AI sweeping habits but firms take baby steps

Global technology industry is in a state of flux. Tariffs imposed by the Trump administration have created significant business uncertainty among enterprises in the world. When companies are navigating such fluidity in the market, rapid adoption of AI (artificial intelligence) is making things trickier. Though dusts of tariff-induced changes will settle sooner or later; AI is bringing in fundamental changes to the technology world. Especially, the very business model of the global IT outsourcing industry is witnessing a shift.

AI and generative AI (GenAI) are automating several tasks, replacing human talent. Billions of dollars are being invested by technology companies of all hues into R&D of AI-related development. Despite the rapid adoption of AI and GenAI tools, questions are being raised over the return potential of such investments. A recent study done by MIT pointed out that only about 5% of AI pilot programmes achieve rapid revenue acceleration with the rest 95% failing to justify the investments. That is the reason why certain scepticism has crept in into the discussions around AI.

Consumer-facing AI picks up momentum

Despite the doubts; AI tools have seen significant adoption among consumers. GenAI tools like ChatGPT, Grok, Gemini and several AI-powered apps have witnessed fast-paced growth in the last two years. For instance, ChatGPT has around 800 million weekly active users as of now. India has the largest ChatGPT users in the world with students leading the race. The country has also seen significant downloads of AI-powered apps. And India is not the only nation driving the userbase. From the US to Europe to Asia, South America, & Australia; users are lapping up the apps.

“AI apps, services, & platforms are becoming like smartphones with people using them as daily essentials now. Video, picture, voice notes, and several other things have come into our daily lives in a new way. These have in many ways changed our habits. Therefore, adoption of AI has already increased and the pace is expected to be faster than any other technology that the mankind has ever seen,” Aditya Narayan Mishra, MD & CEO of CIEL HR told DH.

No wonder, fintech, edtech, medtech, consumer-tech and several other consumer-facing business apps have come to the fore in recent years with millions using those on daily basis.

Enterprise adoption remains slow    

While consumers have started using AI apps as a habit, enterprise use cases are growing at a slow pace. Though it always has been the trend, the hype around AI had raised hopes of bucking of this trend. However, industry experts opined that businesses globally are taking a cautious approach in integrating AI into their processes.

“Enterprise AI has had limited success. The pace of development in consumer AI has been far greater than the impact on enterprise AI. Despite massive potential, enterprises are plagued by rudimentary processes, lack of data readiness, varied and complex technology footprint, and a conventional culture,” Ashish Chaturvedi, Executive Research Leader at HFS Research said. 

“We are seeing only 15% of all POCs (proof of concepts) making it to production. Interestingly, most of these 15% are also mostly co-pilot implementations, or simple agents created over existing RPA bots. We are still scratching the surface and are yet to see high-value Agentic AI orchestration use cases across most enterprises,” he added.

Overall business environment is not supporting a full-throttle push towards AI by the enterprises. Pareekh Jain, Founder of Pareekh Consulting said that an adverse macroenvironment is not lending a helping hand towards faster AI adoption.

“Enterprises are struggling in macro environment and don’t have full budget to scale AI. AI will need further investment in cloud and data for AI readiness,” Jain said.

No wonder, investors have been a worried lot over huge investments flowing into the AI space without accompanying returns. Tech giants like Meta, Amazon, Alphabet, Microsoft, Apple, Tesla, and Nvidia are likely to spend around $320 billion on AI and data centres in 2025. Such huge investments demand quick returns, failing which stock prices will correct.

Indian IT industry’s resilience put to test

As the technology world sees sweeping changes driven by AI, Indian IT industry is facing another tech cycle with far-reaching impact. And the impact this time is on its established operating model. Indian IT firms traditionally rely on T&M (time and materials) in which billing happens per hour per resource. AI is bringing in a shift in this model to more outcome-based. Though domestic IT companies are increasingly executing more outcome-based project, T&M still holds a significant share. Moreover, AI-led productivity is poised to cannibalise a part of their revenues in coming years.

Another significant risk is coming from demand for workforce optimisation. Global tech giants like Microsoft, Google, Meta and several others have laid off thousands of staffers since last year. Earlier, TCS has said that it would cut over 12,000 jobs. Last week, Accenture’s Q4 results showed 11,000 job reduction during the quarter with the company embarking on a business optimisation programme. In this perspective, Indian IT firms have to carve a delicate balance between AI-led developments, shift in business model and employee well-being in an increasingly uncertain business environment.

(The writer is a Bengaluru-based technology journalist)