The threat from these frontier model companies has been rising over the past few years, but the rumblings are now getting increasingly harder to ignore for the likes of Infosys, Tata Consultancy Services, and HCLTech.
As enterprise adoption of AI has lagged expectations, large language model (LLM) providers seem to have taken it upon themselves to ensure their products are embedded across workflows. This would not only lead to quicker revenue realisation but also justify the billions of dollars they have been spending to refine their flagship products.
Anthropic announced last week a $1.5 billion partnership with Blackstone, Hellman & Friedman, and Goldman Sachs to form an AI services company. Similarly, OpenAI is raising about $4 billion from 19 investors, including TPG, Bain Capital, and Brookfield Asset Management, to set up The Deployment Company, according to reports. Google Cloud has also tied up with Vista Equity Partners to deploy agentic AI solutions across the PE firm’s portfolio companies.
Analysts say this is the most serious structural threat the IT services industry has faced since the rise of offshore outsourcing in the late 1990s.
The difference now is that OpenAI and Anthropic are not simply enabling new software capabilities; they are moving directly into enterprise execution, workflow ownership, and decision orchestration.
“That strikes at the core economic engine of traditional services firms: large labour pyramids monetising implementation, maintenance, and process management. The first thing services firms need to stop doing is pretending AI is an efficiency overlay on the existing model. Second, they need to own enterprise trust, governance, security, and integration. And third, firms need to radically simplify their organisations,” said Phil Fersht, founder and chief executive officer (CEO) of HfS Research.
Indian IT services firms have consistently downplayed the possible threats from these behemoths, often citing the nearly $300 billion opportunity they envisage from AI services over the next four to five years. The focus, they say, will be on AI engineering, which includes building and orchestrating agents, besides modernising legacy systems.
IT firms have been tying up with these LLM makers to accelerate enterprise AI transformation and unlock AI value at scale. For example, Infosys partnered both Anthropic and OpenAI earlier this year.
Infosys CEO Salil Parekh, in an interaction with Business Standard last month, said the threat from these firms appeared limited and that it was more of an opportunity.
“Large organisations operate with complex layers of processes, technologies, and institutional knowledge — some formal, some implicit. That contextual understanding is critical, and it is not something that off-the-shelf AI tools can easily replicate.”
Similarly, Coforge CEO and Executive Director Sudhir Singh also pointed to the vast scope of work ahead for service providers despite the onslaught from LLM makers. Such tasks include monitoring models, retraining agents, and driving governance around those agents.
“I think at this stage we’re not worried about the news articles that are coming on the next set of capabilities being created. We are more worried about whether we are ready for where the value pools of the future are, and the value pools of the future lie in building agentic AI harnesses for clients,” he said in response to a query.
It is unlikely that these giants will immediately overpower decades-old IT firms. But there will definitely be a deflationary impact on traditional IT services revenue from AI companies, which HCLTech has pegged at 2–3 per cent annually. The bigger risk, however, is that OpenAI and Anthropic become the control layer for enterprise operations while services firms are reduced to commoditised implementation arms beneath them. That, analysts say, is the nightmare scenario.
“One big challenge this will create, which is not discussed enough, is the poaching of senior talent from tech services firms. When Cloud vendors scaled their services and offerings, they hired from service providers. The same will happen now. This can create good opportunities for many leaders who are struggling to grow in current roles,” said Yugal Joshi, partner at Everest Group.
The old outsourcing playbook may be fraying
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Analysts warn IT firms risk slipping into commoditised implementation roles
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Indian IT majors say AI still needs governance, integration, and institutional knowhow
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The talent war may intensify as AI firms hunt senior executives from services companies
 "OpenAI, Anthropic")