capturing digital and technology benefits, or meeting business demand for tech, or modernizing the tech infrastructure, these are all services heavy segments,” he told Moneycontrol.
“Nobody is saying, oh I want to implement a new LLM, or I want to buy a new bunch of chips.”
Rightly so, Nasscom projected Indian technology industry will grow to reach $315 billion in revenue in FY26, driven by steady enterprise technology spending and rising adoption of AI.
AI is already contributing an estimated $10-12 billion in industry revenues, the industry body said.
“Overall, the market of IT services is likely to grow in terms of the spend from enterprises, albeit in a different shape and form,” said Rajiv Gupta, MD and Senior Partner, BCG.
Fears of AI replacing jobs
According to Nasscom, the industry has continued to remain a net job generator overall. The sector’s total workforce grew to 59.5 lakh (5.95 million) employees in FY26, up from 58.2 lakh (5.82 million) in the previous year, translating into a 2.3 percent increase in headcount.
“AI is both expanding and compressing work,” Nasscom chairman Rajesh Nambiar said, adding that AI is now embedded in virtually every technology proposal.
According to Gupta, while the AI disruption is real, it won’t be entirely negative.
“While initially there will be some revenue loss and some jobs losses in the areas of development, testing and a few other segments, there’s going to be a net increase in the type of new roles that are coming up. And, the type of new use cases that are coming up that will bring new revenue pools,” he told Moneycontrol.
In short, IT industry has to move away from their dependency on legacy work, while being agile enough to build its moat to win in this AI-led enterprise disruption.
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