Siva Ganesan, who took over the business head of AI.Cloud at India's largest software service provider in July 2023, left earlier this month, according to two people who know the issue. His exit led the new AI unit following the appointment of company veteran Amit Kapoor.
Two bosses in the AI business for over two years have been overhauled at least three times in the last three years, reflecting TCS' uncertainty regarding new technology. The Mumbai-based company is laid off 1,200 intermediate-level executives, or 2% of the workforce, to be “ready for the future.”
“TCS has been delaying its colleagues on this issue and appears to be making changes to address this market gap,” says Peter Bend Samuel, founder of Everest Research. “TCS still doesn't know how to drive to a new AI operating model and how to get its clients on this journey.”
TCS is staring at the risk of falling behind in the Indian AI services market, according to the Boston Consulting Group, with an estimated opportunity worth $17 billion by fiscal year 2027. Accenture PLC has a market and client base that overlaps with its homemade peers and is already beginning to deliver results from its AI team.
mintQueries sent via email to TCS on September 13th and September 24th remained unanswered.
Double Wrmmy
Despite the IT services sector facing surveillance with US President Donald Trump, it has raised the fees for H-1B workplace visas, primarily used by technology companies, from around $1,000 to $100,000, threatening India's $28.3 billion information technology (IT) services sector.
An uncertain demand environment has already forced the company to cut down the employment of AI talent. “Demand is generally low this year, and AI engineers are not as high as last year,” the first executive who spoke about the terms of anonymity quoted earlier.
According to executives, TCS was employing around 1,000 engineers with AI expertise in its last finances. “There aren't many skilled people in the market. Even if the company wants to hire more, there's that kind of talent deficit.”
However, TCS' AI challenges predate the expansion of consultations in the US.
The company established AI. In August 2023, the Cloud Business Unit collectively provided AI and cloud services. This illustrates the initial change in the operational structure of AI. Leading by Ganesan, they provided AI and cloud solutions to clients who integrated under one banner, rather than maintaining a small team that caters to individual clients.
In May this year, TCS split AI.Cloud into AI & Data and Cloud Units for “acceleration, expansion and sharpening focus.” Ganesan combined AI and data led, and his deputy Krishna Mohan took over Cloud's responsibility.
However, the company announced another Rejig last month. The formation of the “AI and Services Transformation Unit” led by Kapur, reporting to TCS Chief Operating Officer Aarthi Subramanian. The move aims to integrate the company's existing AI teams and capabilities with other service units and industry business groups.
“The reason for the new AI unit is to determine AI-driven revenues because there is no clear pricing strategy for AI services,” the second executive said.
However, according to Bendor Samuel of Everest Research, AI has stopped operating margins for TCS.
“One of the key complications facing TCS is that new AI behavior models dramatically disrupt existing appropriate models and remove important sources of TCS profitability,” he said. “This is very difficult to grasp. It's clear that they're losing confidence in their existing leadership in this area and are making changes.”
This GEN AI-induced tissue flip-flop has made shareholders cautious. Since ChatGPT launched in November 2022, the company's shares have fallen almost 15%. The company's stock fell 29.3% from the start of the year, becoming one of the worst SenseX stocks amid slowing demand and growing scrutiny in the US.
Accenture shows the way
TCS' growth has slowed amid a massive lack of trade and uncertain macroeconomic conditions. TCS closed in its last fiscal year with revenue of $30.18 billion, up 3.78% per year. This is the lowest growth in four years.
Since its listing on the stock exchange in August 2004, there is a year-end risk with a decline in revenue, Motilal Oswal Analyst Abhishek Pathak, Keval Bhagat and Tushar Dhonde wrote in a note dated April 11, citing the rampdown of the BSNL project.
TCS troubles when navigating AI strategies occur when Accenture PLC, the world's largest IT services company, is leading the pack. Dublin Headquarter's Accenture reported $2.7 billion in revenue from Gen AI when it announced its full-year results last week. This shows a triple jump from the previous fiscal year when it reported revenue of $900 million from new technology.
The company's GEN AI business has grown rapidly.
“In fiscal year 2021, around 30 AI professionals have 40,000 AI professionals, and we are working on a very small number of GEN AI projects. Today we have 77,000 AI and data experts. This year we have worked on more than 6,000 advanced AI projects. Analyst Interaction on September 25th.
Gen AI accounted for more than half of Accenture's incremental revenue, $4.788 billion. Accenture, which follows its September-August calendar, ended with revenue of $69.7 billion last year. At that base, less than half of Accenture's TCS still struggles to call in revenue from Gen AI.
Accenture's management is thought to be attributed to AI leadership, regardless of market conditions.
“When you look at the market, you don't see any positive or negative meaningful changes across the market. We focus on delivering results regardless of market situation by being most relevant to our clients, and today's relevance requires AI leadership,” Sweet said.
