How AI is reshaping software development in India

Something peculiar happens when you spend time in corporate boardrooms across India these days. CIOs walk in looking defeated before meetings even start. Their digital initiatives are hemorrhaging money. Projects that seemed straightforward six months ago have become multi-year nightmares.

Consider the common scenario of a large insurer and its claims processing app. What began as a simple, eight-month build turns into an eighteen-month ordeal involving three different vendors and countless regulatory hurdles. All the while, their startup competitors launched similar functionality in weeks.

This is not an isolated incident. According to a 2024 NASSCOM report on AI and digital adoption, only about 28% of Indian organizations have been able to move beyond pilot projects and achieve measurable business outcomes from digital transformation initiatives. Yet, the pressure is on as India remains a key market that global players look to for delivering world-class, digital solutions – buoyed by its flourishing digital landscape, from UPI transactions surpassing 13 billion per month in early 2024 to the steadily expanding reach of the Open Network for Digital Commerce (ONDC), which is reshaping the country’s digital trade.

The Skilled Talent Crunch Nobody Wants to Discuss

The Indian IT industry is facing one of its most uncomfortable realities: we have put ourselves in a corner. NASSCOM highlights significant challenges in the country's AI and digital workforce, where it is no longer a quantity issue but extends to the gaps in skillsets and execution capabilities. The lack of engineering maturity, poor change-management, and product-engineering practices – further exacerbated by the prevalence of complex legacy systems and organizational frictions – have left many large-scale tech projects falling short of their goals.

Consider this in the case of a typical banking, financial services, and insurance (BFSI) modernization project, aimed at overhauling legacy systems built in the 1990s. On top of complexity from rigid, monolithic architectures, enterprises have to also navigate monthly regulatory requirements changes and shifting customer expectations. Even with unlimited developer resources, traditional approaches cannot match this pace of change.

Take, for example, a customer-service function at a major bank. Legacy systems and lengthy delivery cycles meant a new complaints-tracking and loyalty system would take many months to build. By the time it is delivered, product features, regulatory guidance, and customer expectations would have already evolved, leaving the system unable to address current challenges — ultimately frustrating customers, straining operations, and wasting budget.

This scenario is common in Indian businesses, where projects fail not because of a lack of effort but due to predictable operational flaws. Teams are constrained by outdated systems and expensive integrations slowing even minor changes, a lack of established governance and compliance framework impacting data quality, and limited engineering skills hindering iterative deliveries. Additionally, rising security and privacy risks – particularly in health and financial systems – have further raised the bar for deployment, delaying timelines and making it more challenging for enterprises to deliver high-quality, reliable digital solutions.

Beyond Code Generators: Real AI Impact

Discussions around AI in software development often focus on machines writing code. Yet the true impact is far more practical — AI is reshaping how companies are building software. According to Forrester Research, organisations using AI-powered application-generation platforms are delivering projects faster and achieving higher quality. By optimising design patterns, testing, and deployment pipelines, these intelligent systems automate tasks that human teams often rush under pressure, minimising errors and reducing manual workload to enable greater focus on higher-value, strategic work.

This change can be seen in different sectors: Schneider Electric, a global specialist in energy management and automation, for example, turned to AI-powered low-code tools to implement a system for real-time equipment monitoring and predicting maintenance needs in a matter of weeks instead of months. Utilising a single platform, the manufacturer was able to seamlessly create integrated workflows, dashboards that complied with standards, and maintenance alerts for several production lines all at once.

Strategic Shifts Indian CIOs Must Consider

The classic build-versus-buy dilemma is evolving. With the emergence of AI-driven, full lifecycle development platforms, businesses no longer have to choose strictly between building their own apps or purchasing off-the-shelf solutions. The most efficient approach now combines both: leveraging commercial software for standard functions while using AI-powered tools to rapidly customize and enhance systems to meet specific business needs.
 
Forward-looking CIOs do not just look at the number of developers or time required to procure a new software – rather, speed is the new priority. Whether it is testing, validating, or scaling applications, it is the speed at which new ideas can materialize that is changing how tech strategies are formed in trailblazing Indian companies.

At the same time, business functions are already adopting these tools independently. From marketing teams creating prototypes of a customer-engagement application to operations teams leveraging solutions to automate workflows, IT oversight is often not present. For CIOs, the question is no longer whether to allow AI-assisted development, but how to establish governance, security, and data-management frameworks that enable innovation responsibly.

Practical Steps to Stay Ahead

With an established strategic framework, the focus now shifts to disciplined execution. Businesses need to pick technologies that will make the process of rapid iteration predictable rather than reckless. The most optimal platforms are the ones that intertwine speed with security and governance. Auditing trails, access based on roles, policy controls, and data-localization are some of the features that allow teams to experiment securely within the compliance limits. This mix of agility and governance will help enterprises ascertain that innovation takes place without creating unseen regulatory or security risks.
 
The most unrecognized benefit that many businesses have is their own employees. Developers, product owners, and subject-matter experts are the ones who have the context that no outside consultant can duplicate. Training these teams through short, result-driven cohorts, cross-functional pilot projects, and pairing programmers with business subject-matter experts gives companies the power to transform their institutional knowledge into high-impact, bespoke applications. Building a library of reusable components further increases this value, aiding the teams to develop better solutions at a faster pace and with less cost than hiring scarce specialized talent. 

The Window is Closing

Organisations embracing AI-enhanced development are establishing competitive positions that followers will struggle to match. They are not just building applications faster. They are accelerating their core operations with productivity and efficiency that far exceeds traditional systems.
When enterprises can test business hypotheses in weeks instead of months or years, the very nature of technology strategy begins to change. Rapid experimentation shifts IT from being a support function to becoming a direct enabler of growth and innovation. Early movers in Indian markets are already demonstrating this advantage across sectors.

The enterprises that define India's next digital chapter will be those that recognise software development's evolution toward intelligence and business-speed delivery. For Indian CIOs, the strategic imperative has crystallised: embrace AI-enhanced development capabilities or ensure agility to constant change. With India's digital ambitions and competitive intensity, hesitation represents a luxury few organisations can afford.

Vivek Ganesh