• Top Indian IT firms shift gears, betting big on startups and co-creation to adapt to Gen AI-driven disruption in traditional IT services.
• TCS expands COIN startup ecosystem to 3,000+ partners in FY25, focusing on rapid AI, blockchain, and IoT prototyping without direct equity investments.
• Infosys grows Innovation Network to 370+ startups, prioritizing collaboration over funding to embed next-gen tech into client solutions.

As automation and Gen AI reshape the technology verticals in industries, India's leading Information Technology (IT) services companies are progressively wagering on startups, investing in them, collaborating with them, and co-creating solutions to remain relevant.

Gen AI is changing the way conventional application development, software engineering, and testing are done, resulting in anaemic growth for the IT sector for the last few quarters. In February, HCLTech and Infosys CEOs announced that the clock has already struck on the conventional IT services model.

From Infosys to Wipro, TCS, HCLTech, and Tech Mahindra, annual reports reveal a firm shift: a drive to depart from strictly linear, headcount-driven services revenue to intellectual property and high-margin platforms.

Take the case of India's largest IT services provider, TCS, which is banking on its Co-Innovation Network (COIN), becoming one of the world's largest global startup ecosystems in IT services.

In FY21, COIN had approximately 2,400 startups. This increased to 2,600 in FY22, 2,900 in FY24, and to 3,000 startup partners in FY25, in addition to 55 active academic partnerships. Instead of direct equity investment, TCS leverages COIN to co-create and prototype quickly in AI, blockchain, cybersecurity, and IoT.

TCS' closest competitor, Infosys, developed its Infosys Innovation Network (IIN) in recent years. In FY22, IIN had more than 150 startups. This number increased to 305 startups by FY24 and further to over 370 startups in FY25, as the company broadened its emphasis on co-creation and next-gen delivery models.

"IT firms were investing and partnering in some way or other for the past 10 years but it has increased exponentially in the two-three years because of Gen AI, tech disruption", said Pareekh Jain, Founder and CEO, EIIRTrend, to Moneycontrol.

Although Infosys has continued to hold its $500 million Innovation Fund initiated in 2015, the emphasis has moved away from raw investing and toward greater co-creation. Instead of taking equity positions in the majority of instances, Infosys increasingly finds value in integrating these startup capabilities into client solutions directly.