Synopsis
The report, The India AI Edge: How India Uses AI, based on OpenAI’s India usage data and a survey of more than 100 CXOs, found that more than a third of mature adopters have cut outsourced work by over 25%. It also said that most additional AI spending is not coming from new technology budgets, but from reallocations of outsourcing and software-as-a-service spends.The report, The India AI Edge: How India Uses AI, based on OpenAI’s India usage data and a survey of more than 100 CXOs, found that more than a third of mature adopters have cut outsourced work by over 25%. It also said that most additional AI spending is not coming from new technology budgets, but from reallocations of outsourcing and software-as-a-service spends.
“There is a re-architecture of where the spend is going,” Vikram Vaidyanathan, managing director at Z47, told ET. “We are definitely not saying IT spending is coming. down. In the near term, IT spends are going up as AI adoption goes up.”
The findings show that AI adoption in Indian enterprises is moving from experiments and projects aimed at productivity gains to a more direct impact on cost structures. While almost all surveyed companies have started using AI in some form, the report suggests the real divide is between those using it in pockets and those rebuilding workflows around it.
“This is not a story of displacing labour today. It is about re-architecting the organisation,” Ashwin Kannan, vice-president at Z47 and co-author of the report, told ET.
The report says 95% of Indian enterprises surveyed have embedded AI into workflows, but maturity levels vary sharply. It classifies companies into four groups: Tinkerers, Democratisers, Enforcers, and Transformers.
Tinkerers are companies where AI use is largely bottom-up and productivity-led. Democratisers have scaled usage across teams. Enforcers have a top-down push, but limited execution depth. Transformers are the most mature adopters, where AI is embedded into core business operations.
The report found that nearly two-thirds of mature adopters spend more than 10% of their software budgets on AI, while most early adopters remain below that threshold. Around 85% of mature adopters plan to increase AI spends by more than 10% over the next 12 months, compared with about 53% of early adopters.
That spending gap is beginning to show up in outcomes. Transformers, the report said, are using AI beyond individual productivity use cases and seeing gains across cost reduction, customer experience, revenue growth, and new business models. Tinkerers, on the other hand, are largely seeing efficiency gains, while Enforcers are struggling to quantify returns despite leadership mandates.
For India’s IT and business services ecosystem, the findings point to both pressure and opportunity. AI-led BPO displacement is already visible among mature adopters, but Z47 executives said that that does not necessarily mean enterprise technology spending will shrink.
Vaidyanathan said a new category of AI services companies could emerge from this shift. “An AI services company, which is a company that is delivering AI as a service but also using AI to deliver that service, is a pretty exciting company and a new kind of company that is going to get created,” he said.
The changes are also visible in engineering teams. The report said that AI has not necessarily cut engineering hiring among mature adopters, but has raised expectations from each role. Several mature adopters are keeping hiring momentum intact, but some are shifting away from junior engineering roles towards mid-level and senior engineers.
Kannan said AI tools are increasingly taking over parts of junior code-writing work. “AI has become good enough to take over a lot more of the junior code-writing work, and it is able to do it a lot faster,” he said. “The bet now is to get slightly more experienced folks into the organisation and then have them use all possible tools.”
The report also found that AI is blurring traditional boundaries between product, design, and engineering. Nearly half of mature adopters said product managers are now using AI coding tools, with some expected to create wireframes and frontend prototypes before backend teams take over.
Vaidyanathan said the demand for engineering talent is unlikely to disappear, but the definition of that talent will change.
The report also argues that India’s AI opportunity may lie less in racing to build frontier models and more in helping enterprises make AI work in production. Kannan said the rise of forward deployment engineers, who combine technical depth with customer-facing execution, plays to India’s strengths.
“India is the only country that can supply this role consistently at scale,” he said. The report estimates that AI could add $1.7 trillion to India’s GDP by 2035. But for companies, the more immediate question is whether AI remains a productivity tool or starts reshaping budgets, teams, and operating models.
