According to a significant report from Bessemer Venture Partners, India’s information technology sector is driven by strong India IT Industry Growth and is entering a new era. The current size of the industry is $264 billion, and it is expected to reach $400 billion by 2030. The engine for this rapid growth? Artificial intelligence. We are not talking about yet another forecast from analysts; we are discussing a fundamental shift that will change how technology services are provided, who delivers it, and what opportunities exist for new entrants to the market.
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AI Creates a Once-in-a-Generation Opportunity
Bessemer Venture Partners refers to this shift as a “once-in-a-generation shift” for India’s large IT industry. The company recently released their AI Services Roadmap, which illustrates and demonstrates how artificial intelligence is going to transform the entire IT industry over the next five years.
The numbers speak for themselves — India’s IT industry grew at 8.1% per year from 2022 to 2025. Now, they expect the industry growth trajectory to accelerate—growing at 8.7% a year until 2030. The reason for why it is going to accelerate is that customers are starting to outsource more complex, higher value hybrid human + AI work in various parts of the world.
As Nithin Kaimal, Chief Operating Officer, Bessemer Venture Partners India states: “Every CXO today is under pressure from boards and investors to provide evidence of AI progress. If a startup can prove its value in four to eight weeks, it can win large, repeatable mandates.”
Why Startups Now Have a Fighting Chance
Startups have long found it nearly impossible to disrupt established IT players such as TCS, Infosys, Wipro and HCLTech, due to their large workforce, years of client work and global delivery capabilities that small businesses simply can’t replicate.
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But AI is leveling the playing field in surprising ways.
“Three years ago, it was incredibly hard for a small startup to challenge an Accenture, Deloitte, or TCS. It’s still tough, but there is now a real window. If you have the right combination of founders, product and an understanding of AI, and you can deliver value quickly, it is a golden opportunity,” said Kaimal.
Why? Because enterprises are looking to put AI solutions in place quickly, and traditional IT companies are struggling to change their business model. The vast majority of the largest IT businesses spend less than 2% of revenue on R&D, while global product companies spend well over 20%. This creates a slower pace of innovation into emerging technologies like AI.
At the other end of the spectrum, AI-native startups are designed from the ground up to do intelligent automation, data analytics and AI services. They are inherently designed for speed, and are able to provide proof of outcomes in weeks, not months, and to charge based on proof of concept and outcomes, not billable hours.
How Traditional IT Giants Are Responding
The substantial players aren’t doing nothing. HCLTech made headlines as the first significant Indian IT business to reveal separate AI revenue, earning $100 million for the second quarter of the fiscal year 2026. While not a huge part of the total revenue for HCLTech, the disclosure set a new standard in transparency.
Other behemoths such as TCS and Infosys speak of AI in each deal, but haven’t disclosed a revenue figure. TCS recently announced a $6.5 billion investment in data centers to facilitate AI workloads – that indicates it’s taking the threat seriously.
Industry leaders recognize the challenge ahead. “We have to be paranoid,” said Infosys CEO Salil Parekh, recognizing the disruption that is coming. HCLTech CEO Vijayakumar C cautioned clients that AI will disrupt IT services more than cloud computing or digital transformation ever has.
Startups Are Raising Big Money
Investors are making significant investments in India’s AI startup community. In the first seven months of 2025, AI startups in India raised $665 million through 109 deals—an increase of 50% over the same timeframe in 2024.
Even more telling: The average deal size increased from $4.9 million to $6.1 million, a 24% increase, suggesting that investors are making larger commitments to more-developed startups with more proven business models.
Bessemer Venture Partners announced a $350 million dedicated fund for India in March 2025, focused solely on AI-enabled services, SaaS, fintech, and cybersecurity.
What Types of AI Services Are Growing
The AI services market breaks down into three main categories:
AI-Enabled Services: Traditional outsourcing enhanced with AI-driven automation and analytics. Think customer support powered by intelligent chatbots or data entry automated with machine learning models.
Services Built for AI: Specialized offerings that help enterprises implement AI solutions. This includes data cleaning and preparation, AI model training, and integration with existing systems.
Pure Software Platforms: AI-powered tools delivered as software rather than human-intensive services. These platforms can handle tasks like financial analysis, legal document review, or supply chain optimization with minimal human involvement.
Vertical AI platforms—solutions made for specific industries such as healthcare, manufacturing, and financial services—are particularly hot right now. The global market for domain-specific AI solutions is approximately $5 billion and growing at 40% YoY.
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The Employment Question
The AI transformation brings an uncomfortable question: what happens to jobs?
The numbers tell a different story. India’s largest private employer, TCS, with over 500,000 employees, cut more than 12,000 employees, or 2% of its global workforce, in 2025. Across India’s technology sector, there were approximately 10,375 job cuts in 2025 cited specifically as resulting from AI-driven restructures.
However, the reality is not one-dimensional. AI-related job advertisements have more than doubled between January 2023 and March 2025. AI roles now comprise 6.5% of overall white-collar job listings. Demand for AI skills is growing 75% faster than non-AI roles.
The trend is obvious—AI is displacing routine and repetitive jobs while creating a demand for senior technical positions which blend domain knowledge with AI capability. Entry-level business process outsourcing jobs are at the most significant risk, while older engineers who can leverage AI tools are highly sought.
Why India Is Uniquely Positioned
Despite the disruption challenges, India has several distinctive advantages:
Massive Talent Pool: India currently has 15 million software developers, projected to exceed 20 million by 2027. One in four AI projects on GitHub originates from India.
Cost Advantage: Indian startups benefit from 3-5 times cost advantages in software development compared to Western competitors. This enables capital-efficient scaling.
Domain Expertise: Twenty years of IT services experience has created deep knowledge across supply chains, analytics, compliance, and healthcare operations—context that’s crucial for building effective AI solutions.
Localization Capability: Indian AI companies are developing solutions with multi-language support for Hindi, Tamil, Bengali, and other languages, making technology accessible to hundreds of millions of first-time digital users.
The Partnership and Acquisition Wave
Instead of simple competition, many experts believe we will see a flood of partnerships and acquisitions between large IT companies and AI start-ups.
Mergers and acquisitions in global IT services nearly doubled from 2022 to 2024, surging from $4.4 billion to 10.5 billion. There is now a race among companies to acquire AI expertise, intellectual property, and domain expertise.
Particularly for India, tech sector M&A activity reached $1.48 billion over 80 deals in the third quarter of 2025, 33% above the $1.1 billion that occurred the preceding quarter.
“It is not easy to displace incumbents,” Kaimal observed. “We think we will see a mix of models—some will build capabilities in-house, others will partner with AI-first firms, or acquire firms that are scaling quickly.”
The Business Model Is Changing
One of the biggest shifts isn’t just about technology—it’s about how companies charge for services.
Conventional IT services operated under the “billable hour” model: clients paid for the hours worked by consultants regardless of results. AI is upending that model. When AI tools can accomplish in minutes what used to take days to finish, it’s impossible to charge by the hour.
Instead, firms are evolving toward value-based pricing, where clients pay for documented business outcomes, not hours worked. This change is a huge challenge for conventional IT firms but will create opportunities for AI-native firms that can deliver the results faster and more efficiently.
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Short-Term Pain, Long-Term Gain
One important nuance to the market situation. In the short run, many enterprises will use the productivity gains from generative AI to negotiate lower prices with their IT services.
But Bessemer’s thesis also highlights that this short-term pain conceals larger long-term opportunities. As generative AI takes over low-value work, enterprises are getting comfortable outsourcing more high-value work that had historically stayed in-house.
While the unit price of work may be declining, total work being shifted to an outsourcing model is increasing. Firms with a robust AI-enabled delivery capability will capture that increasing market share.
Looking Ahead
The next five years will be crucial for India’s IT industry, which is undergoing the biggest shift it has experienced since the global outsourcing wave of Y2K in the late 1990s.
AI creates unprecedented disruption and opportunity at scale. Businesses that embrace the disruption, invest in new capabilities, and promote change quickly to derive returns, will survive. Those that rely on their legacy – or old way – of doing business risk becoming obsolete before long.
For startups, the message is simple: there is a window of opportunity to displace the giants, but the window of time is limited. Speed of return and proof of execution will be more important than ever.
For workers, the message is simple: adapt. AI will not eliminate the requirement for human labour or process labour, but it will change what the human value looks like, how it’s done and when.
For India, the stakes are even higher. The IT industry employs millions of employees directly and creates millions while impacting the economy indirectly. To successfully adapt to and build a new version of itself in an AI world, India could solidify its decade-long position as a leader in technology services.
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