Infosys co-founder and Chairman, Axilor Ventures, Kris Gopalakrishnan on MNCs choosing India for global capability centres, investing in R&D and rethinking healthcareA technology that’s horizontal, impacts every aspect of life. We took advantage of one of those disruptions — the introduction of computing — because every business process has to be automated. We said, ‘Let’s do that software from India using a lower-cost economy to lower the overall cost and take advantage of the abundant talent in India.’ That’s the global delivery model that was created. AI too is a horizontal technology, but for the first time, we are grappling to understand it. The immediate impact is democratisation of intelligent productivity.The first sector that was impacted is software development, programming because it can write code better than humans. We still need a human in the loop to check for bugs. But it is faster than humans so it will start impacting jobs. But it’s also creating new opportunities because you need people to train and write the right prompts. In the medium to long term, it will be positive because of the productivity increase. But we must understand the downside.E Kumar Sharma: What is the role of IT services in an AI or post-AI world?Software development probably is about 15-20 per cent of the total effort. That’s the one which is getting automated, but in the transition, even with that automation, it will probably not impact that much.With AI, there will be new opportunities integrating with existing systems, curating data, training the models and more capabilities now are available to an organisation to leverage AI. That means new systems will have to be developed. So from an opportunity perspective, it will expand for the IT services industry.Ishan: For some time now, we have seen the IT sector in India getting battered. Perhaps, markets and investors are not as optimistic as you seem. Are our markets overreacting?Whatever I have seen, markets always overreact to the extreme. If you look at the revenue of the IT services companies, they are still growing, maybe not at the rate they used to. Our IT services companies are highly profitable — they are debt-free with experienced leadership with deep client relationships which ran for decades. None of that has changed. What has changed is entry-level recruitment, which is almost zero. They need to figure out how the workforce will have to be retrained and reconfigured. Reskilling is required for existing employees. Even there, the model has an advantage. Reskilling happens at a lower cost economy. That’s why the profitability is still high. You don’t see mass layoffs. That’s the strength of this model, which is why every multinational company is today setting up their global capability centre in India. The research is moving to India because of the abundant talent that’s global in experience and expertise. So, if you are passing out this year or the next, you will find it challenging to get a job in the IT industry unless you have AI skills.Because of the lag the universities typically have, it will take three-four years for the system to react to the changing realities so recruitment will be lower. Revenues are going to be steady, but growing at three-four per cent, profitability will still be high. But the market may feel that’s not enough.Story continues below this adIshan: The IT sector has been a vehicle for upward mobility, which is now being cut short. Do you see this being permanent?You have to look at actual data. The industry employs six million people out of 1.4-1.5 billion people. Of course, the multiplier effect, the per capita income of that employee is very high. Their prospects are global for a small segment of population. Aspirationally, everybody wants to go there and that is probably limited by what is happening today, but it’s temporary.Kumar: The IT sector has been profitable. Any observations on the little yield on the products front?The model is different. The industry was created primarily when there was no venture capital. We had to bootstrap and leverage our strengths — talent, low cost, remote software development capabilities, ability to scale, high-quality workforce.The model for the product is you make upfront investments. Typically, you need risk capital and market access to do that. The domestic market is not big enough to create large enterprises. That’s why you have to go global. All the SAS (Statistical Analysis System) companies actually flip to the US because that’s a larger market that values them. But now we are seeing product companies emerge. It’s not a capability issue but a resource and capital one. Having said that, the top three banking products in the world are of Indian origin. So are the best logistic products in the world. At the top tier of all product companies, there are a large number of Indians. So, it proves the point that it’s the right model for the right ecosystem.Ishan: Is the binding constraint risk capital?We have to change our risk appetite as a society. Entrepreneurship has taken root. Until recently, entrepreneurship was family-driven. Now, you are seeing first-generation entrepreneurs doing extremely well.Story continues below this adKumar: When the founders of various companies in the US were investing in brain research they were looking from the longevity point of view. You were talking compute power. How has the journey been so far?We need to invest more in research. In hindsight, it has been proven right in terms of events that happened with AI, where we now understand the strategic nature of technology, and why sovereignty is important. We need to create a product-led economy, where we own the technologies we use.Kumar: But there is hardly investment in R&D.Because that necessity is not there. If you want a strong India, you also have to make that happen by owning the IP that is important to us. The government may create IP but it’s not going to commercialise, market and create industries around it. It is the private sector’s job.Ishan: If I had to set up a lab in a Western university and you had to set up similar facilities in India, what are the constraints?None. It’s for us to change it. I started working with IIT Madras Research Park in 1999. In 2001, I was its first investor. That’s the best ecosystem we have. Over the last five years, IISc has been becoming a hotbed.Kumar: What sector would you be investing in and what output would you expect two years from now?Output depends on the problem. When you are trying to figure out how people age and is the Indian population susceptible to aging in the same way, you have to study somebody for 20 years. You can’t get data in one year. So, longitudinal study takes longer. You have to set expectations properly. I have split my office into two parts. One is to grow wealth. Second, to use it wisely.Story continues below this adIshan: Give me your best and worst case scenarios for 2035.Now, we have 4,500 deep tech startups. I believe it will go to 45,000 at least. That will create new product categories, and technologies that we will own. We need to still understand the commercialisation part of it fully, and we need to figure out how it can be retained in those companies in India. Ownership is also about where the wealth accrues. That is a change we will see in the next 10 years. We will also work on technology sovereignty. We will see some brilliant solutions coming out of India on health care. India has the opportunity to become a laboratory for the 21st-century world.Kumar: Can you explain the healthcare lab for the world example?In health care, typically 70 per cent of the money is spent in the last three years of a person’s life. It should be spent from the age of 20. You have to think about wellness and healthy living. That’s a cultural and habit change that has to happen. Now, we need to look at public policy and incentives. We also need to leverage health insurance.Ishan: What will be the constraint in this journey?You have to do it strategically. The industry has to take some big bets because all of them will not succeed. If you look at renewables, for example, a lot of people went into creating solar farms. Many actually failed because it was built on a certain assumption of government subsidy and when the subsidy went away, the price per unit came down, business was no longer viable. All those cycles will happen. And that’s why we need to build failure into our cultural mindset issue. The ability to take risks has to be built into society.