Indian IT Firms Race Ahead with Software-Led, AI-Powered ITSM

As enterprise IT evolves, the traditional model of managing IT services is being rewritten. What was once a service-heavy, project-led function is now morphing into a platform-driven, software-led ecosystem. This shift towards service-as-a-software, is redefining how Indian IT companies deliver, consume, and also compete in IT Service Management (ITSM).

The global IT Service Management (ITSM) market is consolidating into a platform-led ecosystem powered by AI, automation, and cloud-native operations. Valued at nearly US $12 billion in 2024, it is projected to exceed US $36.78 billion by 2032, growing at over 15% annually. 

ServiceNow dominated with about 51.1% share in 2023, setting the standard for workflow automation, while Salesforce, BMC, and Atlassian are expanding their footprints through AI-integrated service layers. 

The ITSM space is witnessing strategic partnerships that blur the line between software vendors and IT service firms. Salesforce is emerging as a challenger with its Agentforce IT Service, backed by an HCLTech alliance for AI-led enterprise solutions. BMC has teamed up with Infosys and Tech Mahindra on hybrid-cloud and automation, while ServiceNow has collaborated with Wipro, Tech Mahindra, and NTT DATA. 

Service-as-a-software

Achyuta Ghosh, executive research leader HFS Research, says this is the Services-as-Software shift in motion. “As ITSM becomes productised, IT vendors are reinventing themselves from service integrators to platform providers.” They’re moving from time-and-material models to subscription-led outcomes, monetising uptime, resolution speed, and productivity rather than manpower,” he adds.

This evolution turns IT services into software-powered assets — repeatable, scalable, and designed for measurable business value.

The future of ITSM lies in consuming intelligent service platforms as a product, not as a project, according to Shelton Rego, VP of India business at Freshworks, a company that provides enterprise-grade service software solutions.

He says that modern businesses are looking for faster results, instead of slow rollouts, and uncomplicated AI-powered solutions, instead of consulting contracts. “Software-led servitisation delivers that promise, transforming ITSM into an engine of growth and efficiency. Vendors who build for speed, simplicity, and real-time adaptability will define the next era of service management,” Rego adds.

Therefore, companies providing ITSM remove complexity, so that organisations can focus their energy on customers and business outcomes rather than wrestling with IT processes.

How are IT companies adopting?

Across IT functions, adoption is accelerating as AI and automation embed themselves into daily workflows. Platforms like ServiceNow have redefined how IT teams handle incidents, changes, and problems.

Vineet, an IT service delivery professional at a large IT company, who wishes to go by his first name,  explains: “Earlier, teams used multiple tools like Outlook for notifications, separate dashboards, and manual reporting. With ServiceNow, all of that happens in one place.” Built-in dashboards now visualise real-time ticket data, track change progress, and automate stakeholder alerts.

ServiceNow’s GenAI capabilities have further simplified operations. Based on historical incidents, the platform can generate proactive recommendations and summaries reducing reliance on separate knowledge databases. “Earlier, we had to use different tools for root cause analysis, but now GenAI does it automatically inside ServiceNow,” Vineet adds.

However, not all functions are fully automated. Post Implementation Reviews (PIRs) and final change reviews still require manual effort. “ServiceNow hasn’t yet matured in that area,” he says.

This mix of automation and manual intervention defines the current state of IT adoption rapidly evolving, but still balancing between machine intelligence and human oversight.

Business model

The platformisation of ITSM is not only a technology shift but also a business transformation. As automation and AI integrate deeper into delivery, IT firms are moving from manpower-based contracts to software and subscription-led engagement.

Ghosh explains, “Vendors are developing proprietary IP, automation frameworks, and cloud-native platforms that can be licensed or co-delivered with hyperscalers. Instead of billing for effort, they’re monetising outcomes—like uptime and productivity gains.”

This transformation is also changing workforce composition. Rego emphasises a “people-first AI strategy” where repetitive tasks are automated, allowing talent to focus on creative and strategic roles. “Traditional headcount-driven models are being replaced by AI strategies which focus on automating the mundane tasks and upskilling talent to do the things that only humans can do,” he says.

For IT service majors, this means balancing two operating models: one focused on scalable software products and another on managed services that integrate those products into enterprise ecosystems.

Integration Challenges 

One of the primary challenges in transforming ITSM is integrating legacy systems that were not built for agility.

Rego says that these legacy systems often lack the flexibility to support modern day DevOps practices, leading to compatibility issues and slower deployment cycles. “Cloud and AI-native solutions are built with platform capabilities in mind. Unified platforms like Freshworks which have ITSM, ITAM and ITOM capabilities make it easier for companies to not just onboard quickly but also to start realising return on investment much faster,” he says.

Ghosh adds, “Transforming ITSM from process to product isn’t easy. Vendors face challenges such as standardising highly customised processes, integrating with legacy backends, and building unified data models for automation.”

Codifying ITSM requires profound architectural change—APIs, low-code frameworks, and AI-driven decisioning, not just process digitisation, he says, adding that IT service teams must re-skill from process managers to software engineers, adopting agile release cycles and product thinking.

Convergence creates competition

The ITSM market’s evolution is creating new competitive pressures. As SaaS companies encroach on areas once dominated by IT service firms, both are converging around the same goal—automation-led, software-powered service delivery.

Ghosh observes that the rise of ITSM-as-software blurs traditional boundaries between IT service providers and SaaS players. “While today they collaborate with services firms acting as implementation partners, over time, both will compete for the same automation and operations budgets.”

In India, this is reshaping customer behaviour, as they seek cost-effective digital solutions with speed and simplicity. “Our clients typically go live in under 90 days, and AI solutions in under 30 minutes. This rapid time-to-value is putting pressure on traditional IT service providers to adapt or risk obsolescence,” says Rego.

Ghosh says that the decision to go for an IT company or SaaS vendor depends on enterprise maturity. Digital-native organisations increasingly adopt ITSM platforms directly, valuing agility, control, and transparency. In contrast, large traditional enterprises still rely on IT service providers to manage ITSM due to integration complexity, legacy systems, and hybrid operations, he says. 

However, competition is not only between vendors—it’s also driven by enterprise preferences. As Vineet explains, clients dictate tool choices. “Even if we have our own AI-enabled ITSM tools, customers often insist on ServiceNow or Salesforce. They know these are market leaders and prefer not to take risks with alternatives,” he says.

This customer-driven consolidation means newer or niche vendors must differentiate through speed, AI integration, and ROI visibility rather than tool variety.

ITSM as a platform marks a shift from manpower-driven services to software-led, AI-powered platforms. As IT firms and SaaS players converge, success will depend on delivering speed, simplicity, and measurable outcomes. The future of ITSM lies in turning service delivery into a strategic, software-defined advantage for enterprises.

The post Indian IT Firms Race Ahead with Software-Led, AI-Powered ITSM appeared first on Analytics India Magazine.