New Delhi [India], March 11 (ANI): The Indian IT services industry faces no major threat from the emergence of Generative Artificial Intelligence (Gen-AI), and the sector is likely to emerge stronger from the ongoing technological shift, according to a report by Nuvama.

The report noted that with the advent and rapid adoption of Gen-AI, concerns have been raised about the future of the Indian IT services industry.

It added that obituaries of the sector are being written across the market, and these concerns have been amplified by sharp stock reactions, first in global Software-as-a-Service (SaaS) companies and now in IT services firms.

It stated 'We see no existential threat from Gen-AI, as we believe the requirement for a system integrator--which can customise an enterprise' plug-and-play software's input and output as per its requirements--shall always exist'.

Nuvama highlighted that similar fears have surfaced multiple times in the past whenever the industry faced disruptions.

The report pointed out that during several key global events, experts had predicted the downfall of the Indian IT services industry's offshoring model. These included the Global Financial Crisis (GFC) in 2008-09, the rise of Robotic Process Automation (RPA) in 2012, the election of Donald Trump as the President of the United States in 2016, and the outbreak of Covid in 2020.

Despite these challenges, the industry continued to expand and strengthen its global position.

According to the report, the Indian IT services sector not only survived these disruptions but also emerged stronger and captured market share more robustly over time.

Nuvama believes the current situation surrounding Gen-AI resembles previous phases of disruption faced by the industry.

'We see this as a deja vu moment for the industry and believe it shall come out of this disruption--just like earlier ones--with a net increase in its total addressable market (TAM),' the report said.

The brokerage maintained a positive outlook on the sector from a medium to long-term perspective, although it noted that near-term volatility could persist.

The report also highlighted that the sharp correction in IT stocks over the past two months has made valuations highly attractive.

Nuvama further stated that the industry is once again at a crossroads where the emergence of a new technology, Gen-AI, has raised concerns about the sector's near-term growth and long-term survival.

However, the report emphasised that Gen-AI does not pose an existential threat to the industry.

According to Nuvama, the need for system integrators will continue to exist, as enterprises require firms that can customise plug-and-play software and adapt the input and output of such systems according to their specific requirements.

It added that even as companies move toward automation of tasks, enterprises will still require organisations to take ownership of systems and manage their integration.

In such a scenario, as per the report, IT services companies are expected to continue playing a crucial role in supporting enterprises in adopting and managing new technologies, the report added. (ANI)