A recent report by Bessemer Venture Partners (BVP) said that India’s IT services sector, valued at $264 billion, is expected to grow to $400 billion by 2030. The growth is attributed to large language models (LLMs), AI, automation, and data-driven workflows.
The conventional model, which relies heavily on personnel and processes, as well as the global “follow-the-sun” approach and cost advantages, is now facing challenges.
“This is a very peculiar India-specific phenomenon, a dominant position in IT services. A lot of the founders we meet have the front-end capabilities that you see in the West, but they also know what it takes to work with a product engineering team back home,” said Nithin Kaimal, partner and chief operating officer at BVP India, told Mint News.
However, this presents a significant opportunity. Established companies must “upgrade or lose,” creating space for agile AI-focused startups to capture portions of the value chain.
Legacy companies rely on the time-and-materials (T&M) model, where revenue is tied to billable hours. This is misaligned with the AI era, which aims to reduce work hours. Many have large entry-level teams and show little productivity growth, with one firm’s headcount doubling but revenue per employee unchanged.
According to Mint News, BVP is also focusing on pre-seed, seed, and early-stage investments in AI companies seeking to transform India’s $283 billion information technology services industry, a senior executive at the global investment firm said.
Bessemer reviews 20-30 companies in the AI for the IT services sector weekly. The firm is willing to invest between $3 million and $6 million, as Kaimal mentioned. For later funding rounds, the investment fund is prepared to contribute up to $15 million, thanks to its access to Bessemer’s extensive global capital resources.
“About 95% of our conversations are with early-stage founders, but that’s because these are very early days of the disruption of the market,” Kaimal added.
The investment fund is prepared to invest up to $15 million, or more, in future rounds, thanks to its access to Bessemer’s global capital resources as well. “This is enough for them to get things off the ground and get their first set of clients. If they’re scaling well and are successful, we have no problem writing another cheque,” he added, as per Mint News.
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