Good that the hype around Gen AI has come down: Capgemini CEO Aiman Ezzat

Ezzat talks about hype around Gen AI, India talent and recovery in global business

‘Too many attempts of regulating technology can kill innovation’ For Aiman Ezzat, chief executive officer (CEO) of Paris-headquartered Capgemini Group, the current phase is the most exciting in the last six-seven years. He tells Shivani Shinde in Mumbai, during his recent India visit, that there are two reasons for this. First, IT services players are more visible across client organisations. The partnership with clients is more strategic and integral. Two, is the evolution of technology and its convergence with businesses, making them look for partners in their tech journey. He also talks about the hype around Gen AI, among other things. Edited excerpts:

The first half of the year is over, how do you see technology spends now?

Yes, there is recovery. But the recovery slope is slower and similar to the start of the year. We did say that we will end up with a higher exit rate and we stick by it. In terms of geographies, Europe has been more resilient than the US. In the US, there was more focus around cost reduction last year. Reason being, the technology bills have gone up, labour cost has gone up, the consumption of Cloud and software as a service (SaaS) has increased and so has the price. With heavy spending in 2021 and 2022, customer’s technology bills have gone up, and now they want to rationalise. The attention to cost remains, but now they want to invest to transform and be efficient. We see large programmes on how they can drive efficiency.

Would it be fair to assume discretionary spending will also be back as recovery happens?

No. The client wants to see more impact from technology. Across industries, technology spend, as part of operating cost, is going up. It is also becoming more visible and it's growing faster than all the other cost bases of the client's business. So, now the attention is on what value are they getting? When we look at our pipeline, discretionary spend is flattish but there is a lot of growth in large deals. This is because clients are looking for real impact from technology and they want to measure the outcome.

How significant is AI and GenAI for client spends?

It certainly has taken a lot of attention. AI is not new, GenAI is. We have over 30,000 people working on data and AI even before Gen AI made its presence. Clients are realising that Gen AI is still very complex. And like AI, they also need to move bit by bit in Gen AI adoption. GenAI also got a little hyped, especially around productivity and cost cutting. It is good that the hype around Gen AI has come down and now we can really get to work.

Analysts were predicting that the year 2024 was about scale in GenAI. What are your views?

It is the start of scale for GenAI. AI has taken years…Gen AI will also be use case by case. For Capgemini, we have about 400 ongoing projects and about 1,800 deals in the pipeline. These are small projects and large projects go up to $10 million. We are yet to see $100-200 million deals happening.  While it will take time, we are sure that anything we do in the future will have some AI or Gen AI related aspect.

Capgemini had announced an investment of euro 2 billion last year in AI-Gen AI. What is the progress on this?

It is work in progress. A lot of it is linked to doubling our data and AI capability, which means most of the investment is on talent. Some are going in training on GenAI, others on creating tools, assets and platforms. Since half of our talent pool is in India, a lot of ramp up is going to be in India. Already, tools and platforms are being developed and built in India.

Last year, Capgemini’s headcount was down over 6 per cent. How do you see this number this year? Do you see GenAI impacting headcount?

Year 2022 was about high growth and attrition too. We had to create a buffer with higher hiring. Last year, we focused more on re-optimising operations coming out of a huge acceleration that we saw in 2022. India headcount will be growing again. GenAI will bring in some productivity gains and importantly, it will bring scalability to our business. The last one year has seen several things like rationalisation and global capability centres (GCCs) hiring more. We need more talent and will always be short on digital talent.

How do AI regulations impact the IT industry, especially with Europe being the first one to come up with rules governing the use of AI?

It can become quite complex for clients to operate. It’s good to look at some regulations but we have to be careful. Regulation should not be too early because you cannot try to regulate something you do not understand. I think Europe went a bit fast on regulation. Initially, the regulation was around AI, which made sense…but as Gen AI came, they extended the rules to that. Too many attempts to regulate technology can kill innovation. Gen AI is too new to be regulated. Regulation should be there to safeguard, and reduce risk. Trying to stop risk is like killing innovation. What we need is global regulation. Imagine companies who work in the global supply chain segment. How will they comply with regulations that are different in every country?

Is Capgemini also calling employees back to the office?

For us, it will be hybrid. We have several employees coming back to the office, and there are a few who are working from home. For young recruits, the onboarding has to be physical. Why would I force people to come back? The office is for collaboration, to innovate and build intimacy within teams. For that, we do not need people to be in office five days a week. I think we are comfortable with hybrid.
 

On one hand companies are wanting to reduce carbon footprint under their environmental, social, and governance (ESG) targets. However, use of GenAI means more compute power, higher consumption of power. How do you balance that?

You have to look at Gen AI and the overall equation. When we use AI, it generates carbon and also has benefits, which are measurable. A lot of Gen AI is a big lever to improve sustainability. Many artificial intelligence-machine learning (AI-ML) models are able to improve the quality of manufacturing and efficiently use energy. We have to see the overall equation. There is concern that GenAI means more data centres, and consumption of power. But there will be more use of renewable power.