From the old economy stocks, let's focus on the new economy and the IPO that's underway.
Oh yeah, absolutely. And I think Srikanth is walking in as we speak and we'll be able to sort of go across to him in just a bit. I'm talking about the Fractal IPO. So that coming up in just a bit. Why don't I take a minute to just look at where the IT services stocks are trading at, right? I mean let's just pull up the Nifty IT index. Let's look at the Infosys, Wipro, Coforge, TCS and the likes. Last week of course was big damage across the screen on all these names and on your screen now Infy is down about a third. And this all of course started on Wednesday morning, our Wednesday morning, when I mean you know in the US session all the EPAM and the Globant and the Accenture, Cognizant and Gartner all of those sold off hard triggering this sort of sharp correction of stocks here. Claude was mentioned and I mean how AI is going to really, it's not new but basically I think you know those plugins and I mean we covered all of this extensively through the course of the last four or five days. I think we have the Fractal Analytics management now with us. It's a 2,800 crore IPO which opens today. It's a combination of fresh issue and OFS and we have Srikanth, co-founder, group chief executive and executive vice chairman at Fractal Analytics with us. Srikanth, good morning, great to have you with us here.
And I must say you are I think really one of the sort of only pure play kind of AI companies. You're in the cutting edge new age company but you're not a new company for those who may be wondering. You've been around, I mean you've been actually around perhaps the longest in that space. So welcome to the program and congratulations, you're coming to the market now. So just, I mean I think you know we have to, your this IPO and the conversation we will have, it's all happening in the backdrop of what I just described, all of this perceived or real disruption etc. It's all happening of course in the US. So for viewers who are watching and who don't go into the nuance of you know this segment that segment and they all see this big headline that AI is going to eat everyone's lunch especially IT services, what's the message from you?
Yes, so I think it's clear that AI is eating software. And AI in general is one of the most transformational technologies of our time and it is in some ways compressing everything.
What do you mean by that?
Something that takes let's say 10 people 10 days to do, what if two people can do it in one day? That means the work has compressed. Now machines take a larger share of it and therefore do we need that many people to do the same kind of work? Now this is not just true for tech services, it's true for a broad variety of services, legal services, marketing services and literally any workplace today. Any big organization has to think how many people do I need and how many machines do I need. For example Amazon has 1.5 million or 15 lakh employees and about 10 lakh robots. They're at a 1.5 is to 1 ratio and they're slowly inching up the robots and decreasing the number of people. So they're going to hit 1 is to 1 and this is going to happen in other industries too.
So you know, your clientele is the big Fortune 500, I mean companies in that list right? So how does it change, I mean is it deflationary? What does it mean for a business like you, Srikanth? I mean the general argument we get is that the volume of work will expand so that'll take care of any price deflation etc. Is that the way to think about it or you think in a way you know there's very few places to hide in that sense?
Yes, tech has always been deflationary right? Regardless of any technology you see it by the, I mean for example cell phone rates I mean have crashed completely. So tech for the last 100 years has always been deflationary. It compresses and what's called as a Jevons paradox plays in, which is essentially that the work expands so significantly that still you are growing as a net result of that. It's going to happen in the world of tech too. And what is different about this tech is that it not just looks at one aspect of life, it looks at every aspect of life. Having said that, the world needs thousand x more tech than it has today. So what will happen is now that a problem becomes easier, other problems get opened up, newer problems get opened.
I'll tell you the way I'm coming from is that all the models are coming from the US, it needs to be integrated into enterprise workflow etc. That was the tough part and that's essentially where everyone said Indian IT comes and plays a role like it always has. But now you got all these, I mean as I said those plugins which basically help in integrating which is essentially the pain points right? So if companies, enterprises themselves decide well this is very easy to do, I mean I need to put in some effort but then I'm set, I'm done. I mean I don't know if we are there yet but is there any way out in that sense? Or I'm just sort of exaggerating to perhaps make a point and ask you that question but do respond.
Yes, so it does happen that you can now bring in these AI tools. So whenever there's a platform shift, this is a massive platform shift that's taking place. Now these foundation models have become an element of everything that you solve. You bring in the foundation model, it compresses the rest of the work, right? Which is required because it is doing a lot of the heavy lifting as well. So have we seen that foundation model start to play a role in everything in an enterprise? Absolutely. Is it early days? It's still early days. So what's going to happen is that earlier you used to do this work, let's take tech majors right, they do a lot of data migration, SAP migration, things like that. These kinds of tasks used to take several months, maybe years. So not just Anthropic but Palantir also showed last week that this kind of work can be done much faster with these AI tools. So whoever is native with these AI tools can compress that, which means that earlier if you were charging 4 million for something, a project, now you're going to charge only 2 million for it or even 1 million for it. But even in that 1 million you can be more profitable because now a large part of the cost is taken out because you can do it with machines. Number one. And number two is that it's not that there is only one piece of work to be done. There are thousands of pieces of work to be done. Therefore it expands the number of things that you can do. Companies don't nearly have as much tech. If you take generally speaking, companies spend roughly 4 and a half percent of revenue on technology. Right? This is a global average. This number is going to go from 4 and a half to 6 in the next few years. So where is that extra tech going to be spent? So no CEO, no Fortune 100 CEO or Fortune 500 CEO is telling the street, hey AI is most transformational and by the way I have found out ways to reduce my tech spend. No, they're going to increase their tech spend. It's just that they will find different places to spend that tech and a lot of that or some of that value will go to the foundation model players. And that's why you're seeing an Anthropic going from 0 to 70 billion in 5 years and similarly OpenAI going from 0 to 70 to 100 in 5 years. So that's the kind of acceleration you're seeing. Some of that is getting taken out from existing players but a lot of new value will get created in the process.
