AI Will Deflate Value of IT Work by Up to 25%, Hexaware CEO Says

(Bloomberg) -- AI could lower the price of routine IT projects by as much as 25%, the head of India's Hexaware Technologies Ltd. said, highlighting the impact the technology will have on a sector known for labor-intensive tasks.

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As AI helps to improve efficiency, customers could demand 20%-25% lower fees for some of the work Hexaware accomplishes currently, Chief Executive Officer Srikrishna Ramakarthikeyan said in an interview. At the same time, Hexaware will need fewer people for the same task, as AI increasingly takes over duties, he said.

"For some services, AI is deflationary," said Ramakarthikeyan, 56. "The number of people required to do the same job will go down."

Still, that doesn't mean Hexaware will shrink, the CEO said, as AI will result in productivity gains that allow the company to chase new revenue sources. Hexaware, which competes with the likes of Infosys Ltd. and Wipro Ltd. in India's $280 billion outsourcing industry, will be able to go after work it hasn't traditionally handled.

More than half of Hexaware's revenue is already "AI infused," Ramakarthikeyan said, meaning the work it charges for is produced at least partly by AI. He expects that proportion to grow to about 80% within three years.

Shares of Hexaware have lost more than 20% since its initial public offering early last year as investors have assessed the impact AI will have on its business. Larger Infosys, Wipro and Tata Consultancy Services Ltd. are all down about 40% over the same span.

The major IT firms have already curbed hiring as they prepare for the effects of AI. India's labor market is set to feel the impact: the IT firms traditionally hire hundreds of thousands of graduates each year for projects at multinational corporations, banks, and governments. Hexaware is likely to hire fewer entry-level engineers going forward, while seeking out those with AI skills, the CEO said.

Ramakarthikeyan said customers will be able to reduce IT teams because of AI. Still, Hexaware hasn't lost contracts because clients chose to perform the work themselves using AI, he said.

AI is also pushing Hexaware to rethink how it gets paid. Most industry sales are tied to billable hours, Ramakarthikeyan said, which means gains in productivity may not mean a significant revenue surge. Therefore, the company is now seeking more fixed-price and platform-based contracts and expects AI tokens, or the cost of running AI models, to emerge as a new components of customers' technology budgets.