Harnessing the Power of Generative AI: Opportunity for Technology Services”, which sheds light on  how generative AI unlocks multiple opportunity pools for Technology services across new offerings and  existing services. 

The last 6-8 months have seen a rapid evolution in Generative AI with multiple releases across models, datasets, and applications. According to the report, GenAI is expected to generate economic value worth  USD 2.6-4.4 trillion annually, of which around 75% is expected to be concentrated in functions like  software engineering, customer operations, product and R&D, and sales and marketing, which are core  service lines of many technology service providers in India today.  

While the potential impact varies significantly by industry, the highest impact is expected in high-tech,  banking, and retail with hyper-personalized customer support in banking and retail, revolutionized coding, and testing in high-tech. Concision, Coding, Customer engagement, and Content generation are the four  applications that can create a significant impact. 

Opportunities in the short term  

The report highlights four areas of opportunity emerging for technology services in the short term: Firstly, the expansion in addressable markets with the emergence of 100+ generative AI use cases, potentially driving 15-20% additional growth for leading technology service providers via new/reimagined  offerings like responsible AI consulting, generative AI chatbot, and legal contract management over the  next 5 years.  

Secondly, 30% improvement in delivery productivity is projected within the next 2 to 3 years, with services  like application development and BPM expected to witness a significant impact.  Thirdly, there are anticipated productivity enhancements spanning the entire sales and marketing process,  ranging from lead generation to faster sales strategy formulation.  

Lastly, the general and administrative costs (G&A), inclusive of sales, are predicted to see a 40% surge in  productivity over the next three years, supported by functions like finance & accounting, legal, and HR. 

The Impact Potential  

The report states that Generative AI brings both tailwinds and headwinds for technology service providers,  with the impact determined by the existing service line and vertical mix, as well as an interplay of drivers  and the speed of adoption. Four central factors will shape this impact. These are economic alterations in  the present business model, encompassing employee expenses and AI costs, the extent of scope reduction  from automation, the inclination of enterprises to insource or opt for SaaS/hyper scalers, and growth prospects in both new and existing services. This growth is especially notable in domains like data and  cloud, fueled by greater cost-effectiveness and administrative enhancements in up-and-coming  enterprises. 

Sangeeta Gupta, Senior Vice President, and Chief Strategy Officer at nasscom, said, “The generative AI  space will continue to evolve with the trajectory of technology service providers being reshaped and new  capabilities emerging. With the full scope of its potential still emerging, continuous monitoring and re assessment of opportunities become vital to maintain a competitive edge. Providers are constantly re evaluating their approaches based on new insights, many are intensifying their investments in areas like  technology, talent, risk management, and even mergers and acquisitions with generative AI startups. The  future success hinges on strategic advancements, pilot project outcomes, and the lessons learned.” 

“Generative AI has emerged as a discontinuity that has the potential to reshape the trajectory of  technology service providers. It holds the promise of a step change in productivity and unlocking multiple  new revenue pools for providers. Early movers are positioned to emerge as frontrunners in this dynamic  industry’, said Ankur Puri, Partner, McKinsey & Company.

Way Forward 

Despite its potential, multi-dimensional uncertainties hinder the widespread adoption of the technology.  Seven fundamental pillars that service providers must act on moving forward. First, they should establish  a strategic posture that prioritizes investments in growth and productivity-boosting use cases. Second, it’s  essential to focus on technology and partnerships to ensure a robust foundation across all tech stack  layers. Third, they need a reliable data pipeline for model development or refinement. Fourth, an  operating model that fosters collaboration and experimentation is crucial. Fifth, as roles and  responsibilities evolve, talent reskilling becomes imperative. Sixth, implementing robust risk management  and governance is essential. Lastly, a focus on adoption and change management will be crucial to  navigate the shifts. 

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