Good or bad: DeepSeek's ripple effect set to impact Indian IT industry

While DeepSeek's achievement democratises AI with its open-source model, these are early days to gauge its impact on the enterprise IT ecosystem, say industry experts

Some in the industry are referring to DeepSeek’s artificial intelligence (AI) initiative as the ‘’Sputnik Moment’’ while US President Donald Trump has called it a ‘’wake-up call’’ for the American tech giants. In India, however, the mood is one of wait and watch after the Chinese startup stunned the world with its AI model built at a fraction of the cost compared to industry leaders such as OpenAI.          

 

Against the global backdrop of shock and awe, the Indian tech industry and startup ecosystem have been subdued in their reaction. Industry experts and investors believe that

 

while DeepSeek’s achievement democratises AI with its open-source model, these are early days to gauge its impact on the enterprise IT ecosystem. Startups, while realising the advantage that they can draw from the foundational model of the Chinese app, are also watching the developments.

 

Analysts are making a point. “While US tech giants like Meta & Microsoft scramble to defend their positions, ripple effects are being felt in Indian IT,” said a report by Anand Rathi on The GenAI Wave: Indian IT’s Next Frontier. ‘’DeepSeek's democratisation of AI will expand the addressable market for Indian IT companies,’’ it pointed out.

 

DeepSeek’s open-source model challenges US tech giants like Meta, which is ramping up AI capex to $65 billion annually. Indian IT firms play a key role in the AI value chain, handling data management, migration, and fine-tuning language models like LLMs and SLMs. 

 

Top executives indicated, on the condition of anonymity, that the use of the DeepSeek model in the enterprise ecosystem will be carefully calibrated.

 

“The results are phenomenal and it is clearly a wake-up call. How we use this for our large enterprises will take some time. We work with large banks who are highly regulated, besides the US-China equation will have its impact for the adoption of DeepSeek in the enterprise ecosystem,” said a senior executive who did not want to be named.

 

Another executive explained why the immediate impact of DeepSeek on the enterprise ecosystem would be negligible. “Indian IT players are not into making LLMs (large language models), they are partnering with providers of these platforms. If DeepSeek is able to reach that global status and not get embroiled in geopolitics and if customers are ready, then Indian IT services could also look at using it,” said the person. He added that the China overhang could make this possibility a tad longer to happen.

 

“The DeepSeek breakthrough is phenomenal, it also means more AI models for the Indian tech industry to work on. But the enterprise ecosystem is different,’’ said Pareekh Jain, founder of Pareekh Consulting and EIIR Trend. He added that the enterprise ecosystem works with regulated industries, so they may wait for some time. ‘’From an investment point I do believe the industry will have to recalibrate their AI investment,” said Jain.

 

There are concerns too. “We may miss the bus when it comes to this newer area since we don’t have that kind of research talent in the country,” said a technology head of a tech company. 

According to Naresh Singh, senior director analysts, Gartner, IT services players are unlikely to move away from their existing partnerships as they have already invested in specific technology stacks and skills resources. "However, they will have to work closely with the large principals to explore and potentially leverage new techniques and alternative approaches to stay competitive and offer greater value to their clients," he added.

   

Bhaskar Majumdar, managing partner, Unicorn India Ventures, said, “The Deepseek moment is a reminder that accepting status quo is a wrong strategy. All of us will witness significantly power efficient, high performance, solution centric chips in the next few years that will shake the likes of Nvidia.’’ Anticipation of this disruption will benefit India and its solutions community, according to Majumdar.

 

Meanwhile, venture capitalists have been pumping funds into the AI world. According to a Bloomberg report, VCs have invested more than $300 billion in AI startups globally in the last five years. Such huge investments are now being questioned. In India of course investments in AI have been much smaller in nature.

 

Narendra Bhandari, general partner, Seafund, believes that DeepSeek and some of the other newer models have demonstrated a fantastic opportunity for India. “Indian startups can aspire to build relevant models at much lower costs. The government should focus on a few areas, like fund the capital build out as laid out in the budgets to much higher returns in the new environment,’’ he said.

 

"I think this is a legitimate and significant breakthrough with serious implications. We now have an open source model which rivals the best proprietary models in the world. The number of mathematical and computational breakthroughs DeepSeek has achieved in training R1, all at a fraction of the cost, is significant from an engineering perspective" said Kailash Nadh, CTO, Zerodha.

 

“In many large models, large scale human supervised learning is required to tune and align the models. However, Deepseek used fully automated reinforcement learning techniques. They made a series of technical and engineering improvements on top of the state-of-the-art techniques that yielded outsized results,” Nadh added.