AI-native startups challenge India's $300 billion IT services industry with autonomous agents and innovative business models.

A new wave of AI-native startups, such as Atomicwork and Nurix AI, is challenging India's $300 billion IT services giants by leveraging AI to transform enterprise workflows. These startups use AI at the core of their product, business model, and customer offering, and are backed by venture capital firms like Khosla Ventures and Accel. The shift is driven by the potential for AI to radically transform how companies work, and is expected to reshape the IT-BPM industry.

A new wave of AI-native startups, such as Atomicwork and Nurix AI, is challenging India's $300 billion IT services giants by leveraging AI to transform enterprise workflows. These startups use AI at the core of their product, business model, and customer offering, and are backed by venture capital firms like Khosla Ventures and Accel [1]. The shift is driven by the potential for AI to radically transform how companies work, and is expected to reshape the IT-BPM industry.

Atomicwork, a Bengaluru- and San Francisco-based firm, uses artificial intelligence agents that can autonomously handle everyday IT services. The company raised $25 million in January, led by Khosla Ventures and backed by more than 40 global chief information officers. This funding round reflects a broader shift in the IT services industry, with AI-native startups challenging traditional players [1].

These AI-native startups are fundamentally different from their predecessors. They don't just use AI as a helping tool; instead, it is at the core of their product, business model, and customer offering. Their solutions are deeply rooted in technologies like machine learning, natural language processing, computer vision, and generative AI, making them truly 'AI-first' in their approach [1].

For example, global businesses like Zuora and Pepper Money use Atomicwork to empower their teams with seamless service, intelligent automation, and actionable insights. This is driving productivity and transforming their digital workplace experience [1].

Accel, a venture capital firm, is also backing AI-first startups. They are focusing on 'Enterprise AI' platforms that enable enterprise AI use cases using agentic technologies, large language models (LLMs), and small language models (SLMs). Another focus is 'services-as-software' - the other end of software-as-a-service - where AI startups leverage India's large IT services capabilities to provide better automation offerings. Additionally, 'vertical AI' focuses on startups tapping into India’s AI talent pool to integrate AI into vertical-specific use cases [1].

These startups are creating new business models and are more agile than traditional IT service providers. They are not burdened with legacy processes and tools, allowing them to innovate rapidly and deliver superior customer experiences with speed at scale [1].

Venture capital investors are placing greater emphasis on early margins for AI-first businesses due to their service-oriented nature. They are also focused on profitability and operational efficiency as companies scale. For example, Nurix AI, a startup founded in 2024 by serial entrepreneur Mukesh Bansal, is developing enterprise-focused AI agents with human-like voice and reasoning capabilities. Backed by $27.5 million in seed and Series A funding from Accel and General Catalyst, the company aims to automate a wide range of business tasks, boosting productivity and transforming customer engagement [1].

The surge in AI-first competition is now forcing established IT giants to reconsider their traditional business models. Infosys and TCS have both begun ramping up investments in high-performance computing infrastructure, including Graphics Processing Units (GPUs), while simultaneously retraining thousands of employees in AI-related skills [1].

References:
[1] https://www.business-standard.com/companies/start-ups/ai-first-startups-challenge-india-s-300-billion-it-services-giants-125072300870_1.html