TCS and Infosys AGMs: What Chandrasekaran, Nilekani said on AI, demand concerns

At TCS and Infosys AGMs, AI dominated the conversation.

Artificial intelligence (AI), the new tech frontier, has emerged as the key theme for Tata Consultancy Services (TCS) and rival Infosys as well and is expected to drive growth for India’s top two IT consultancy services as demand concerns weigh.

At their annual general meetings (AGMs), held a day apart, TCS and Infosys also agreed that the overall demand environment is expected to remain volatile amid macro-economic challenges.

Chairman N Chandrasekaran said that TCS was shifting gears to be more AI-centric.

“Over the past decade, there has been a rapid evolution of digital technologies, bringing about a transformation across every industry. Now, the advancements in AI have made AI transition a central focus…There is a transition already underway from predictive AI to generative AI,” he said on June 29.

Despite a volatile demand environment, at least in the short term, Chandrasekaran was bullish in the long term on growing adoption of predictive AI, generative AI, cloud and IoT by its client companies -- all the areas he believes TCS is strong in.

A day earlier, Infosys CEO Salil Parekh told shareholders that the company had already bagged 50 generative AI projects.

“We have today 50 active client projects where we are using generative AI and this is becoming an increasing part of the new world which is going to be defined on an AI-first basis,” he said.

Infosys chairman Nandan Nilekani did flag practical, ethical and intellectual property-related concerns surrounding generative AI.

Chandrasekaran had a similar response when asked about the challenges of generative AI. He concurred that every technology has to be used responsibly, adding, “Countries across the globe will regulate generative AI to be used responsibly.”

In May, TCS and Infosys launched their generative AI offerings TCS Generative AI and Infosys Topaz.

Volatile demand environment

Infosys has already pegged its constant currency revenue growth guidance for FY24 in single digits at 4-7 percent.

Responding to shareholders, Nilekani said though the receding coronavirus pandemic ended one set of challenges, its aftermath created new ones.

“The cocktail of inflation, interest rates, geopolitics, war, demand volatility, supply chain dislocations, the shift from efficiency to resilience and security, all morphing quickly and without warning is upon us,” he said, adding they must be flexible.

TCS doesn’t give forward guidance but Chandrasekaran said he was bullish in the mid-to long-term as the company was well-positioned to capture the opportunities and growth coming from trends like artificial intelligence, energy transition, supply-chain shift and the need for new skills.

“I believe that the growth for medium to long term is going to be strong. But in the nearby quarters there will be volatility in different markets on customer spending, especially in discretionary projects. It will go across sectors—some places it will be BFSI, others it will be manufacturing or retail,” he said.

In times of uncertain global economic situation, higher inflation or slowing growth, companies would calibrate their spending, he said. “Whether it will happen in this quarter or after two quarters, it will happen. So certain discretionary spending companies will make a choice. It also depends on the amount of capital they want to spend at this point in time,” Chandrasekaran said.