Note to readers: Get ready for Tech3's special year-end editions starting today! We'll be looking back at the biggest tech and startup stories of 2023. Our regular editions will resume on January 2.

It has been a year marked by more lows and corrections than achieving new highs for India's information technology (IT) services sector. The initial surge in demand driven by the pandemic has waned, overshadowed by macroeconomic challenges and clients tightening their technology budgets. 

• As a result, IT services companies find themselves navigating an uncertain demand environment

The uncertainty has cast its shadow across 2023, leading to significant developments. This includes a notable exodus of top-level executives, disruptions in campus hiring, low to zero salary increments, and setbacks in onboarding new hires. 

• Ongoing projects have also encountered cancellations and pauses, as evidenced by Infosys losing a $1.5 billion contract over the Christmas weekend

Despite these challenges, the sector finds some relief in the buzz and demand surrounding generative AI. Furthermore, there is a silver lining in an all-time high deal pipeline, propelled by mega-deals secured by top IT companies.  

To recap this rollercoaster year, we've curated a selection of our must-read IT stories. Let's dive into the biggest developments, highlights, and trends that shaped the sector in 2023.

Was this newsletter forwarded to you? You can sign up for Tech3 here

• The biggest shocker of the year for the sector was Tata Consultancy Services' (TCS) CEO and MD, Rajesh Gopinathan, quitting after just six years in the role. No one saw it coming. Since its inception about 55 years ago, TCS has had only four CEOs. So, what prompted Gopinathan's abrupt exit? Was there a deeper story lurking beneath the surface? We took a deep dive into what went on behind the scenes.
  
  
• In 2023, IT companies went all-in on generative AI, highlighting the increasing demand and proof of concepts (PoCs) they were working on. Despite these endeavours, their quarterly earnings performances were lacklustre. Analysts and consulting firms too remained skeptical. We took a closer look to see if reality matched the hype.
  
  
• Stuck in a TCV conundrum? Some of the Tier-1 Indian IT companies reported their highest ever quarterly deal win pipeline in the second quarter earnings, yet slashed their full-year revenue growth guidance for FY24. What explains this discrepancy? We found out in this story.
  
  
• India's abundance of STEM graduates, combined with its cost-effectiveness, has positioned it as a prime location for global conglomerates to establish captive centres for their back-end tech support needs. This expansion not only helped these companies navigate through the slowdown in IT hiring but also contributed to job creation. Here's a closer look at how the numbers stacked up.
  
  
• The biggest news in the Indian IT sector this year was the changing of the guard at the top five companies. Notably, two of these three companies chose Infosys veterans to lead the charge. Ravi Kumar S took the reins at Cognizant, Mohit Joshi became Tech Mahindra's CEO, and TCS promoted BFSI vertical chief K. Krithivasan to its top position.
  

•  The year 2023 went on a shaky note for the Indian IT sector, with giants like TCS facing project demand pressures. Over 200 new hires at TCS, the country's largest IT company, saw their onboarding delayed by over three months, raising panic among them. Accenture joined the trend by skipping hikes and slashing bonuses for India employees, while LTIMindtree offered meagre raises of 0-2%. 

• In the face of an unclear project pipeline and uncertainty in demand, Tier-I Indian IT companies turned to their pool of benched employees for internal deployment on projects, rather than relying on campus hiring and recruiting new lateral hires. Data accessed by us indicates that the internal fulfilment rate is projected to rise from 60% in FY23 to an estimated 70-75% in FY24. Find out more 

• Data services management giant NetApp's global CEO, George Kurian, made a recent visit to India. Doubling down on India's potential, he shared the company's ambitious plans for the region in an interview. We discussed NetApp's focus on generative AI, its roadmap for the technology, and the company's perspective on the improving demand landscape. Go deeper

• In an effort to combat the escalating menace of deepfakes and AI-generated misinformation, today the Ministry of Electronics and Information Technology issued its second advisory to all social media platforms, urging them to comply with the existing Information Technology Rules. Find out more
  
  
• Amid strong market speculations about IT industry veteran and former LTI CEO Sanjay Jalona possibly joining Wipro, the IT giant's stock has been notably active since Friday. This comes at a time when the company is undergoing a notable exodus at the top level, and the incumbent CEO, Thierry Delaporte, is grappling with challenges related to modest growth and declining margins.
  
  
• Code.org, a non-profit organisation and educational website, sued Byju’s-owned WhiteHat Jr in a US District Court, according to documents reviewed by us. This comes at a time when the most-valued edtech company is battling a series of troubles on multiple fronts. Find out more
  
  
• A staggering 34,848 startups shut shop in 2023, according to data from Tracxn. This figure marks a significant jump from the 18,049 startup closures recorded in 2022. From GoMechanic in January to ZestMoney in December, the year witnessed a wave of startup shutdowns. Find out more
  
  
• Online discount brokerage platform Fyers is looking to enter the lending business with Margin Trading Facility as well as enter the Portfolio Management Service (PMS) business in 2024 focussing on managing assets for High Networth Individuals (HNIs) in India and abroad, the firm’s co-founder and CEO Tejas Khoday told us. Find out more

• Electric vehicle (EV) maker Ola Electric filed its draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) last week. While the filing marks a significant step towards Ola Electric's potential IPO, it also reveals several concerning internal risk factors that could affect the company's operations. Check out seven key highlights from the DRHP that raise questions for potential investors.
  
  
• The 2023 Cricket World Cup boosted TV ad spending; however, excluding sports advertising, expenditures saw a year-on-year decline of 1-2% in 2023. On the other hand, the cinema industry is expected to reach Rs 12,000 crore at the box office, setting a new milestone after achieving the highest box office business in 2023. The media and entertainment industry experienced its share of ups and downs this year. In 2024, all eyes will be on consolidation. Find out more

Note: By subscribing to Tech3 you have already made the right choice. Top it up with a premium offering, the Moneycontrol Pro Panorama, a newsletter that gives you a sharp take on macros, markets, business and finance. Sign up for Pro from this link to get this newsletter in your inbox and also a host of content enjoyed by 500,000+ subscribers.