Let's go on to our next session this morning. And this session asks a very critical question. Will Indian tech simply adjust to this AI wave or will it rethink its business models, its investments and its talent strategy to lead the next chapter. Taking us through this session, we're absolutely delighted to have with us a leader where under his leadership, HCL Tech has accelerated growth while building a billion-dollar software. Also widely recognized for his strategic vision and executive excellence. He's earned multiple global CEO honors and played a very active role in shaping the industry as well as ESG leadership across international forums. Please put your hands together as we welcome C. Vijaya Kumar, CEO and managing director HCL Tech. And hosting this conversation we have with us Noshir Kaka, senior partner McKinsey.
CV, it's an absolute pleasure to be back here with you. I think for one bit of introduction that folks may not know, in a decade or in an era of shrinking CEO tenures, I think 2026 marks the 10th year for CVK as the CEO of HCL Tech, and congratulations on that.
So with that CVK, we'll get straight into it. You know, this industry is at a very interesting time. Once again, the obituary of the IT services industry has been written, I think almost since the day it started. I remember going back in sort of '99, and we were kind of saying, 'Oh, well, once Y2K is done, like what are you going to do on 2nd of Jan?' Right. Then came the SaaS revolution, and people said, 'Well, software is going to need services, that's pretty obvious.' Then came digital, and we said, 'Oh, hang on, you know, how do we retrain this workforce at this speed?' and you know, it's not going to happen. And now is the AI revolution. Is this time going to be different, or pretty much the same again where every time the industry has only got stronger?
Yeah, thank you Noshir, and thank you NASSCOM leadership team for giving me this opportunity to talk to you. I was here last year, and I think this was the hottest topic. I believe whatever I mentioned became a little controversial. But my answers are not going to be very different. Is this time different? I would say yes and no. It's not different because this time again, it's really not the obituary. I think the industry is going to reinvent, and what a lot of people, doomsayers especially, miss is how messy the enterprise IT landscape is. And it is different for many reasons, right? Because whether it is cloud, digital, Y2K, all of that needed more people, right? This time, the inflection is really making a lot of what we do and our people do, can be done a lot more efficiently with significant speed. So I think this transition is different from the other transitions. It's going to be painful because it really involves people. But do we have solutions? Is there a way ahead? I think there is a very, very promising road ahead. It's going to be a painful transition, painful reinvention I would say, but it's definitely going to happen. I think we have amazing talent, amazing leaders, very, very reputed companies. So I feel very confident that as an industry we will emerge stronger and not only stronger, much more relevant to an enterprise IT landscape.
Wow, that's good. So hopefully from last year to this year that confidence will continue. Um, so they say, you know, in a person's life there are two things that are guaranteed: death and taxes. Okay, if I might add a third, it's actually that enterprise tech spending continues to go up, right? And no matter what survey you look at, whether you look at ours or anyone else's, when we spoke to about 600 CIOs in December of last year, they said actually on average the enterprise tech spending is going to go up by about 6-7%. Right now, so start with the opportunity on that side, which is for the first time, but we are seeing that spending is actually shifting away to hyperscalers, to chip companies, and so on. So when you look at the enterprise tech stack and the spending which is going to continue to increase, how are services companies operating in that, and do you see value shifting towards services or shifting away from services?
See, I think if you look at the enterprise tech spend, it continues to increase; there's no doubts about it. I can't see any company in the world which is telling us that they're going to spend less on tech, right? Because tech is the business. Now, there are multiple stacks as you rightly called about the semiconductor and the technology OEMs like Nvidia, for example, then you have the hyperscalers, you have the SaaS companies, and now you have frontier model companies, and then we have tech service providers. I think the value is going to shift over time. Today, enormous value is captured by the tech OEMs and the semiconductor companies. That's because it's truly driven by a constraint that exists, and whether it is for semiconductors or even technology, I do think there will be more competitive players who will emerge, and the hardware OEM industry would follow a similar trajectory like what hardware has always followed, right? There are more people, more competition, pricing cheaper, all of that. So I think the value is disproportionately with tech OEMs and semiconductor companies; I think it will shift. The second is, of course, hyperscalers. They really have become the enterprise compute layer and all the innovation around that, and I think they will continue to capture a lot of revenue from enterprises, but the hyperscaler business model also is now so much capex-intensive. So I'm not sure if the revenue that they can capture is really in proportion to the capex investments, and there could be a little bit of economic dilution. Now, SaaS companies, yes, of course, they have very strong hold in enterprise, whether it is enterprise ERP or CRM or any function. But if you see the last decade, SaaS companies enjoyed very strong pricing power with the enterprises. Now it's because they are so embedded; clients are so dependent. So they could every year grow at least 10% by just raising prices. Now I think that is being challenged. I'm not saying it's getting disrupted, but SaaS companies are getting challenged because AI-native companies, the frontier model companies, can really enable native applications which can chip away some market share from SaaS companies, for smaller companies to start with, even large enterprises, because SaaS companies have been a little bit unfriendly with enterprises. If you ask any enterprise CIO, he would tell us these guys keep increasing prices. I'm sure I have a lot of friends from the software industry, but that's a reality. I think because of that, some functionalities will chip away from these companies. I think the biggest value will get created in the long term from frontier model companies and service providers because service providers have so much of enterprise context; I think that is going to be immeasurable value as companies want to modernize their stack with an AI-native mindset. I think that's where I think long-term value will be, and that's what gives me also a lot of confidence that our tech services industry has a huge opportunity to transform itself to capture value.
Yeah. No, I think I would corroborate what you said, which is when we talk to those CIOs again, 72% of them say they're increasing spend, and if you look at the areas they are increasing spend in, it's actually most tailored to services companies. Right, of course it depends on how fast we move and all the rest of the things you said to change our operating model quickly to capture that. But services companies are certainly as well positioned as anyone else to do that. Now CVK, last year on stage you mentioned that you brought a few examples of what HCL is doing in actually even shortening impact to delivery of some very fundamental transformations. You've laid out also a new strategy on AI, the four pillars you talked about, partnerships, you talked about IP, and so on and so forth. Tell us a little bit about what are you looking for from HCL Tech and what are some stories you're hearing from customers that give you confidence that this transition for HCL Tech is underway and you're actually at the forefront of it.
