Cost concerns could delay AI ramp up among IT clients, Infosys exec says

FILE PHOTO: Figurines with computers and smartphones are seen in front of Infosys logo in this illustration taken, February 19, 2024. REUTERS/Dado Ruvic/Illustration/File Photo

MUMBAI (Reuters) - IT clients are excited about using artificial intelligence, but cost considerations are forcing them to apply brakes on the faster adoption of the technology, a top Infosys executive said.

"You have to think about return on investment, because this tech, unlike the other ones, is high on cost," Satish HC, executive vice-president and co-head of delivery at India's No.2 software services exporter, told Reuters.

Clients have focused on cost-takeout projects in recent times. Satish said budgets are being eaten up by "absolutely essential" requirements, such as making themselves resilient to cyber attacks, which may delay AI scale-up.

"Some of those priorities are reducing the pace at which organizations go," Satish added.

The Indian information technology sector is expected to grow a modest 3.8% to $253.9 billion in the year ending March 2024, as clients cut spending and delay decision-making amid inflationary pressures and global economic uncertainty.

While some companies may not be ready for AI scale-up due to reasons such as not being data-ready, the technology is being adopted rapidly by others for the higher opportunity it provides, he said.

Infosys, however, is optimistic about its bet on the futuristic technology.

"At Infosys, I don't think we were digital first... It took us a few years, but now that we have the hindsight of how we adapted to digital, we are adapting to AI much better and I think we are going AI first," he said.

While 2023 was a "sliding slope", 2024 could be a year that lays the foundation for the future, he added.

India's AI market is projected to touch $17 billion by 2027, growing at an annualised rate of 25-35% between 2024 and 2027, according to industry body Nasscom and consulting firm BCG.

"I think you can build a lot of foundation for acceleration. That's why I call this a bridge year," he said, adding he still does not expect clients to splurge.

"I don't see that significantly changing because half the world is going through elections this year," Satish added.

(Reporting by Haripriya Suresh; Editing by Dhanya Skariachan and Eileen Soreng)

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