AI impacting revenue for all technology: Coforge CEO

India’s potential as a significant market for source of talent and for driving the global disruption and transformation in the IT sector is well recognised. However, India is not a priority market for IT services company Coforge as it is margin-dilutive compared to the rest of the markets, with only 4-5% of revenue coming from operations here, says the IT services firm.

“India and the proliferation of GCCs (global capability centers) tell you that it is not only emerging as a source for third party talent for organisations across the world, it’s also emerging as a source of talent for them from a more controlled-direct taxes, direct-control talent perspective. To that extent, India will continue to be central,” says Sudhir Singh, the U.S.-based CEO of Coforge.

He believes that compared to 20 years back, technology spends in the country are no longer being seen as a discretionary spend. All innovations and operations in a majority of the industries are technology powered now. “The whole concept of tech services spending going up and down, significantly depending on how the enterprise business outlook was, is becoming de-hyphenated,” he adds.

At the beginning of the year, the company had announced that 40% of incremental investment in FY25 will take place in the area of artificial intelligence (AI). Being an AI-first organisation, AI investments continue to remain in the prime from Coforge’s vantage.

Recently, the Noida-headquartered firm signed a definite agreement with the global AI & IP-led IT services company, Cigniti Technologies to further boost its commitment, acquiring a 54% stake. Coforge believes the acquisition will further help grow the company to become a $2 billion company by FY 2027.

The CEO says the acquisition will lead to the creation of three new scale-up verticals – retail, technology, healthcare, improve its footprint in the south-west, midwest and western US markets and help Coforge leverage the opportunities that the proliferation of AI is creating for specialised assurance services.

“If there’s one thing that excites us more than anything else for the next 10 years, it’s the Cigniti acquisition,” says Singh.

The AI challenge

On the other hand, despite the rapid advancement of AI and its widespread integration into various sectors by IT services firms, a significant challenge persists: the transition to revenue generation.

Singh explains that unlike traditional technology service lines, such as data, cloud, VPO, which run horizontally, AI operates as a diagonal cutting across all the horizontal technology lines. Therefore, all horizontal service lines are being recreated by AI.

Although, not directly, AI is impacting revenue for all technology. “In every horizontal service line, the increase and growth we are seeing is coming on the back of AI,” he adds.

However, he underlines that the persistent problem currently is replicating the AI pilot at a large scale across the organisation, while suggesting that it is the data structure and data handling which need to be addressed first before AI can become effective at that scale.

Although, in a year or two, he estimates, no percentage of Coforge’s revenue will not be influenced by AI directly.

Coforge announced its Q4 results for FY24 on May 2. It reported a 94.8% year-on-year (Y-o-Y) increase in Q4 profit which stood at ₹223.7 crore compared to ₹115 crore in the same period last year, led by deal wins worth $774 million in the quarter. For the complete year, the revenue reached ₹9,179 crore, a 14.5% jump, on a YoY basis.