India's leading information technology companies, traditionally known for their asset-light, services-led models, are undergoing a significant transformation. Firms like Tata Consultancy Services (TCS) and HCLTech are making substantial capital investments in physical data centers and developing new service offerings to capture a larger share of the burgeoning artificial intelligence (AI) market.
This strategic pivot comes as AI adoption reshapes global outsourcing and clients increasingly move critical operations in-house to Global Capability Centers (GCCs). To adapt, IT service providers are expanding into infrastructure-heavy domains, a stark contrast to their decades-long focus on human capital.
HCLTech's Data Center Expansion
HCLTech recently announced its entry into the data center segment. The company plans to invest approximately Rs 3,500 crore, with its first facility slated for Bhubaneswar. This initiative is a collaboration with the Odisha government and Sarvam AI, an Indian generative AI startup in which HCLTech has invested. CEO C Vijayakumar stated that this move represents a "new growth vector" for the company, shifting towards higher-value, AI-ready solutions and enabling outcome-based contracts for global clients.
TCS Ventures into HyperVault and OpenAI Partnership
Not to be outdone, Tata Consultancy Services established a new unit called HyperVault in late 2025. This venture, in partnership with private equity firm TPG, aims to create state-of-the-art AI-ready data centers. TCS has acquired land in Maharashtra and Andhra Pradesh for these facilities. Notably, one of these data centers is set to become OpenAI's first such facility in India, underscoring the strategic importance of these investments.
The Rise of GCC-as-a-Service
Beyond physical infrastructure, Tier-I tech firms are also offering "AI GCC-as-a-service." This model provides partial or end-to-end management services, assisting clients in setting up, scaling, and managing their global capability centers. This offering aligns more closely with their traditional services model and seeks to mitigate potential revenue losses from clients bringing work in-house.
Industry Perspectives and Financial Implications
Industry analysts view these moves as a natural extension of IT companies' offerings, driven by client requirements. Amit Chandra, Vice President at HDFC Securities, highlighted that these new facilities allow companies to host data locally, addressing crucial data sovereignty requirements for clients. He also noted that this shift allows service providers to tap into rising AI spending, which is often replacing traditional IT budgets, and explore innovative pricing and revenue models.
While the data center business is capital-intensive, experts suggest that investments will likely be staggered over several years and shared among partners, thereby mitigating the impact on the companies' return on equity (ROE). Most IT firms currently boast ROEs of 25-26%, with top-tier companies like TCS exceeding 50%. While the data center vertical might generate a lower ROE of 16-17%, its potential to drive overall business growth could offset these concerns.
However, not all major players are embracing this new direction. Infosys CEO Salil Parekh confirmed that after internal discussions, the company decided against venturing into the data center segment, citing its capital-intensive nature.