How India’s IT giants are reinventing themselves for the AI era

As artificial intelligence adoption begins to disrupt the IT industry’s business model, services companies are expanding into newer areas to access a larger share of customers’ AI spending.

IT companies are now entering the data centre space, a significant shift from the traditional asset-light, people-led business model they have mastered over the past few decades. Further, as more customers move critical work in-house to their global capability centres, all Tier-I tech firms now offer AI GCC-as-a-service.

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Last week, IT services major HCLTech announced its expansion into the data centre segment, with its first facility scheduled to come up in Bhubaneswar in collaboration with the Odisha government and Sarvam AI, an Indian generative AI start-up in which it recently invested. This is part of the company’s planned Rs 3,500-crore investment to expand into the physical data centre segment, a shift from its core services-led business model.

In late 2025, Tata Consultancy Services set up a new unit, HyperVault, in partnership with private equity firm TPG to create AI-ready data centres, in line with its aim to become the largest AI-led technology services company. The company has acquired land in Maharashtra and Andhra Pradesh for its data centres, one of which will be frontier AI firm OpenAI’s first data centre facility in India.

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Industry watchers say any attempt to capture a larger share of customers’ AI investments is likely to have a positive long-term impact on the business, despite being capital-intensive. The GCC offering, where companies provide either partial or end-to-end management services to help customers set up, scale and manage their capability centres, is more in line with their traditional services model and is an attempt to recapture some potential revenue loss.

“This is a natural extension of what IT companies offer, based on their client requirements,” said Amit Chandra, Vice President, HDFC Securities. The new facilities that TCS and HCLTech are setting up would largely be for their own clients. “A lot of data analysis and AI work that these companies do doesn’t need to go to the cloud. Working with IT service providers helps companies host their data locally, meeting data sovereignty requirements as well,” he said.
For services companies, it is an opportunity to tap into a larger portion of rising AI spending, which is replacing traditional spending, and to explore newer pricing and revenue models.

“This is a business that is shifting from physical infrastructure to higher-value AI-ready solutions, one we believe will be a new growth vector for HCLTech,” said C Vijayakumar, CEO, HCLTech, during a post-results analyst call.

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“This capacity is also going to help us drive more and more outcome-based contracts and managed services contracts, where we can consume some of this capacity that gets bundled into our outcome-based pricing and managed services pricing for global clients,” he said, explaining the business rationale.

Not everyone is making that transition yet. While announcing its quarterly results, Infosys CEO Salil Parekh said the company had discussed this internally and decided not to venture into the data centre segment.

While there are concerns over the capital-intensive nature of the data centre business, IT firms are expected to work with partners, with investments split among them. Even so, the move could still affect the return on equity (ROE) of services companies.

Chandra said most IT firms have an ROE of 25-26%, while top-tier firms such as TCS are at over 50%. The data centre vertical could generate an ROE of 16-17% and account for 4-5% of a firm’s revenue over time.

“Most of the investments would be staggered over a few years and shared between the partners. If this can help grow business for services companies, then the impact on ROE is not that much of a concern,” he said.