When OpenAI unveiled GPT-5, an incremental yet meaningful advance in artificial intelligence, the global tech world sat up and took notice. The launch is poised to reshape India’s sprawling IT services industry.

Many industry experts believe the progress could potentially dent revenues in the short term, but unlock a new wave of long-term opportunities in the long run.  

With marked improvements in reasoning, a sharp reduction in hallucinations and lower pricing than competitors, GPT-5 is expected to accelerate enterprise adoption of generative AI, particularly in software development. 

This increased efficiency, however, could slow the Indian IT industry growth, creating a 2-3% drag over the next two to three years. As productivity gains rise, traditional effort-based billing models face revenue deflation for services based on, according to a Kotak Institutional Equities report accessed by AIM. 

While the analysts who drafted the report argue that this is only a temporary setback, they believe the sector is on the cusp of a significant transformation, where new AI-driven businesses will eventually offset the short-term pressure. 

Enterprises, they noted, will increasingly turn to IT partners to build strong cloud and data foundations necessary to harness AI, modernise legacy applications with lower risk, and deploy AI across sector-specific use cases.

Insiders See the Light

Firstsource views this trend as an opportunity rather than a threat. The company’s chief digital and AI officer, Hasit Trivedi, emphasises that it isn’t just GPT-5 alone; new models will continue to emerge, offering the developer community powerful productivity tools.

Trivedi acknowledges that the technology would compress some legacy revenue streams in the short-term, but argues that the focus should not be on offsetting deflation but on stepping into a larger, higher-value opportunity space.

AI is already reviving long-postponed modernisation decisions, building trusted data foundations and operationalising AI use cases at scale, he added.

Among the most promising areas, he identifies four: legacy modernisation; data foundations for AI, AI operationalisation and edge AI.

A senior executive at a leading platform-based company, who asked not to be named, pointed out that advanced large language models are set to reshape the sector. 

Clients of IT companies, he noted, are primarily focused on creating applications faster and differentiating from competitors. With AI tools like GPT, “companies can accelerate coding, boost reasoning capabilities, and enhance productivity”, he said. 

Rather than job losses, he argued that the shift has led to faster delivery and higher-quality output.

The impact is also visible in sustenance services, where AI can correlate incidents quickly and provide real-time summaries to improve 24×7 operations. However, he admitted that revenues may take a short-term hit.

While consulting engagements may shrink in duration, from a year to four months, IT firms will be able to execute more projects at a higher quality. 

He agreed that while headcount needs may fall in some functions, “overall work will expand as clients push for faster modernisation, greater automation and better user experience”.

The executive dismissed the idea that clients might bypass IT firms altogether to adopt these technologies themselves. 

“If that were the case, it would have happened earlier,” he said, explaining that enterprises prefer to focus on their core business and rely on external expertise for complex migrations and AI integration. 

On this point, Trivedi differs. He contended that there is no one-size-fits-all approach. As with every significant technology wave, he believes some enterprises will adopt directly, some will rely on IT partners, and others will go through startups or hyperscalers. 

“Most will experiment across all of these and eventually settle into an equilibrium of in-house vs outsourced, build vs buy. The key role for IT and digital partners will be bringing domain context, integration expertise and governance discipline, because that’s where enterprises will need the most support,” he shared.

Relook the Approach

Roopa Sunder Raj, former MD at Accenture, acknowledged that GPT-5 and similar technologies will have a “huge impact across several IT functions”.

The first barrier to adoption of advanced technology, she highlighted, is mindset, wherein fears of layoffs must be replaced with an exploration of new possibilities. 

Once that shift happens, enterprises need a clear vision and the willingness to experiment with pilot programmes, Raj added. 

Moreover, she also spoke about the need to look into the aspect of immense revenue-generating potential beyond simple cost savings. Raj cited the example of AI’s ability to screen thousands of resumes for a single job opening, something “humanly impossible for recruiters”.

This evolution will fundamentally alter the client-vendor relationship, she observed. 

The future, in her view, lies in a combination of service models where enterprises combine traditional IT support with “plug-and-play” solutions from startups specialising in agentic AI.

The impact, she warned, will be felt most by manpower-heavy IT services. 

“In the past, clients asked for 100 Java developers or 200 Python developers,” she recalled. “Now with generative AI and agentic AI, a lot of tasks that once required large teams no longer need to be built from scratch.”

Consequently, the traditional pricing model of charging for headcount or developer hours is being directly challenged. 

Clients, she added, “will expect new pricing models aligned with outcomes delivered by AI”.

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