Information technology (IT) sector in 2025 saw a landscape defined by “purposeful” digital investment and resilient growth, shedding “pilot fatigue” to embrace production-grade artificial intelligence (AI), industry leaders and analysts tell BW Businessworld.
While the sector continued to grapple with global macroeconomic headwinds and margin pressures, the year marked a definitive structural pivot. Leaders from major firms including Cognizant, Wipro, Persistent Systems, and Happiest Minds describe a transition where AI capabilities moved from experimental discussions to becoming a non-negotiable requirement for deal-making, fundamentally altering operating models ahead of 2026.
2025 Performance: Resilience Amidst 'VUCA' Winds
Despite a volatile global environment, the Indian IT/ITeS sector demonstrated steady domestic strength and resilient order conversions.
“Overall, in 2025, the industry saw resilient growth despite macroeconomic headwinds, while domestic demand strengthened significantly,” said Achal Kataria, Vice President & India Country Head at Cognizant. He noted that enterprises placed AI at the top of their agendas for productivity, focusing on measuring Return on Investment (ROI) rather than mere experimentation.
Jaideep Dhok, Chief Operating Officer – Technology at Persistent Systems, felt the same, observing that the sector’s performance remained strong despite global fluidity. “India’s IT/ITeS sector in 2025 continued to demonstrate steady growth, with AI emerging as a critical catalyst accelerating technological innovation and reshaping enterprise transformation,” Dhok said. He added that despite volatility, “demand patterns stayed broad-based, resulting in strong order conversions across sectors.”
Industry data supports this view of cautious stabilisation. Sangeeta Gupta, Senior Vice President at Nasscom, said that while the Nasscom’s full annual report is due in early 2026, interim data shows a recovery. “The September quarter of FY26 signalled a balanced tone of recalibration for India’s tech services industry,” Gupta said. “Aggregate industry revenue basis an analysis of the top five publicly listed firms... grew 1.5 per cent quarter-on-quarter (QoQ).”
However, analysts urged caution regarding the pace of this growth. DD Mishra, VP Analyst at Gartner, characterised the year’s performance as modest. “Indian IT service providers experienced modest revenue growth, accompanied by significant margin pressure and ongoing global macroeconomic uncertainty,” Mishra said, noting that the “VUCA” (Volatility, Uncertainty, Complexity, and Ambiguity) climate is expected to persist into 2026.
“However, there are tailwinds, such as AI, cybersecurity, and data management, that can help grow revenue. Uncertainty may bring opportunities for new streams of revenue. End-user spending will continue to remain under pressure, but some possibility of a gradual return to growth is expected,” Mishra added.
The AI Pivot: From Pilots To ‘Skin in the Game’
The defining narrative of 2025 was the industry’s shift from proof-of-concept (PoC) to deployment on AI.
Sridhar Mantha, CEO of Generative AI Business Services (GBS) at Happiest Minds Technologies, described 2025 as “a year of purposeful digital investment.”
He added that the AI market has matured. “The market moved past from the pilot fatigue and focused on turning successful experiments into production grade programs,” Mantha said. “Enterprises prioritised taking integrated view of cloud foundations, data quality and modernizing the legacy systems so AI could be embedded into business workflows.”
This shift has hardened client expectations. Sandhya Arun, CTO at Wipro, in an interview earlier this year with BW Businessworld said that AI is no longer optional. “For our clients today, AI is a given. No one even considers a partner without strong AI capabilities,” she said. “Clients want to see real skin in the game, not just PowerPoints or brochures.”
Kataria of Cognizant noted that this focus on ROI drove specific behaviors. “CIOs should focus on three to five high-ROI AI use cases and ensure end-to-end alignment with cloud-AI integration.”
By The Numbers: ROI and Efficiency Gains
As projects moved to production, tangible data on AI’s impact began to emerge, say leaders.
Persistent Systems provided specific metrics on the efficiency gains realized in 2025. “We have launched more than 50 agents across delivery excellence, finance, legal and talent supply chain, achieving measurable savings in turnaround times,” Dhok said. He listed the outcomes: “Accelerated decision making, reduced audit exposure, automation of up to 60 per cent of repetitive tasks, productivity improvements of 20-30 per cent and infrastructure cost efficiencies of 15-25 per cent.”
Nasscom’s Gupta added that financial commitment to AI has solidified. “Enterprises in the last one year (as of CY2024) are spending more than 10 per cent of their digital budget on AI,” she explained.
Outlook 2026: The “Service-as-Software” Paradigm, Better IT Spends
Industry leaders predict fundamental changes to business models in 2026, moving away from traditional headcount-based growth.
Dhok identified a structural transformation he calls “Service-as-Software.”
“The technology services industry is undergoing a structural transformation, with AI‑led initiatives redefining this model by embedding software as an intrinsic part of the offering,” he said.
He explained that “enterprises are moving toward unified technology stacks that bring together established platforms, startup ecosystems and proprietary innovations.”
Meanwhile, Kataria predicts that IT spending will accelerate in 2026, driven by AI and cloud adoption. “Budgets will primarily focus on AI production and cloud-native solutions,” he said. He also forecasted a shift in contracting: “Enterprises are consciously moving from T&M (Time and Material) and fixed-price models towards consumption-based and outcome-driven pricing.”
Mantha of Happiest Minds warned that this scale-up will force rigorous financial discipline. “2026 is the year when enterprises move firmly from trying AI to scaling AI and this is reshaping both budgets and expectations,” Mantha said. “We are seeing a clear shift in spendings from routine run costs into AI/ML/GenAI/AgenticAI infrastructure... As a result buyers are asking for tighter FinOps.”
The Talent And Data Gap
Despite the optimism, 2026 may be fraught with implementation risks, particularly regarding data readiness and talent.
Gartner’s Mishra issued a stark prediction regarding the failure rate of current initiatives. “Half of the GenAI projects are predicted to be abandoned after the proof of concept stage due to issues like poor data quality, escalating costs, and unclear business value,” he said.
He also mentioned the growing threat of AI-specific security breaches. “By 2028, 25 per cent of enterprise breaches will be traced back to AI agent abuse, from both external and malicious internal actors,” Mishra added.
Dhok warned of a new form of technical debt. “AI-generated code and rampant AI experimentation risk giving rise to a new wave of legacy systems, which are costly to maintain, complex to manage and difficult to scale sustainably,” he said.
The talent challenge has also evolved from volume to specialisation. “Talent on the other hand will play a huge role as deep skills in constantly evolving AI engineering, cloud architecture and cybersecurity are in short supply while demand for traditional broad IT roles is stabilising,” said Mantha.
Nasscom’s Gupta agreed, noting that “technical skills alone will not be enough.”
Gupta added that “the real differentiators will be domain depth, adaptability, problem-solving ability, and industry fluency capabilities.”
Reports from financial institutions corroborate the industry’s cautious optimism. HSBC Global Research noted post Q1 FY26 IT earnings that while near-term discretionary spending remains weak, “FY27 is likely to see pick-up in demand driven by recovery in the US macro and increase in demand from IT companies looking to drive enterprise scale AI adoption.”
Meanwhile, an Axis Capital report post Q2 FY26 earnings noted that Tier-1 technology firms, including Infosys and Wipro, saw growth broadly in line with expectations in Q2 FY26. It noted that hiring has restarted, with “Infosys (adding) 8,200, the highest increase since Q2FY23,” indicative of early signs of demand stability. |
