From Horses to Tigers: A New Reality for IT Services

Since January 20th through the last week of February, shares of every major global IT services company have dropped between 20 and 30 per cent. Accenture was down roughly 30 per cent. IBM was down 24% with a single-day 13% decline around February 23rd-24th. Wipro and Coforge shed nearly 25 per cent. TCS, Infosys and HCL Tech are all trading at lower levels.

The only comparable sector decline in such a compressed window was COVID-era 2020—except that time, the Dow Jones fell 39 per cent alongside them. This time, the Dow was essentially flat.

The broader economy was not in crisis. It’s the IT services business model that the market is repricing—and it is signalling a shift. The US-Israel-Iran war has broken out since this piece was conceived, affecting broader economic forecasts, but the article focuses on the impact of AI specifically on the software consulting services business model.

Riding the Horse: A 35-Year Playbook

AI impacting traditional revenue models built around human capital seems to be the central story for this decline. However, nearly every major IT services firm has announced an AI partnership. Accenture joined OpenAI’s Frontier Alliance alongside McKinsey, BCG, and Capgemini. TCS, Infosys, and Wipro all have deals with Anthropic, OpenAI, or Google. In previous cycles, announcements like these would lift a company’s stock for weeks. This time, Accenture’s shares fell 6.6 per cent on the very day it announced its OpenAI partnership. The market is not buying the story.

The 35-year IT services playbook used to be: announce a partnership with the rising platform, stand up a competency centre, train people, and use the partner’s brand to win enterprise contracts. SAP and Oracle in the ’90s for ERP implementation. Salesforce in the 2000s for SaaS-led services. AWS, Azure, and Google Cloud in the 2010s for Cloud migration. Each time, the software platforms made clear that services were not their business. They left the gap open. Services firms filled it and built empires. I call this “mount the horse and ride.” We did exactly this at Imaginea—the technology services company I co-founded under Pramati, later acquired by Accenture. Pick the fastest horse early enough, and you win.

Not anymore.

AI Is Different. You’re Riding a Tiger.

In every previous cycle, technology vendors needed IT services companies. But AI does not need implementers in the same way—it is the product and service rolled into one. When Claude Code can automate COBOL modernisation, and when the CEOs of Anthropic and OpenAI publicly state that software engineering roles will largely disappear within three years, they are not describing disruption. They are describing a possible replacement. Horses make the riders winners. The tiger turns on you eventually.

Jefferies recently downgraded TCS, Infosys, HCL Technologies, and three other major IT firms, explicitly citing AI as a structural threat to the business mix. JP Morgan warned that clients will reallocate spending as AI-led efficiencies shrink demand for managed services. This is now the mainstream analytical consensus—not a fringe view.

Build the Moat or Become Irrelevant

The answer is not another partnership announcement. The era of scaling revenue by scaling headcount is changing. The firms that may remain competitive will use their deep domain expertise—the genuine understanding of how enterprises work—to build proprietary software assets. Products that clients cannot simply replace with a prompt. Use AI to build at greater velocity, but build something that is yours. The most pragmatic path may be acquisition: seed a product culture with companies that already have it and play the game with your software, not just your services.

It may be a do-or-die time for IT services.

This article is written by Vijay Pullur, CEO and Co-founder, WaveMaker.ai.

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