“We are building the foundation for what we need to run AI large language models and agents in the future,” Lovelock said, noting that enterprise networking equipment spending has also risen as a direct knock-on effect of the hyperscaler expansion.
India’s opportunity in managed services
Despite overall IT services growth running at a modest 3–4%, Lovelock sees a genuine opportunity opening up for India. As CIOs globally shift their internal teams away from routine, commoditised work toward strategic AI initiatives, a labour gap is emerging — and managed services providers are well placed to fill it.
The next phase of that opportunity, he said, lies in managed services providers building AI and agentic automation into their offerings, creating a new layer of cost efficiency for global clients. India, with its deep services talent base, is well positioned to capture this demand.
The uncomfortable reality for services firms
But Lovelock did not shy away from the structural challenge facing Indian IT. The industry is at a crossroads, he said — and the dynamics are unfavourable for pure services players compared to software companies.
When a software firm invests in AI, clients reward it with larger contracts for richer features. When a services firm does the same, clients expect the efficiency gains to be passed back to them in the form of lower prices. “Services firms spend money to bring in AI-enabled delivery and they are rewarded with smaller contracts,” Lovelock said plainly. That asymmetry is a structural headwind the entire global services industry — not just India — must navigate.
India does not need to win the data centre race
On the question of India’s participation in the AI infrastructure buildout, Lovelock offered a reassuring perspective. Unlike cloud computing, where data centres need to be close to end users due to latency constraints, AI delivery can tolerate the delay involved in distance. This means India does not need to match the United States — which accounts for over 50% of global AI spending — in mega data centre construction to remain relevant.Having local data centres would help India build its own large language models and domain-specific AI, but it is not a prerequisite for benefiting from and contributing to the global AI economy.
Margins under pressure near to mid-term
For IT companies broadly, Lovelock warned that margins will face significant pressure in the near to medium term. The industry is still in an investment phase — overbuilding data centre capacity ahead of demand — and many companies are offering AI products, services, and tokens at reduced prices or free to build user bases. A clear, standardised path to monetising that infrastructure has yet to emerge, and the means of doing so vary widely across companies.
The broader message: the AI era creates real opportunity for India’s IT sector, but the business model of services delivery is being fundamentally disrupted — and firms that do not embed AI into how they work, not just what they sell, risk being left behind.