“Too many attempts to regulate technology can stifle innovation.” Ayman EzzatShivani Shinde, CEO of Paris-based Capgemini Group, says the current phase is the most exciting in the last six to seven years. He told Shivani Shinde in Mumbai during his India visit that the reason for this is twofold. First, IT services companies have become more visible across client organisations. Partnerships with clients have become more strategic and essential. Second, technology is evolving and it is merging with business, leading them to look for partners in their technology journey. He also talks about the hype around Gen AI and more. Excerpts:
Now that the first half of the year is over, how do you think technology spending is looking now?
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Yes, we are seeing a recovery. But the slope of the recovery is gradual and similar to the beginning of the year. We have said that we will eventually see higher exit rates, and we remain firm on that policy. Geographically, Europe has been more resilient than the US. In the US, there was a lot of focus on cost reduction last year. The reason for this is that technology and labor costs went up, and there was increased consumption of cloud and software as a service (SaaS), which also drove up prices. With heavy spending in 2021 and 2022, customers' technology costs went up, and now they want to streamline. The focus on costs remains, but now they want to invest in transformation and efficiencies. We are seeing large programs on how to drive efficiencies.
Is it reasonable to assume that as the economy recovers, discretionary spending will also recover?
No. Clients are looking to get more out of technology. Across industries, technology spending as a portion of operational costs is increasing. And technology spending is becoming more visible and is growing faster than all other cost bases in our clients' businesses. So the focus now is: what value are clients getting? When you look at our pipeline, discretionary spend is flat, but we're seeing significant increases in our larger deals. That's because clients are looking for true impact from technology and they want to measure those results.
How important is AI and GenAI to your clients’ spending?
It's certainly getting a lot of attention. AI is not new, but GenAI is. We had over 30,000 staff working on data and AI even before Gen AI came on the scene. Clients are realizing that Gen AI is still very complex. And like AI, clients need to take it step by step. GenAI was a bit hyped, especially around productivity and cost savings. It's good to see the hype around Gen AI die down and we can actually get to work.
Analysts predicted that GenAI's scale will be significant in 2024. What's your take?
This is the beginning of the scale of GenAI. AI took years. Gen AI is also used on a case-by-case basis. At Capgemini, we currently have around 400 projects underway and around 1,800 deals in progress. These are small projects, the larger ones are at $10 million. We are yet to see $100-200 million deals. It will take time, but I am confident that everything we do going forward will have some aspect related to AI or Gen AI.
Last year, Capgemini announced a €2 billion investment in AI-Gen AI. How is this progressing?
This is a work in progress. A lot of it is related to doubling down on our data and AI capabilities, and a large part of the investment is going towards talent. Some are getting trained on GenAI, others are working on creating tools, assets and platforms. Half of our talent pool is in India, so a lot of ramp-up will be in India. Already, tools and platforms are being developed and built in India.
Last year, Capgemini's employee headcount fell by more than 6%. How do you see this number this year? Do you think GenAI will have an impact on employee headcount?
2022 was also a year of rapid growth and attrition. We had to hire more to make room. Last year was focused on re-optimizing operations to come out of the huge acceleration we saw in 2022. Our headcount in India will grow again. GenAI will bring productivity gains and more importantly, it will bring scalability to the business. The past year has seen several things including rationalization and increased hiring in Global Capability Centers (GCC). More talent is needed and digital talent is always in short supply.
How will AI regulation impact the IT industry, especially now that Europe is the first to enact rules governing the use of AI?
It can get quite complicated for clients to operate. It's good to have some regulations in mind, but be careful. You can't regulate what you don't understand, so you shouldn't regulate too early. I think Europe was a bit early on with regulations. Initially, the regulations were about AI, which made sense… but with the arrival of Gen AI, the rules were extended to it. Too many attempts to regulate the technology can stifle innovation. Gen AI is too new to regulate. Regulation should be there to protect and mitigate risk. Trying to stop risk is like stifling innovation. What we need is global regulation. Imagine a company that operates in a global supply chain segment. How will it comply with regulations that vary from country to country?
Is Capgemini also calling for employees to return to the office?
We will have a hybrid workforce. Some employees will come back to the office, some will work from home. Onboarding of young new hires should be done in person. Why should we force employees to come back? The office is a place for collaboration, innovation, and building intimacy within a team. For that, employees do not need to be in the office five days a week. I think a hybrid workforce will be fine.
On the one hand, companies want to reduce their carbon footprint under Environmental, Social and Governance (ESG) goals, but with GenAI comes increased computing power and power consumption – how do you strike that balance?
You have to look at Gen AI and the whole equation. Using AI creates carbon, but it also has measurable benefits. A lot of Gen AI is a big lever to improve sustainability. Many artificial intelligence machine learning (AI-ML) models can improve the quality of manufacturing and use energy efficiently. You have to look at the whole equation. There are fears that GenAI will lead to more data centers and more electricity consumption. But it will increase the use of renewable electricity.
