Saurabh Gupta — President, HFS Research[00:21]
Welcome, everyone. Welcome to HFS Unfiltered. And honestly, today we are in for a special treat, because we’re joined by none other than Abhijit Dubey, the CEO of NTT DATA, Inc., to discuss his vision on responsibly reinventing one of the biggest IT service providers in the globe, and his perspectives on the broader market.
Abhijit Dubey — CEO, NTT DATA, Inc.[00:21]
Saurabh, thank you very much for having me.
Saurabh Gupta — President, HFS Research[00:45]
So, Abhijit, let’s start off by discussing some of the really big changes that you’re leading at NTT DATA, where you’ve consolidated all your capabilities and services outside of Japan. So can you briefly describe this initiative, and what was the rationale behind it?
Abhijit Dubey — CEO, NTT DATA, Inc.[01:01]
Absolutely. So, as NTT Group, which is a $100 billion tech conglomerate, the eighth largest technology company in the world, the global expansion journey outside of Japan started in 2007. And it was basically in the IT services and IT infrastructure space, but starting about five to six years ago, there was a realization that, hey, we have to combine these capabilities and assets outside of Japan into a single global company to really provide a much stronger value proposition to our clients. If you fast forward since 2007, we are now a $19 billion company outside of Japan, and with our sister company in Japan, we are about a $30 billion IT services and IT infrastructure provider, which makes us amongst the top five for sure, if not even higher in the space. So, what we hope to achieve now that we are one single global company is, one, a significantly differentiated and unique value proposition to our clients. So we describe ourselves as the world’s only full-stack transformation portfolio company. We’ve assembled an incredible set of capabilities, both breadth and depth, globally, and we think that’s a pretty significant value proposition to our clients. So that’s number one. Number two, we have the optimal mix of global capabilities and local capabilities and local intimacy and proximity, because we grew through acquisitions. So we have a lot of presence and capability, both in delivery, technical, as well as client-facing, sitting in our countries. And at the same time, now that we’ve brought all the companies together, we have built a formidable global delivery capability across all of the domain areas. And that is a pretty unique combination, I think, in the industry. We invest 30% of our profits on innovation and sustainability, which is also unique in the industry. But now that we’re one single company with global assets and global capabilities, we can innovate once and deploy it immediately globally to all our clients. And so the pace of that innovation, the scale of that innovation, how it reaches our clients, should be significantly enhanced. So that’s the big reason why we created this single global company. The other thing is, of course, it creates incredible opportunities for our people. The way I would describe it, it used to be very much an offshore-driven model. I think it’s going to be much more about a skills-driven model that presents an optimal mix between nearshore, offshore, as well as onshore. And so that value proposition to our employees is significantly enhanced through this merger and creating this single global integrated company.
Saurabh Gupta — President, HFS Research[03:54]
You’ve had a very fascinating career, right, leading up to this job. Can you share a little bit of your personal journey, your experiences that have shaped your leadership style? And you keep talking about responsibly reinventing NTT DATA. How has that influenced your vision for NTT DATA?
Abhijit Dubey — CEO, NTT DATA, Inc.[04:30]
Yeah, listen, before I came to NTT Group and NTT DATA, I spent 20-plus years at McKinsey & Company, and I was in the technology practice, serving a lot of the big tech players, as you can imagine. So, hardware, software, IT services, telco. My exposure and worldviews were very much centered around the power of technology and innovation—you’ve got to be very dynamic, you’ve got to be very agile, and you’ve got to take bold risks, and it’s all about innovation, right? Innovation wins the game. But at the same time, it is also about delivering on your performance on a quarterly or yearly basis, right, which is the mode of capitalism as we’ve gotten used to nowadays. But then, in 2011, I started serving NTT Group, and it was the first time I had a Japanese client. And it was fascinating to see similar amounts of innovation that came through, but with a very long-term lens in terms of impact. And a real commitment to society and communities and the planet, right? This is the first time I learned about this concept of Sanpo Yoshi, which is embedded into the fabric of Japanese companies, especially NTT. Sanpo Yoshi was the philosophy of one of the merchant classes about 300 years ago in Japan that became very popular, and they were the most successful business class or merchant class at the time. And Sanpo Yoshi, if you translate it in English, literally means good three ways: good for buyer, good for supplier, good for community. And that philosophy is still embedded in how we think and how NTT thinks. And so this notion of innovation that drives reinvention came from the Valley, and this notion of responsibility, where we use innovation and technology for good—for good of our clients and good for our society and good for our communities—comes from my exposure to NTT and NTT DATA in Japan. And so what I’ve tried to do as I’ve come over to be CEO on the NTT DATA side is to really combine those two philosophies, and I call it responsible reinvention, which is all about: we have to reinvent, and innovation is still key, but we have to do it responsibly, and that means it’s got to be trusted, it’s got to be secure, it’s got to be ethical, it’s got to be sustainable.
Saurabh Gupta — President, HFS Research[07:18]
You mentioned a lot about innovation, both in your personal life. You also mentioned how NTT invests about 30% of its profits in innovation. NTT DATA overall has one of the highest R&D budgets, at least from what I understand. So, as we are seeing so much change both in IT services as well as innovation across different industries, what are some of the big investments that NTT DATA is focusing on right now?
Abhijit Dubey — CEO, NTT DATA, Inc.[07:44]
Yeah, so I think it’s in a few areas. So one is in the entire generative AI ecosystem and stack, right? We provide the physical infrastructure, so the data centers that power the AI infrastructures for the world. And obviously, as you know, there is a huge energy requirement for that, as well as a freshwater requirement for that, right? And so what we are doing in terms of innovation there is to really use AI itself to optimize the energy consumption of these very energy-hungry infrastructures. And second, introduce direct-to-chip liquid cooling technologies and other liquid cooling technologies so that we lower the power consumption. So that’s here and now. Then at the next level, we are engaged in very cutting-edge research in what we call IOWN, and IOWN is effectively an attempt to replace all electronics with all photonics, whether that’s in the network or in the devices that sit within the data center. So that’s at the infrastructure level. And then we’re also investing in building a lot of our assets and platforms around generative AI, both for our internal consumption as well as providing to our clients. We call that whole platform AeT Plus. And then finally, we’re investing in—or in many cases co-investing with our clients—to build at-scale use cases as it relates to generative AI, whether it’s the next-generation smart factory or the agentic workflows that will probably become more the norm in 2025. So it’s up and down the entire stack and the value chain that we’re making investments as it relates to generative AI. The other thing is, in Japan we’ve built our own large language model called tsuzumi, and that is incredibly lightweight—almost similar level of performance as, let’s say, a ChatGPT, but much less power-hungry. And our view is that in the future, we will have a lot more specialized models, and many of those highly specialized models will interact with each other as it comes to a single enterprise. And so obviously we want to play our part in providing tsuzumi, which is a much lighter language model, but similar performance, much lower power consumption, but also play with the entire ecosystem. And so we bring the entire ecosystem of models to bear.
Saurabh Gupta — President, HFS Research[10:37]
Yeah, what’s fascinating about that, Abhijit, is, as you mentioned, this is really full-stack investments, right—from power consumption to photonics, to small language models, to agentic services, and so on. Which is fascinating. But let me flip the coin here, right? Because if you look at most enterprises, whether it’s your clients or not, they are going through a tough time right now because of two factors, two sort of opposite forces in my mind. On one hand, whether we are in a recession or not, everybody’s behaving as if they’re in a recession. Operating budgets are being cut, IT investments are flat to declining, there’s a talent war. There are actually two wars going on in our world right now. And on the other hand, everybody is in a big hurry to innovate. Everybody wants to digitally transform as of yesterday, people are trying to figure out new business models. So, as you take this full-stack approach at NTT DATA, a global approach to this, what’s your advice for enterprise leaders who are sort of working against these two forces that are colliding with each other, in a way? How do they save money but at the same time innovate? What’s your advice?
Abhijit Dubey — CEO, NTT DATA, Inc.[12:01]
Yeah, it’s a tough problem, and, as you very correctly point out, I mean, I think IT spend is at best flat. But the pressure on technology organizations and enterprises has never been higher to go innovate, especially now with GenAI, and to show the success and the returns of that investment, right. So I think the reality is IT spend is not growing. The outsource spend will likely grow, so the reliance on partners like us will actually grow, I think, even though it’s more nuanced, because there are headwinds and tailwinds on that. I would say the headwinds are, you know, mature outsourcers are actually moving more towards in-house GCCs, or global captive centers or capability centers, as you know. But on the other hand, there are tailwinds in the market as well, right, because if you look at enterprise customers, they’re basically trying to do three things. They’re either trying to optimize the legacy environment, or they’re trying to modernize the core, or they’re trying to build the new, right? And the reality is you have to shift dollars while your total spend doesn’t change much. You have to shift dollars from the run and the legacy to transform and the new. And most organizations are still stuck at 70% of the spend on run and 30% on the new and transform, right? And that paradigm, unfortunately, has been true for the longest period. Everybody’s tried to break that, but I think the pressure is significantly higher right now. And what that is leading to is two things. We’re starting to see a barbellization of deals. So think about a barbell. You’ve got these massive large-scale outsourcing deals, and a lot of it is driven by the desire for vendor consolidation as well. But those deals have to self-fund from a transformation standpoint, right? So we’re seeing a lot of that. And at the same time, you’re seeing, especially in these new emerging technology teams, right—AI and sustainability and digital engineering—you’re seeing highly specialized, domain-specific, technical-oriented projects. So you’re starting to see the barbellization of deals. And we think that’s going to continue, and I personally think that’s going to continue, right? So you’ve got to have a motion that’s driven towards the large-scale transformation deals. At the same time, you’ve got to build a motion and an engine to be able to drive this velocity innovation into the clients, right? And that’s a hard thing, by the way, to pull off for any company—to drive both motions at the same time. But the advice to enterprise clients has always been: start with where the business value is. Be rigorous about ROI. Be very thoughtful about partnerships—a few, fewer strategic partners, with some augmentation of specialist domain and technical skills, is probably a better approach to go than a more fragmented approach, if you may. And bring your partners along with you on your journey.
Saurabh Gupta — President, HFS Research[15:22]
No, you’re absolutely right, Abhijit, because I’ve been thinking about this as well. You look at the technical debt that we’ve created in our enterprises—most estimates suggest that it’s anywhere between $1.5 and $2 trillion. Whatever it is, it’s very big. What have we done to solve that? We’ve created a $1.5 trillion IT services industry. And to your point, 70% of it is basically servicing that tech debt. So where is the money to actually drive innovation? And I really like the way that you’re thinking about it: this cannot be a one-versus-the-other. This has to be an “and” construct, and you have to somehow figure out how you invest in both. And for that, you need to get alignment both internally and externally with your vendors. So let me also flip this question a little bit. From a supply perspective—we’ve talked about demand, we’ve talked about NTT DATA. This IT services industry is really built around people. It’s a people-led model. And I don’t think that’s going to change anytime in the next couple of years. But on one hand, you see things like services-as-software, agentic AI services coming into the picture, which at the macro level suggests that it’ll reduce the reliance on people. But on the other hand, even if you look at India as a delivery location, IT services is not the top choice for the cream of Indian talent. They want to join a startup or a technology provider, or start their own gig. How are you seeing this talent equation as you think of the future of IT services?
Abhijit Dubey — CEO, NTT DATA, Inc.[17:20]
I think it’s probably going to be one of the hardest things for our industry, no doubt, right? And I think our industry, for the most part—if you think about the massive growth that the industry has experienced over the last decade or so, or even longer—a lot of it has been driven by labor arbitrage, arguably, right? And I think we’re going to move to a whole era of what we call skills arbitrage, right? So our clients will come to us because we have differential skills to what they can do on their own, right? And so, but that’s got to be at some scale as well. So I think the need for specialized technical talent, coupled with deep domain expertise of the client and their industry, and the ability to orchestrate bringing that capability to best serve the client where they are, whether it’s onshore, offshore, nearshore—I think that is the people supply chain of the future, right? It really is a supply chain of the future. And so as we start to pivot in that direction, that’s how I think about it. It’s like you’re designing a completely new supply chain. And you’ve got to start rethinking about everything, from where and with what competencies and what skills you’re hiring, all the way to how you upskill, reskill your entire employee base, in terms of the development paths that you provide. So I think all of that has to be fundamentally stepped back and rethought in terms of the supply chain. So that’s how we are starting to take a look at it. I would say that it’s not an easy one, because the space is evolving so quickly, the technical skills become obsolete pretty quickly. I think in the era that we are now, a software developer, or any technical skill, has a half-life of less than two years. So you’ve got to reinvent yourself all the time. So therefore, as a company, we’ve got to figure out how we drive that at scale and at speed and at scope, right?
Saurabh Gupta — President, HFS Research[19:24]
Before I let you go, I’ll ask you this question. If, let’s say, you had a magic wand, Abhijit, and you could make one challenge disappear—what would that be?
Abhijit Dubey — CEO, NTT DATA, Inc.[19:45]
One challenge disappear. If I could solve the talent equation at scale—I really think that’s going to define the winners of the future. If I could solve that quickly and at scale and at speed, I think that would…
Saurabh Gupta — President, HFS Research[20:02]
With a single magic wand, Abhijit, I don’t think we’ve got a formula written for that, but I think it’ll only come through conversations like this. I’ve really, really enjoyed talking to you, Abhijit. Thanks for spending some time with us. I think you gave us a lot of food for thought. So thanks a lot for spending some time with us.
Abhijit Dubey — CEO, NTT DATA, Inc.[20:21]
Absolutely. Thank you for having me, and I enjoyed the conversation as well.
