AI will improve productivity, jobs in IT industry won't be significantly hit: Kris Gopalakrishnan

Kris Gopalakrishnan, Co-founder, Infosys and Chairman, Axilor Ventures

Senapathy ‘Kris’ Gopalakrishnan, Chair - GFF 2024; Chairman, Axilor Ventures; and, Co-founder, Infosys, is an eternal optimist.

For someone who has closely seen and contributed to building India’s $250-billion tech services industry over the past four decades, a new technology shift, like artificial intelligence (AI), is only a wave that will take the industry forward.

In 2014, he started early-stage venture capital firm Axilor Ventures, along with his Infosys co-founder SD Shibulal and others. It has been investing across SMB SaaS, fintech, supply chain, healthcare, agritech, climate tech and consumer startups.

In a candid chat with Moneycontrol, on the sidelines of the Global Fintech Fest (GFF) in Mumbai last week, Gopalakrishnan discussed the changing contours of the tech industry, startup themes he is bullish on, the AI opportunity and more.

Three-day long GFF is one of the largest annual fintech events in the country. This year, it saw a footfall of nearly 100,000 attendees, over 350 sessions and had marquee investors, founders, venture capitalists and global regulators speaking. Prime Minister Narendra Modi too attended this year's event. 

See, this funding winter is part of a cycle. So, you will see these cycles repeating. You will have a boom and then you will have a downturn.

At Axilor, we are looking at fintech as a part of our portfolio, which consists of supply chain management, deep tech, and healthcare. So we have a few themes around which we make investments.

AI is a horizontal technology which is going to impact every industry. Every vertical will get impacted by AI.

I don't completely agree. Fintechs are businesses by themselves. This is a layer which sits in between the consumer and the banks, you know, providing an interface. Now, they are also creating products for lending, and other services like insurance, securities trading and things like that. So, this layer is actually expanding its services.

First of all, we need to understand the life cycle of a software project. Software project starts from understanding the customer's requirements, designing the system, coding, testing, implementing and operationalising the system. So, coding is a small part of the overall life cycle. Coding has been automated from the beginning. I began my software journey by coding in assembly language, which is a low form of machine language. Then we went to Cobalt, C etc., and today we use Python and other higher level languages. Any time, languages are introduced, the number of lines of code keeps decreasing and so productivity is actually increasing.

Now, this is another way of productivity increase where some of the code will be generated by AI, just like, you know, it prompts you to complete the sentence, etc. It will actually prompt you to complete the code and maybe even write the full code but that's probably only 10 percent of the job of a software developer or a software project. So that's one thing to remember.

The second thing is that any time you develop a software you are building it on top of existing systems and existing software. So, you have to actually interface with the existing software, which is again a human or a manual task. So I believe there will be some improvement in productivity but there will not be a significant reduction in the number of people working in this industry.

Also, the industry is continuing to grow with new forms of technology, and new services are required. For example, in AI itself, you have to now collect training data, train the model, ensure that the model satisfies the security and transparency requirements, etc. So, there are new types of tasks being created whenever these technologies are introduced.

The slowdown is again part of economic cycles. There has been a slowdown in the global economy in the last 2-3 years and the IT industry is a replica or a reflection of the global economy. So, when the global economy slows down, the industry also slows down. Whenever a new technology is introduced, the industry as well as its customers will pause to understand the impact of this technology before they actually start responding. So, you will now see new implementations leveraging this technology -- new services, new products, new capabilities -- which means more work for services companies.

I think this slowdown is again temporary and every wave of technology has grown this industry. The introduction of mobile phones, internet, the new ability to connect and every one of them has grown this industry. You have to be relevant, you should understand what new opportunities are there and take advantage of those opportunities.

Similarly, every wave of technology is built on top of existing systems. The old ERP system still runs the core of any company. Now, of course, you have to create large amount of data to train AI models and things like that. This is an additional requirement that has arisen now.

So, all of these things have to be taken advantage of. I am confident in saying that the Indian services industry is a mature industry, very broad-based, financially very strong, cash-positive, has a leadership with tremendous experience, has a client base which is like the who's who, the multinationals of the world. Government support for this industry is also there. As long as these conditions remain the same and emerging technologies create new opportunities, I am confident that this industry will continue to do well and that's the reason why you are seeing GCCs also increasing.

Again, these are cycles. There will always be somebody who pays more. If you are a new entrant, how do you attract employees? You pay more. When GCCs come here, they actually recruit from the industry, and they have to pay more to get people.

This is not new. These are all part of how the industry has evolved. I remember in 1993 when India opened up, all the multinationals came back, you know the IBMs of the world, the Oracles of the world, etc.  The Indian industry was very very small, the total industry was about $150 million, not even billion, and everybody thought this industry will not survive. But today, this is a $250-billion industry.

That is why I am saying that the industry has the experience and the expertise and I consider GCCs as part of this industry. When you see the growth of the GCCs, it just means that India has become the default location for R&D and software development.

Some of it will be through their own operations, some of it will be outsourced. It just shows that this industry is a mature industry, and it will grow, depending on the global economy, somewhere between 5 percent and 15 percent. In a good year, it will probably grow in low two-digits. In a not-so-good year, when the global economy is not good, it will grow somewhere around low single digits. That is what we are seeing.