Gen AI boost: GenAI could boost India’s outsourcing business margins

Specializing in technological services ServiceNow has earned $10 million in annualized tangible profits thanks to cost savings and Increased productivity across the organization as a result of using Gen AI, a senior executive said.

The company’s AI-enhanced product Now Assist, which offers customer support with virtual agents, customer service management, HR service delivery, ITOps management, field service management, strategic portfolio management, AI search, etc., has emerged as the company’s fastest-growing product with 11 deals exceeding $1 million in annual contract value in the second quarter (April-June), Pat Casey, CTO and EVP, DevOps, ServiceNow, told ET. Casey also cited Wipro and LTI Mindtree as case studies that explain the impact AI has had. “Through the integration of Virtual Agent with Microsoft Teams, Wipro “Employees can now quickly find answers to their requests. Common tasks, such as resetting passwords or ordering a new laptop, can be resolved in less time than with a human agent. This increase in efficiency has resulted in a 40% reduction in service requests and a 25% reduction in support call volume,” he said.

The virtual agent now handles 16,000 requests a month, growing by 40% each month. Meanwhile, at Mindtree, IT operational costs have been reduced by 50%, he said.

Benefits for India

India, the leader in the IT services outsourcing market, stands to benefit the most from Gen AI applications as they offer the opportunity to expand margins. “(The outsourcing business) is a huge part of the Indian economy. And that business runs on very thin margins and has been under pressure for years on that front,” Casey said, adding that Gen AI could quadruple these margins, which are as thin as 5%.

When asked about the adoption of his StarCoder text-to-code AI model, Casey said developers are using it for code completion, summarization, snippet retrieval, and more. Internally, the model has boosted developer productivity and innovation velocity by 52%.

Will AI replace humans?

He warned that people are overselling the idea that AI-generated code is replacing developers. “If you look on the internet, there’s always someone saying that developers can just sit on the beach and have a drink, and the code will write itself. But anyone who works in the industry knows that’s simply not true. It’s very much the human being in the loop. You need to know your code well enough to know what you want it to do,” he said.

StarCoder LLM is an open-source large language model (LLM) for code generation developed by ServiceNow Research and Hugging Face. Trained with one trillion tokens, the model has a size of 15 billion parameters and is trained using permissibly licensed source code in over 80 programming languages.

In terms of workforce, Indian employees account for more than 20% of ServiceNow’s global workforce and Hyderabad has become its largest site in terms of headcount, the executive said. “The India team has become a microcosm of ServiceNow globally. In India, 85% of its employees are engineers and developers, and more than 40% of our global product engineering is done from India,” he said.

Asked about building AI processing infrastructure in India, Casey said, “Right now, I don’t have any India-specific GPUs (graphics processing units) on my roadmap, but that depends in part on our success in the local market. If there is demand in the market, that’s something we would definitely consider.”