BREAKING: AI Compute Is Killing India's WITCH Model - The $350B IT Outsourcing Era Is Over

Added: 2026-05-14

[00:00:00]Enthropic went from $1 billion in annual recurring revenue to 30 billion in 15 months. In roughly the same period, India's biggest IT firms, the companies that built their reputations across a quarter century of global outsourcing grew between two and 6%. Those are not numbers from the same race. No. Well, it may not be the numbers from the same sport altogether. The acronym the industry grew up with was which we pro emphasis TCS Cognizant HCL. The acronym the market is now watching is Mango.

[00:00:37]Microsoft Meta Amazon Apple Anthropic has just joined in this Mango season.

[00:00:43]Nvidia, Google, OpenAI. I have two guests with me today who understand exactly what that kind of change really means. I of course have with me our ever so evergreen Romesh Padakord who is with prime America bringing the enterprise buyers perspective on how this plays out in financial services and then of course I have someone who I've met in person and I've had a wonderful conversation with I'm of course referring to Mr. Pravin Bada. He is of course the CEO and MD of Neoay Global guiding organizations through what this repricing actually costs. And of course both of them are joining me on front page to well unravel what is going on. Gentlemen that is the question I would like for you to start with. How are you doing both of you?

[00:01:36]>> Oh doing great. Yeah, >> wonderful Romesh. Great as always to have you with us. Pravin, thank you so much for joining us again on front page.

[00:01:46]Uh you're joining me now virtually. So we have now completed the loop in person has happened. Now you're virtual with us. Wonderful.

[00:01:54]>> So the story has come full circle.

[00:01:57]>> But I would like for you to please start with the opening. Pravin since you are going to be somebody who is going to be speaking about and giving us a lot of details as far as the Indian IT is concerned. Let me establish that for the viewers. Romesh on the other hand is going to be well representing Mango.

[00:02:16]So I would like for you to go ahead and let us know what is actually going on in terms of if you could set the context for the viewers. I would like for you to start Pravin.

[00:02:28]>> Sure. Sounds good. again thanks for having us Sudhi Romesh good to be here with you. Um look uh Sudi this is a very very interesting time in the tech industry right now. um uh you know this kind of disruption right the way AI is evolving this disruption in the last 30 40 50 years of tech history uh is the fastest right and um uh we may not be done yet we're just at the starting point of this disruption and uh in our view this will take another 18 to 24 months >> to get to absolute clarity both on the buyer side uh in terms of the demand enterprises companies are consuming AI AI with the hope of unlocking productivity of all kinds >> and at the same time the supply ecosystem right we are obviously seeing acceleration of innovation but that innovation is not done yet right we we are likely to have lot more powerful foundational models lot more new and sometimes even crazy announcements come in >> completely different architecture of different industries be tech platforms be tech services and so on and so forth right now specifically on tech services.

[00:03:38]I think uh uh having looked at the market for last two decades uh and more and you know being in conversations with tech services ecosystem very deeply in the current times we see this as a net positive trend. Sudhi right u you know which obviously is there there are larger Indian IT services companies there are uh global companies of scale that are out there there a lot of mid-market companies right who have over the last 10 years in the context of digital they've evolved in a very meaningful way and when I say evolved it's more in the context of I mean tech is table stake right everyone gets to same capabilities at some point but >> largely on the back of the trust that they've been able to establish with their buyers right and that ecosystem in our view with all the changes that are happening today in AI uh I think the the sector the tech services sector will ultimately be a net beneficiary of this right and the reason I say that is because you know there's innovation at speed right and there's you talked about in your opening narrative in terms of how some of these companies the platform companies are making money and all of that right >> the reason the very reason tech services ecosystem exists is to make that technology purposeful, right? Give the convenience to enterprises to adopt that technology in the context of their workflows, in the context of their business, right?

[00:05:03]>> And that glue in between, the glue between innovation and consumption is where the tech services industry thrives, right? So therefore the more innovation that happens here, the more intent that arises by enterprises to adopt and consume this innovation, we as an industry observer see this as a very very positive trend for the tech services ecosystem.

[00:05:26]>> Okay, >> I'll stop there.

[00:05:28]>> Romesh he set the context as far as the Indian IT is concerned. I would like for you to obviously establish it from the mango point of view and also I would like for you to probably you know give weigh in and and tell us all do you really agree with Pravin what he's talking about in terms of the sheer amount of innovation do the numbers actually go ahead and you know echo what Pravin is talking about >> thank you Sud for inviting me >> as always pleasure >> you uh I do agree with Pravin on the innovation the ecosystem that has been developed.

[00:06:06]Um and coming from the perspective I think this is uh this base this revolution um has been created I would say basically from the mango side.

[00:06:19]>> Mhm. Because um as we all know uh the in the five layer cake uh the you know the enhancement in the GPU the processor the chips okay by Nvidia >> which was and the CUDA you know they developed over the last what about 30 years 25 30 years followed by the hyperscalers and their software ecosystem that they built prior to AI itself >> and now they're using this AI computation or they're creating this massive computation >> to solve our problems. That's what we are hoping though of course is on in in medical research primarily in you know in climate in other places things like that. Um there is uh this mango is creating the base uh and has created the or creating the infrastructure uh to revolutionize our lifestyle our our life to make it easier. Now productivity will improve a lot.

[00:07:25]>> Okay. Now you are already seeing it in the American economy. Last post pandemic the productivity the curve is again improving just like in the '90s after the internet um came and then they the productivity improved.

[00:07:43]>> Fair. Therefore, for I am saying yes the mango is going to make a a big impact and on this whole atmosphere and apart from of course the Chinese Chinese technology is also there we should we cannot >> fair enough I'm not going there but I'm saying according to you mango will make an impact will it overwhelm the witch is the question which we are trying to understand and get deeper into of course before I get into to the next phase of the discussion. I would like to of course please share with the both of you gentlemen that I'm as per positive of time as per the way we are going to try to cover as much as possible. I'm not going to give more than 2 minutes uh to each one of you because I would like for both of you to get as many thoughts as you can across. So uh please excuse me in advance. I'm not going to be rude but I will have to obviously come across to the other person. I hope you're okay with both of that. Right.

[00:08:39]>> Sure.

[00:08:40]>> Wonderful. All right. So Pravin, I'd like to start with you. Now that the context has been set, I'd like to ask you this. What do you what are your thoughts on this emphasis this quarter reference unusual pricing behavior from competitors? A rare admission from a company that built its model on predictable margins. So the point I want to ask you this is this. When emphasis uses the word unusual in an earnings call, what are they actually describing?

[00:09:03]Previne, you got 2 minutes.

[00:09:06]>> Yeah. uh so I think uh look there's no denial that the industry is going through a reset right and in our context we call it the complete refounding of tech services right so it is there's no doubt in anyone's mind that the way the industry evolved in the last 30 plus years uh all of that will change over the next 3 years right so this 30 years of um you know uh innovation and acceleration will look and will morph into something very different right And where there's lot of uncertainty, there's a lot of flux, there's lot of, you know, newness, right? There are a lot of moving parts. And at this point, everyone that we speak with both on the customer side as well as on the platform and services side, a lot of them are, you know, kind of quite honestly crystal ball gazing in terms of how to put all of this to purpose, right? And in that sense, you'll always find customers who will go on the extremes, right? There'll be customers who say look I want 40 50 60% reduction in the >> honestly prain sorry I want to add something here point is the Indian it has forever been very circumspect right has been very veiled in the way that they project things to everyone right they don't really reveal everything we know that they've not been very transparent so do you feel do you agree with me on that >> you do right >> it's gone I don't I don't think there'll predictability uh in terms of where the industry will evolve right I think you'll always see >> the point I was trying to make is this please I mean you can add that to your response the point I was trying to make is this when there is an admission like this right where somebody says unusual is that finally an admission to the fact that okay wait a minute yes we are on the cusp of going through some form of a transformation because that's not happened in Indian IT for the longest amount of Yes, this is an admission that the industry is changing and you know companies are doing their bit to kind of survive and thrive. There's lot of uh uh business model transformation that we can talk about that is in play as we speak and purely because there's admission by the way there was admission of the similar nature when offshoring was coming in. There was admission of a similar nature when digital came in in a big way. There was admission of a similar nature when RPA kind of put a very big risk on appdev market >> the biggest value pool for services company right so I don't think there's any denial about this fact that uh things are changing right now the only problem right now is that the change the pace of change is very fast and for companies of this size right the witch size for them to adapt to that is quite challenging change is never easy right and at that scale change is definitely hard Right. So >> there'sness but there's also optimism right in terms of why this will be net accurative for the industry and yes we are going through a phase where there's confusion where there's lack of clarity but you know the industry is putting its uh bets forward to kind of come out lot more uh you know positively out of this post.

[00:12:19]>> Fair enough. where Pravin has just left off. Pravin has established the fact that yes there is a certain amount of foggess right now but there will be clarity at the end of the tunnel fair.

[00:12:30]So I'll take it up from there. I want to ask you this uh Romesh is in terms of a buyer today right if let's say you're a buyer from Mango how would you approach Indian IT which is which represented by provin how would you have approached him 3 years back what would be the nuance change in the way that you would approach them today >> okay now there are a few factors here one is uh the the whole model of the number of man hours and you know charging by the hour I think that model maybe it'll it'll slowly change I feel okay that's one thing second thing is it's not the implementation of the just the simple software it's more like hey how do as a company let's take four or some some client like how can I how can you help me out in uh you know getting this model getting this my my entire data and ecosystem you know to leverage the AI >> so therefore because these companies are not familiar with AI earlier it was like giving a project and implementing it now it's not like that they have to use this these IT services should use this uh technology and help try to solve the uh customers issues therefore the talk will be different. It's not going to be just simple you know number of people and man and billing for >> it will take some time as Pravin said there will be some flux there will be IT services which has to learn some of the things it's not going to be we will know in the next two three years this whole they will perfect the system but there will be some changes on that it cannot be the same talk or the same discussion as it was three years ago Okay, this is one question which I would like to conclude today's discussion with gentlemen which is the fact that the fractal CEO I mean we are aware of the fact that fine Indian in general has been talking about margins it's been talking about you know pricing etc and various other factors it's been going through a certain amount of choppy waters and then you have fractal which is doing remarkably well the CEO comes out and says there's a 100 time 100x opportunity which is available out out there. I would like you both to weigh in. I would like to start with Pravin. Do you feel uh with this statement coming in with the fractal CEO Pravin that it would be probably somewhere uh sending out some sort of a signal that Bango season is ending both literally and metaphorically and we will have the witch season which will suddenly start to blossom or do you see it very differently because that is a great statement to make coming from the CEO of Fractal that there is a 100x opportunity as far as the software market is concerned.

[00:15:35]Yeah, look, I think we've been long saying that this will be a huge opportunity for the tech ecosystem. The lines will get blurred between what is software and what is services. But ultimately, uh, as long as customers care about the outcomes of their business, there's lot of money to be made being a being in the tech services ecosystem, right? In fact, just to give you the data point, right? As with this whole new models like mythos and all of those coming >> entire software world right is up for is available as an opportunity to modernize right because you know you have to protect your software with models like mythos and so on and so forth right so there there'll be no dirt of work I'll say it's probably more than 100x right in terms of the opportunity if you project it out at the at the terminal value right >> and I don't also see this as a competition ation between Mango and Rich quite honestly, right? Kind of they they are upstream and downstream to each other and they need each other to be able to get to that exponential value, right? the the 100x or beyond that we're talking about >> they both need each other as an ecosystem provider ecosystem enabler to tap into that without without Mango investing the capex the way they are doing this 100x 100x is going to be not real >> and without services companies being there >> you know customers can tap into this potential at a pace that they really need to do right so I think it's kind of coexistence of the two. Yes, there's a lot of noise around, hey, you know, Enthropic is doing a services company and OpenAI is doing a services company.

[00:17:15]>> I see this as a very very positive thing. It actually challenges the earlier narrative of saying look services are dead. If anthropic and open AI are saying that services ecosystem to accelerate AI adoption, that is a very very positive sign for the IT services industry. That's an extremely positive sign for the employment uh ecosystem, right? This will create a lot of demand and so long as you are teed in those environments, you know the technology really well, there'll be no dirt of work. We are very very bullish on the ecosystem, I think the 100x number is maybe underestimated. It can be a much wider, much bigger play uh if we play the cards right.

[00:17:57]>> Wonderfully put. I think it seems like times ahead look extremely exciting and nice. Romesh U since you've been representing since you've been of course representing Mango I would like for you to please comment on what Pravin has mentioned and will mango mean the fact that which is a requirement moving forward there will be a wonderful marriage and which means no pun intended that I've left you >> um overall I agree with with what Pravin says but I don't know whether it's 100x I don't I can't put the numbers but the that as Nandanda Neil said um he has been saying for the last two years >> we mean I'm talking about the Indian IT services should concentrate on the applications and on the implementation that's where the money is rather than go for the models which become commoditized there is a heavy investment things like that therefore I do agree that the applications is there Now you take cursor a phenomenally successful company just hardly two years old and it's already running an AR with about $3 billion revenue or something like that.

[00:19:13]Okay. Uh same thing with uh other uh with others applications there or even on the services side yes it can be utilized and that's where the rich would have to work with the mango. You're right. Exactly. there will be a marriage and I believe Ashwini VHN the IT minister has also mentioned this very categorically that India will become probably the use case capital of the world probably that's exactly what both of you were talking about that that the the road ahead seems to be right now going through a certain sense of agess in terms of how it'll all form etc but with the sheer amount of legacy that these companies are bringing I think yes moving forward coming together might make a lot of sense because it'll also help the ecosystem. Fair.

[00:20:06]>> Absolutely. Yes. I agree. I agree on that. That's where that's where the because the software, the the implementation, the services, the consulting, that's where uh the dollars are rather than at the model level which all these these five companies are fighting it over. Yeah, it'll get commoditized. I don't know whether that's why remember uh Sudi uh today yesterday OpenAI went for the deployment company. They started a deployment company. Yes.

[00:20:36]>> That's what Pravin just mentioned.

[00:20:39]>> Yeah, exactly. That's and also Anthropic did the same thing.

[00:20:43]>> That's where the things are going.

[00:20:45]>> I agree.

[00:20:46]>> I'm so glad that all three of us at the end of this mango season are not waring with each other which is a good thing.

[00:20:54]There is pie for everyone and it seems that that has made Romesh very happy and Pravin as well. Well, thank you so much both of you for joining us on front page as always. It's a true pleasure having the both of you with us and we would of course like to bring you back on because you know honestly this journey is truly very dynamic. There are changes, there are announcements, there are things which are going on which are taking place at breakneck speed. So well we'll of course bring you back and it'll be truly as always a pleasure to host you on front page again. Thank you so much for today.

[00:21:26]>> Thank you. Thank you Sudi. Thank you Pravin.

[00:21:29]>> Bye-bye.

[00:21:30]>> Right. Well there you have it. uh the witch acronym built an industry employed millions and put India on the map of global technology. Now of course let's talk about the mango pie or maybe the acronym which is the boring bit is actually building something that does not need the same number of people to generate the same or greater revenue that I believe is the tension sitting underneath every earnings call this quarter. Romesh and Pravin have both made clear very clear today that the window for repositioning is open but not well maybe indefinitely everyone is trying to put a timeline to it but who knows it is tough to do so in such an environment as on date at least all of them both of them agree the fact that moving forward it is about using each other's legacy using each other's positives and trying to find something new which will only help the ecosystem become a lot more robust as far jobs are concerned, as far as new models are concerned, as far as a new way forward is concerned. What are your thoughts? I would love for you to tell us in the comments below. This, ladies and gentlemen, is front page by the IM network. Like, share, subscribe, and always remember, think AI.

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