Resilience of Indian IT: TCS CEO K Krithivasan Highlights Opportunities Amidst Global Challenges

Synopsis
Despite ongoing predictions of its decline, the Indian IT services sector, spearheaded by Tata Consultancy Services (TCS), continues to demonstrate remarkable resilience. CEO K Krithivasan asserts that this strength stems from the depth of skill sets within the industry, rather than just cost advantages. In a recent interview with The Economic Times, he outlined the significant opportunities that lie ahead in AI-driven modernization, as TCS experiences a strong order book and improved customer confidence amidst global uncertainties.

"We have been writing its obituary every 10 years, but I think Indian IT services have proven to be very resilient," Krithivasan stated. He countered recent claims that the IT services industry would be obsolete by 2030, arguing that enterprises will increasingly rely on firms like TCS to fully harness the benefits of artificial intelligence (AI).

TCS Chief Operating Officer Aarthi Subramanian highlighted a growing gap between AI technology and enterprise adoption, noting that many organizations are struggling to keep pace with rapid advancements. She emphasized that developments in AI, such as Claude Cowork and Claude Mythos, present significant opportunities for TCS rather than threats to traditional IT services. "GenAI has unlocked a significant opportunity in legacy modernization, particularly for large, decades-old systems such as mainframes," she explained. "You have a unique opportunity to reduce tech debt with AI."

As TCS heads into FY27, the leadership team remains optimistic despite global geopolitical uncertainties, particularly the ongoing conflict in West Asia. This optimism comes on the heels of a $30 billion revenue decline of 2.4% for the first time since TCS went public in 2004, attributed to a slowdown in tech spending over the past three years. The broader Indian IT index has also seen a decline of nearly 20% over the past year.

"Yes, nobody can dispute that there's a decline," Krithivasan acknowledged. "However, the decline was primarily due to a large transformation program that concluded in Q1. Following that, we experienced three consecutive quarters of growth, and we are entering the next year with strong momentum and a significant order book."

TCS recently reported its highest total contract value (TCV) ever, with three large deals in the March quarter and five for the entire year, totaling $40.7 billion in FY26 and $12 billion in Q4. "Customers are becoming more confident in investing in their projects, and the decision-making cycle is improving," Krithivasan noted.

Despite concerns over the Gulf war, TCS has not observed any major slowdown in deal closures. "We have not seen any delays in decision-making. In fact, some of the mega deals were signed in the last month," he added, highlighting clients' eagerness to invest in AI transformation.

TCS is also witnessing a shift in deal structures, with clients increasingly opting for bundled, large-scale transformation engagements that integrate multiple services. Subramanian pointed out that AI is becoming central to both operations and transformation work, with annualized AI revenue surpassing $2.3 billion. While AI-led productivity gains may lead to some revenue "deflation" in existing contracts, Krithivasan assured that this is a normal aspect of the business cycle. "On existing projects, there will be some deflation due to the productivity we are delivering," he explained. "We aim to replace it with new projects."

Subramanian added that productivity improvements from coding assistants have increased significantly, now ranging from 15-30%, up from 10-15% previously. TCS has completed its layoffs cycle, hiring approximately 44,000 trainees in FY26, the highest number by any non-state organization in India, and has already made 25,000 offers for the next hiring cycle. However, the company did not provide a hiring target for FY27.

Krithivasan refuted recent reports suggesting a significant percentage of senior management had left during the restructuring process. TCS has also shed its conservative reputation regarding large acquisitions, making its largest purchase in over a decade with the acquisition of US-based Salesforce consulting firm Coastal Cloud for $700 million in December. "We will seek more acquisitions, but not just for the sake of increasing our top line. We will focus on acquiring the right capabilities and competencies to leverage for scale and speed," he stated.

As TCS navigates the complexities of the current global landscape, its commitment to innovation and adaptability positions it well for future growth in the evolving IT services market.

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