AI, H1B disruption: How IT SMEs can pivot toward $1.5 trillion infrastructure to keep jobs

AI, H1B disruption: How IT SMEs can pivot toward $1.5 trillion infrastructure to keep jobs Premium

The Indian technology industry has 10,000+ Small and Medium Enterprises (SMEs) dedicated to providing either traditional or digital solutions to the technology buyers. This subsegment contributes to 7-9% of the overall technology industry revenue (FY 23) in India and employs some 7.5 lakh people.

Some 80% of these SMEs were estimated to offer traditional IT and subcontracting services primarily with digital services as a growing pie. However, the twin challenges of evolving global immigration policies, particularly the H-1B visa changes, and Artificial Intelligence (AI) have created significant headwinds for the SME industry

For decades, the industry thrived on a staff augmentation model, leveraging wage arbitrage to provide talent for routine IT tasks. However, this traditional playbook is rapidly becoming obsolete. Immigration policies in developed countries are becoming more stringent, increasing talent mobility's complexity and cost.

Although the India-UK FTA talks involve deeper mobility provisions, plans for their implementation are unclear and the overall global trend is towards tighter immigration regimes. AI software is quickly automating mundane coding, testing, and maintenance tasks—the bread-and-butter services that established the industry. Clients increasingly wonder why they should pay top dollar for work that AI helpers can deliver at a fraction of the price.

Meanwhile, a huge infra opportunity—fuelled ironically by the same AI threat to software services—remains largely untapped by Indian IT SMEs. Data centres, undersea cables, and renewable energy systems require hundreds of thousands of engineers. In contrast to software services, this cannot be easily automated or outsourced offshore.

Indian IT small and medium businesses have a strategic dilemma before them: keep refining a business model under pressure or shift towards infrastructure and specialized services where Indian engineering talent may have an undisputed lead.

Global data centre capital spending stands at around $1.5 trillion until 2030, fuelled by AI computing needs, cloud growth, and emerging economies' digital infrastructure buildout. Market estimates point toward substantial labour gaps in data centre engineering, especially for specialty positions: MEP (mechanical, electrical, plumbing) engineers, power system experts, cooling engineers, and commissioning professionals.

These experts charge $150-200 an hour—well beyond rates for standard software programmers. And most importantly, this task necessitates physical presence, niche certifications, and sectoral expertise that establishes high barriers to entry and defendable competitive standing.

Indian engineering training generates high-quality mechanical and electrical engineering professionals—exactly what infrastructure services require. The project management skill set built over several decades of IT delivery can be directly applied to large-scale infrastructure projects. Indian cost models allow for pricing competitiveness without sacrificing healthy margins.

But Indian IT companies, especially SMEs, are still overwhelmingly concentrated on software services. Infrastructure is “different” from other areas of IT, with unknown spaces such as power systems and cooling technology. This cultural reluctance is losing the industry a huge opportunity.

Acquisition: Organic development of power and infra skills can take years, but acquiring small specialist firms (Micro data centre start-ups, renewable energy integrators, subsea cable designers) in India, U.S. or Europe accelerates the transition. With $3-8M, Indian IT firms can buy established teams, customer bases, certifications, and credibility overnight.

Data annotation and labelling CoEs: Data annotation remains an immediate revenue opportunity. AI model training requires large amounts of labelled data, which can be processed offshore with no visa dependency. India's cost advantage here drives major savings (up to 70-80%) and offers $25-30M annual revenues at scale with healthy margins.

Geographic expansion: Reducing reliance on a single market lowers policy risks. Setting up in the UK, Canada, or the Middle East—all of which require initial investment and market adaptation—improves resilience. Systematic geographic buildout should reduce US-market dependency from 70-80% to 40-50%, while maintaining diversified growth.

Timeline and leadership: The window of opportunity is short—probably just 18-24 months. As the margin squeeze tightens, SMEs need to overcome cultural reluctance towards infrastructure (“megawatts, cooling towers, data centre builds”) and invest in newer capabilities.

Today's leaders face a bifurcated future: streamline legacy models under growing pressure or disruptively shift into infrastructure and specialist services. The market will not reward straddling both sides. Companies that specialize and adapt decisively will thrive, while those slow to change risk being left behind. The Indian IT sector was built by visionary action in the past; the next generation must act with similar resolve to lead infrastructure buildouts, not just digital migration.

Indian IT SMEs need to focus on two upskilling its workforce with strong enterprise AI skills (like prompt engineering, AI architecture, and AIOps), frontier technology skills (such as quantum machine learning and Neuro-haptics), and advanced AI research abilities (“AI for AI” roles including LLM development and interdisciplinary innovation.

AI skills need to be complemented with Mechanical, Electrical, or Civil Engineering degrees for roles in data centre infrastructure, energy systems, power distribution, HVAC, and commissioning roles. Vocational diplomas/certifications in data centre design, energy management, automation, building commissioning, and green technologies, as well as specialized sector accreditations (e.g., PMP, Uptime Institute accreditation, LEED AP) are much needed for building credibility in the industry.​

(The author is an Emerging Technology expert with experience in setting up DeepTech public private partnerships and policy advisory in areas of AI, IoT, Quantum,5G, Geospatial, Autonomous and Data Centre Technologies.)

Published - October 27, 2025 07:53 pm IST

Source: The Hindu
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