Generative AI deals expected in next two quarters; will not be mega wins: TCS CEO

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

Those deals will not be over $1 billion, TCS Chief Executive Officer and Managing Director K Krithivasan told PTI during an interview here.

“Each organisation will spin out a number of deals, but there may not be a single billion dollar kind of deal in generative AI,” Krithivasan said, adding that at present, every organisation is tinkering to assess the possibilities of the new technology.

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. 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.

Businesses need to be sure about the returns on investments on the deployment of such technologies before they move ahead, Krithivasan said, adding that it is important for an IT company to test and understand such technologies.

It can be noted that 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 every client conversation is finding a mention on generative AI now.

Krithivasan said on Thursday 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, he said there is a prevailing softness because of the economic prospects in the US — the major market for the USD 245-billion Indian IT sector — and the IT companies will become more optimistic when they see clarity.

“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 the governments are 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 is clarity that the US Fed 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) are not getting converted into revenues in the older signed deals because clients are re-evaluating their priorities on what they need to invest in, he said, maintaining that some projects get delayed or scrapped as a result.

He, however, declined to quantify the dip in the TCV-to-revenue conversion rates.

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

The TCS scrip was trading over 2.5 per cent higher at Rs 3,346 on the BSE in afternoon trade.