Generative AI deals expected in next two quarters, won't be mega wins: TCS

TCS, India’s largest IT services company, is expecting some generative artificial intelligence-(AI) based deals in the next two quarters but their sizes will not be big, a top official said on Thursday.

Those deals will not be over USD 1 billion, TCS Chief Executive Officer and Managing Director K Krithivasan told PTI.

Each organisation will spin out a number of deals but there may not be a single billion dollar kind of deal in generative AI, he said.

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At present, every organisation was tinkering to assess the possibilities of the new technology, he added.

TCS, which on Wednesday announced its intent to train 1 lakh associates on generative AI and working on 50 proofs of concept, is also gearing up for the changes in the landscape, Krithivasan said.

“The major impact (for) organisations will happen only when they embark on an enterprise-wide programme,” he said.

“As long as they keep doing some use cases here, some use cases there, some pilots here, even they will not see (the gains),” he said.

Returns on investments

Businesses need to be sure about the returns on investments on the deployment of such technologies before they move ahead, Krithivasan said.

He added that it was important for an IT company to test and understand such technologies.

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Since the launch of ChatGPT by OpenAI late last year, there has been an increased interest in generative AI in the tech world.

In the post-earnings press conference on Wednesday, TCS Chief Operating Officer N Ganapathy Subramaniam had said that every client conversation was finding a mention on generative AI now.

Krithivasan said that training of associates will not extract a significant jump in expenses as it undertakes training efforts for its employees on a regular basis.

Meanwhile, on the overall demand environment, there was a prevailing softness because of the economic prospects in the US, the major market for the USD 245-billion Indian IT sector, he said.

US market

“Optimism or the lack of it (for tech companies) comes from the point that we don’t have a certainty on the government’s position on how they want to handle their current belief is that they will prefer some sort of slowing down because the economy is very hot, unemployment rates are also very low,” he said.

If governments were going to be driving a slowdown, that will have an impact on all parts of the economy, including IT spending. “That’s where our uncertainty or caution comes from,” he said.

Krithivasan said once there was clarity that the US Federal interest rate would not be hiked further, or the government clearly indicates that interest rates will not go up any more, that could be a good indicator for the IT industry as it will encourage clients to start spending.

All total contract values (TCVs) were not getting converted into revenues in the older signed deals because clients were re-evaluating their priorities on what they need to invest in, he said.

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Some projects get delayed or scrapped as a result, he added. He declined to quantify the dip in the TCV-to-revenue conversion rates.

Stress on employee empathy, customer centricity

Krithivasan, who took over the reins of the company in June, said one of his primary objectives is to further TCS’s thrust on employee empathy and customer centricity.

“I’ve been here for 33 years. So I’m a product of this strategy-structured culture. So I won’t be able to even change because I’m a product of what pieces connect culturally. So my focus would be on how do you enhance what we’re doing,” he told MoneyControl.

Stating that the organisation has been built around customer centricity, he said, “…we always behave like the very large family like employee empathy is very cool to us.”

On Wednesday, TCS reported a 17 per cent jump in Q1 net profit but pointed towards sluggishness on revenue growth in FY24 due to ongoing market challenges that have led to a minuscule revenue growth on a sequential basis.

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(With inputs from agencies)