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As the world embraces AI and large language models, India’s IT services industry, which has long been known as the best place to outsource work, is facing a crisis. After 20 years of steady growth from “doing what we’re told,” a big question comes up: can India’s software giants switch from execution engines to research-driven innovators?
The AI Disruption
At recent industry conferences, people have been talking a lot about how AI is changing the way companies think about their workforce, their investments, and their business models. Internally, projects that used to need 60–70 developers can now be planned and finished with just a few engineers using tools like GitHub Copilot or GPT-based assistants. But when you talk to young IT workers, they seem unusually content. They don’t seem to be worried about AI’s ability to automate coding, but they don’t say much about how they plan to stay useful, which is a bad sign.
The “Why” and “What” Are Missing
Three questions are important for the lifecycle of a software solution:
– Why: What issue are we fixing?
– What: What should the answer look like?
– How: How do we put it together?
In the past, Indian IT has been great at the “How,” turning exact specifications into code on a large scale. But since AI has taken over the “How,” the industry needs to learn the “Why” and “What”—finding problems that haven’t been solved and coming up with new ways to fix them. This change needs real research, not just quick coding sessions.
Research Investment: A Big Gap
My research shows that India’s top IT companies spend not more than 1% of their revenue on research, which is almost nothing compared to their competitors around the world. TCS spends 1.1% of its revenue on research and development, Infosys spends 0.62%, and Wipro spends 0.5%. But a lot of this money goes to small improvements to existing tools instead of big new ideas.
In contrast, Aadhaar and UPI benefited from concentrated government R&D investments of ₹25,000 crore and over ₹9,200 crore, respectively. These investments led to the creation of homegrown digital public goods that are now an important part of India’s economy and society. These examples show how long-term funding for research can have a big effect.
The Danger of Commoditization
Indian IT companies could become less valuable if they only implement things. Clients will choose AI-powered platforms that automatically write code, which will lower service margins and make it harder to find talented people for traditional jobs. India’s IT workers could lose their jobs in large numbers if the country doesn’t make its own products or unique IP.
Moving Toward a Future Based on Research
– Strategic R&D Centers: IT majors need to set up separate research labs that focus on new ideas in their field, like AI in healthcare, climate analytics, and fintech products, instead of devops inside the company.
– Collaborations with Academia: Working with universities can bring in new ideas and help people learn how to define problems and come up with solutions.
– Venture Investments: Putting some of your money into seed startups can help you learn about new business models and technologies.
– Internal Talent Development: Teaching engineers design thinking, problem framing, and AI system architecture will change the way the workforce thinks from “we code” to “we invent.”
Conclusion
The IT industry in India has done well by learning “How.” But in a world where AI is everywhere, it’s very important to know “Why” and “What.” To go from being an execution powerhouse to an innovation engine, you need to invest heavily in research and change the culture so that people are more focused on finding problems and coming up with solutions. If this change doesn’t happen, the industry risks losing its main strength—fast, cheap coding—to algorithms, which could lead to lower prices and job losses. Now is the time to think again, put money into new things, and come up with new ideas.
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BusinessLine: “Indian IT companies’ R&D spending is still low, even with AI.” 2025
The Hindu BusinessLine says, “R&D Expenses: Top IT services firms stagnate.” 2025
Infosys sets aside ₹850 crore for research and development in FY25, according to The Hindu BusinessLine.
Wipro’s 2024–25 Annual Report