NewKerala.com

AI Won't Kill Indian IT, Will Be Just Another Tool: JP Morgan

A JP Morgan report argues that Artificial Intelligence will not eliminate the need for IT services but will instead become another tool to handle more work within existing budgets, similar to past cycles like cloud computing. The report highlights that AI will create new areas of work, such as modernizing legacy code and building AI agents, rather than shrinking the opportunity for IT vendors. It cautions against the simplistic view that AI can automatically replace the complex integration and enterprise-grade software capabilities provided by IT services firms. Recent market weakness in IT stocks reflects fears of AI disruption, but the report suggests these concerns may be overstated.

Key Points: AI a Tool, Not Threat to India IT Services: JP Morgan

  • AI seen as net job creator for IT
  • Demand for legacy code modernization rising
  • IT firms are "plumbers of the tech world"
  • Market fears over AI disruption overblown
2 min read

AI is another tool, not a threat to India IT services: JP Morgan report

JP Morgan report says AI will create new work, not shrink IT services. It compares AI to offshore labor and cloud as a productivity tool.

"AI will be another tool to address more work with the same budget - JP Morgan report"

New Delhi, February 14

Artificial Intelligence is unlikely to eliminate the need for IT services. Instead, it will become "another tool to address more work with the same budget," much like offshore labor, enterprise software, and cloud computing in previous technology cycles, according to a report by J.P. Morgan's Asia Pacific Equity Research team.

In its note titled "India IT Services: Looking through the AI fog 2 -- Discounted for extinction? Div/FCF yields at crisis levels," JP Morgan argued that AI will create net new areas of work rather than shrink the opportunity set for IT vendors.

"Thus AI will be another tool to address more work with the same budget like offshore labor, enterprise software, cloud have been in the past," the report read.

The report highlighted emerging demand in modernising legacy code, rewriting customized SaaS applications where needed, building AI agents for operations, ensuring AI trust and reliability, and integrating physical AI systems.

Enterprise technology teams, long viewed as underfunded relative to business demands, are likely to rely on AI to expand output within constrained budgets - not replace service providers altogether.

JP Morgan noted that recent market weakness reflects fears that rapid advances in AI could compress revenue growth and reduce the total addressable market for Indian IT firms.

However, the report cautioned that it is overly simplistic to assume AI can automatically replace the enterprise-grade software and integration capabilities delivered by IT services firms.

They describe these companies as the "plumbers of the tech world," arguing that bespoke AI-driven software deployments will still require significant services expertise to function in complex enterprise environments.

"IT firms remain the plumbers of the technology world," it said. "However, it's overly simplistic to assume that AI can automatically generate enterprise grade software and replace the value IT Services firms create across the cycle."

The Nifty IT index is down 10 per cent over the past month, while the broader Nifty index is flat, amid fears that AI advances could disrupt Indian IT services, among other factors, JP Morgan noted.

"The bears argue that AI will eat into Software/SaaS and therefore reduce the scope of IT services work," it noted.

- ANI

Share this article:

Reader Comments

P
Priya S
This is reassuring for the lakhs of engineers and their families. The key is upskilling. Companies like TCS and Infosys need to invest heavily in training their workforce on AI tools, not fear them. The demand for "AI trust and reliability" experts will be huge.
V
Vikram M
While I agree with the overall sentiment, JP Morgan's report feels a bit too optimistic. Yes, AI creates new work, but it will definitely disrupt *certain types* of routine coding and testing jobs. The industry needs a honest conversation about reskilling, not just positive spin.
R
Rohit P
Cloud, offshore, now AI. Every few years there's a "threat" that ends up becoming a revenue stream for Indian IT. This time will be no different. The Nifty IT index dip is a buying opportunity for long-term investors, mark my words.
S
Sarah B
Working with clients in the US, I see this firsthand. They want to *use* AI, but they have no idea how to implement it securely within their existing tech stack. That's where our expertise comes in. The report is spot on about being the "plumbers."
K
Karthik V
Legacy code modernization is a goldmine waiting to be tapped with AI assistance. So much of the West's critical infrastructure runs on old systems maintained by Indian IT. AI can help us refactor it faster and better. Future looks bright if we adapt!

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

Leave a Comment

Minimum 50 characters 0/50