India’s information technology services sector is heading into 2026 with cautious optimism, as enterprises move from experimenting with artificial intelligence to deploying it at scale, even as risks around cost control, governance and talent shortages intensify.
Executives across IT services firms, industry bodies and analysts say enterprise spending is increasingly being directed toward AI, cloud modernisation and cybersecurity, while operating models are evolving away from labour-led delivery toward platformised and outcome-based approaches.
Spending Accelerates, Pricing Models Evolve
Enterprise technology spending is expected to pick up in 2026, driven by AI and cloud adoption, according to Achal Kataria, Vice President and India Country Head at Cognizant.
“IT spending is expected to accelerate in 2026, driven by AI and cloud adoption,” Kataria said. “Budgets will primarily focus on AI production and cloud-native solutions. Gartner forecasts strong global IT spending growth through 2026.”
Kataria said enterprises are rethinking traditional commercial models. “Enterprises are consciously moving from T&M and fixed-price models towards consumption-based and outcome-driven pricing,” he said, adding that CIO priorities include “security, cost optimization, and sustainable IT.”
He said delivery models are also changing. “Operating models for IT services are gradually shifting from people-led delivery to integrated platforms and services,” Kataria said. “Contracts are evolving toward outcome-based models with longer cycles, creating greater stickiness as the outcomes are delivered.”
Structural Shifts In Service Delivery
At Persistent Systems, executives say AI is driving a more fundamental change in how technology services are structured.
“There are two major shifts reshaping enterprise spending and operating models,” said Jaideep Dhok, Chief Operating Officer – Technology at Persistent Systems. “The first is AI as the core of the ‘service-as-software’ paradigm.”
“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,” Dhok said. “This integration is creating recurring revenue streams for IT service providers, as AI-enabled platforms increasingly serve as the foundation for end-to-end digital solutions.”
Dhok added that enterprises are increasingly focused on ecosystem orchestration. “The second shift involves recalibrating value through integrated AI ecosystems,” he said. “Enterprises are moving toward unified technology stacks that bring together established platforms, startup ecosystems and proprietary innovations into cohesive AI-driven offerings.”
Risks From Overreach And Fragmentation
While demand remains strong, executives warned that AI adoption carries growing risks if not managed carefully.
“Key risks influencing AI adoption include unrealistic ROI expectations, overpromising productivity or cost savings without adequate data readiness or MLOps, leading to dissatisfaction and elongated sales cycles, over-committed outcomes, talent dilution, rising cloud costs, cybersecurity threats, and AI governance gaps,” Cognizant’s Kataria said. “Organisations must address these challenges proactively.”
Persistent’s Dhok said undisciplined AI usage could create long-term 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.
“Without a clear implementation strategy, organizations risk accumulating fragmented tools and idle platforms, echoing the underutilized remnants of earlier technology waves such as microservices and cloud computing,” Dhok added.
Buyers Scale AI, Raise Expectations
At Happiest Minds, executives say buyer behaviour is changing as AI moves into production.
“2026 is the year when enterprises move firmly from trying AI to scaling AI and this is reshaping both budgets and expectations,” said Sridhar Mantha, CEO of Generative AI Business Services at Happiest Minds.
“We are seeing a clear shift in spendings from routine run costs into AI/ML/GenAI/AgenticAI infrastructure, high quality data platforms, cloud optimization and stronger security controls,” Mantha said.
He said buyers are demanding measurable impact. “Demand will remain healthy, but buyer will be far more selective looking for partners who can prove impact and manage risk end to end,” he said.
Talent Becomes The Focal Point
Industry leaders said talent strategy will be a defining factor in 2026 as demand rises for specialised skills.
“The global technology workforce is shifting from execution scale to expertise scale,” said Sangeeta Gupta, Senior Vice President at Nasscom. “Enterprises today are recalibrating their technology spending, striking a careful balance between modernisation, innovation, and cost discipline.”
Gupta said Indian IT operating models are evolving rapidly. “Indian operating models are rapidly evolving from cost efficiency to strategic ownership,” she said, noting that global capability centres are transitioning into innovation hubs.
While upskilling is underway, Gupta said deeper capabilities will matter most. “Technical skills alone will not be enough,” she said. “The real differentiators will be domain depth, adaptability, problem-solving ability, and industry fluency capabilities that enable talent to create enterprise value in an increasingly AI-augmented environment.”
Cautious Optimism Amid Volatility
According to DD Mishra, Vice President Analyst at Gartner, macroeconomic uncertainty will continue to shape the sector’s outlook.
“The Volatility, Uncertainty, Complexity and Ambiguity (VUCA) climate is expected to continue in 2026, and it may not be very different in 2026,” Mishra said. “However, there are tailwinds, such as AI, cybersecurity, and data management, that can help grow revenue.”
Mishra said deal activity remains resilient despite pressure on end-user spending. “The deal pipeline for the Indian IT sector in 2026 is generally expected to remain positive,” he said, adding that “global macroeconomic uncertainty remains a factor that may disrupt expectations.” |
