'Generative AI deals expected in two quarters; won’t be mega wins'

MUMBAI: 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 CEO-MD K Krithivasan said. “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 firm is tinkering to assess the possibilities of the new technology. TCS, which 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.

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 COO N Ganapathy Subramaniam had said every client conversation is 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.

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 $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.