Why TCS and Infosys’ Gen AI commentaries in Q3 felt lacklustre

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India’s two biggest IT services companies Tata Consultancy Services (TCS) and Infosys reported their third-quarter earnings for FY24 on January 11. Amidst a seasonally weak quarter and an uncertain demand environment, all eyes were on their generative AI updates, especially with rival Accenture betting big on the opportunity in 2024.

Though both TCS and Infosys spoke about training and skilling 150,000 and 100,000 employees, respectively, in generative AI and AI skills as well as the continued experimentation with the technology by clients; they shied away from sharing definitive numbers or updates on deal pipeline opportunities or prospects of revenue in coming quarters.

This comes at a time when global rival Accenture is betting big on the technology. Despite ongoing uncertainties around the revival of discretionary spending by clients, Accenture expects Gen AI growth to accelerate manifolds in 2024.

During its Q1 FY24 earnings announcement in December, Accenture revealed an industry-leading Gen AI deal pipeline of $450 million in new bookings in a single quarter.

The company said that it expects clients to move from Gen AI experimentation to more proof of concepts and pilots in 2024. Moreover, Accenture is also looking to double down on skilling its data and AI workforce to 80,000 from 40,000 at the beginning of the year.

Earlier in 2023, the company said it would invest $3 billion over the next three years into its data and AI practice.

Meanwhile, TCS said their clients have started getting comfortable with the technology and figuring out how they can drive the most benefit out of it. In Q2, TCS had mentioned that it had 250 generative AI opportunities in the pipeline, but no update was shared on that during the Q3 earnings conference.

K Krithivasan, CEO and MD, TCS, however, said, “The way we see it is the clients are trying to see what benefit they can gain and are doing multiple experimentations like I talked about. Some of the PoCs have moved to production, but they're all small projects.”

TCS COO N Ganapathy Subramaniam said that clients want to try out new things in new areas across technology operations.

“We are continuing with our focus on training majority of our workforce on using Gen AI and coming up with innovative ideas, to improve productivity and efficiency as well as deliver projects and architecture which can evolve on its own. The possibilities that we see for the future is enormous,” He added.

Infosys, during the company’s annual general meeting in June 2023, had mentioned that it had 50 active client projects that are leveraging its Gen AI capabilities.

As for the company’s Q3 earnings on January 11, CEO and MD Salil Parekh said that Infosys is seeing “strong traction” for generative AI programmes leveraging its Topaz offering capabilities and these capabilities have been integrated into its service line portfolio.

“Generative AI is going extremely strong. There’s a lot of activity with clients. For example, we are working on large diverse structural issues. This is a very strategic time where we are working with a large global bank over use large language models to make that risk area better. We have a large number of such deals,” Parekh said.

He added, “We are not at this stage of publicly sharing what the Gen AI revenue. The reaction is endless capability, a good leading market position. In generative AI, we are very strong in the capabilities.”

Peter Bendor-Samuel, founder of management consulting firm Everest Group, earlier this month, told Moneycontrol that he believes most of the PoCs undertaken in 2023 will not move into production in 2024.

“This may be as high as 90 percent of the PoCs,” he had said.

“However, the 10 percent which do move (to production) will indicate to the market where Gen AI does work and we expect significant opportunities to arise in these areas for the tech services firms by the third quarter of 2024,” he added.