Tech Explained: AI will not kill Indian SaaS, but will make it bleed with 1000 cuts in Simple Terms

In the 1970s when personal computers had not yet arrived but were on the horizon, futurist Roy Amara coined his famous law. A one-line quip, it became a de-facto comment on how humans see tech progress. He said, “We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.” Every time there is something new on the horizon, the quip — later known as Amara’s Law — comes into play. It is, yet again, in play as the world grapples with AI.

In conversation after conversation on AI, we see Amara’s ghost smiling. People hyping AI at the moment are doing so because they are overestimating its short-term impact. People, who seem to be the wise sages believing that all things human will continue to triumph over machines and algorithms, are underestimating AI in the long term.

Amara’s Law has implications for one of the burning questions of our time — will AI take human jobs and will it lead to the death of Indian SaaS? The immediate consensus, because of the hype, seems to be that yes, Indian SaaS is dead as a dodo. The signs are all there. The stocks of Indian IT giants are on a downward slope for months now. Their revenues in the last few years are largely stagnant. The number of people working with the IT giants is largely flat, or even declining. All of this when AI hasn’t yet truly arrived. It is still on the horizon.

With tools like Anthropic Claude and OpenAI Codex starting to do heavy-lifting in some sectors, particularly in software development and finance, the feeling of doom and gloom is spreading. But is it just a feeling or is it real?

The dire state of Indian SaaS, a sector made up of giants like TCS and Infosys, is more of a feeling at the moment rather than the reality. It is a feeling exacerbated by statements from Big Tech leaders. Microsoft AI Boss Mustafa Suleyman says white-collar workers have just 18 months left before they will be made redundant. Sam Altman and Dario Amodei at India AI Impact Summit said humans have another 24-36 months left before they would no longer be the smartest beings on the planet. AI like ChatGPT, Claude and Gemini will surpass the human brain by then. Everyday we hear apocalyptic prophecies about the state of jobs in the SaaS industry. It is as if the world is coming to an end.

In some ways, the old world is indeed coming to an end. But as it happens with global changes, they are rarely sudden. The wheels of time grind slowly. The death of Indian SaaS too will not be sudden. Instead, it will be a process where either the Indian tech giants will have to transform themselves into something that they currently are not, or will have to wither away.

And in this process, they will bleed as AI cuts them in a 1000 ways. What this bleeding will eventually do to them, we are not yet sure. It may, in the long-ish run, kill them. Or it may make them stronger, because as the cliche goes, “what doesn’t kill you makes you stronger.” Irrespective, the process will be painful.

As the AI tools get even better, and some of them are already terrifyingly good, they will be adopted in all sorts of workflows across industries. They will not take over human jobs completely. But gradually AI is bound to transform work across industries in a manner where fewer humans are required and where intelligence doesn’t have as high a cost as it currently has.

This is bound to have a large impact on SaaS companies. Their revenues will be squeezed, their ability to set the prices for their products will be challenged. Their negotiation power will diminish. They will be forced to cut expenses. They will struggle to survive the present, instead of dreaming of thriving in the future. The number of people, and the number of hours, needed to do something will shrink and then shrink more. This will hit the number of hours SaaS companies can bill for.

Jobs within India’s IT industry will certainly be hit, although AI is not going to lead to the emptying out of multi-floor buildings in Bengaluru. There is another cliche nowadays that floats around. AI will not replace you, instead someone using AI will, or so say many.

This is a bit of a misnomer, and an attempt by Big Tech to assuage fears around mass layoffs. It is like telling horses, as a famous toon on the internet shows, that “cars won’t replace you, a horse driving car will.” History proved its absurdness. Horses were indeed replaced by cars and not by horses who could drive cars. In other words, when the world changes the skills needed in the new world are different. And not everyone will have the means and abilities to adapt.

The reality is that a large chunk of employees in the Indian IT industry will be replaced by AI. Whether these employees find some other role or not is something that even Anthropic CEO Dario Amodei cannot predict. “I can’t guarantee that more jobs will be created that are destroyed,” he recently said.

Irrespective, the next few years are going to be painful for Indian SaaS. Unless there is a regulatory and policy cushion. But this is a topic for some other day. The Indian IT giants will face existential crises in the coming years. The rumours of their death are surely exaggerated, but do expect a lot of bloodbath in a lot of unforeseeable ways.tal

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