For three decades, India’s information technology (IT) story and Bengaluru’s have relied on a simple equation: the global demand for software plus offshore hiring equalled growth, jobs and urban expansion. As a thumb rule, an average Indian IT company with $1 billion in revenue employs 30,000 people. Artificial Intelligence (AI) is now rewriting this equation.
Moving toward a ratio of $1 million in revenue per employee, industry experts predict that by 2028, a $1-billion IT services company will operate with 1,000 full-time employees. Unlike technology, where innovation requires clients to pay more, services typically operate the other way round. With Agentic AI altering the manner of building and managing software, the traditional three decade old labour heavy model that built India’s software exports all along is being challenged directly. The typical IT playbook of hiring software engineers offshore to drive technology projects at low costs is changing rapidly and Bengaluru’s population story must inevitably change with it.
The IT industry’s profit is in the software development life cycle, with labour arbitrage enabling a majority of the profit. The services space necessitated a traditional pyramid, with thousands of low-level engineers at the base delivering volume work, forming the bedrock of profitability. With Agentic AI taking over testing, coding and maintenance tasks, productivity has jumped no doubt, but has threatened the requirement of fresh engineers, shattering in the process the profit model of India’s major IT services and consulting companies.
Lower level engineers will no longer be required as clients begin using AI and cloud to make incremental cost reductions in their IT budgets. AI-led efficiencies will be the driver for contract value reduction. The outsourcing model heretofore laid emphasis on clients treating providers as cost-reducing partners, but the seismic shift in the industry is making firms cannibalise their own business models before someone else.
With the requirement of lower level engineers dropping rapidly, India’s technology capital Bengaluru’s population growth is bound to be affected. This far inseparable from migration, millions arrived in the city from across the country, drawn by the promise of IT jobs. Fewer campus hires will mean fewer young professionals moving to Bengaluru each year, gently easing the city’s population growth curve.
Entire neighbourhoods, transport systems, rental markets and social ecosystems grew around the assumption that software services required large teams physically present in the city. With IT firms forced to shift from head count-driven growth to output-driven efficiency, the volume of new hiring at entry level will shrink rapidly. This reduction will translate into less pressure on housing, transport, civic infrastructure and the traffic police, long stretched beyond capacity. A slower influx would allow the city to pause and catch its breath, literally!
Another subtler change would be a redistribution of talent. AI enables high-quality remote work far more effectively than earlier digital tools. With productivity depending on cognitive skill instead of physical proximity, companies will hire people that stay in Tier-2 and Tier-3 cities resulting in the plateauing of Bengaluru’s population growth. Greater population churn due to project-based professionals frequently moving in and out of the city will also mean shorter stints, hybrid living and multi-city careers as ‘digital nomads’ do today.
Undoubtedly, Bengaluru’s demographic profile will change. With AI reducing the demand for junior roles but increasing the demand for specialised, senior and interdisciplinary talent, migrant profile will become older, smaller and selective. The city’s population boom driven largely by young professionals and fresh graduates arriving each year will now attract fewer but more experienced AI architects, data scientists, domain experts and other professionals, slowing population growth but increasing skill density.
This piece is not about shrinking population however, for Bengaluru is also considered India’s start-up city. Start-ups focused on AI products, platforms and applications clustered around innovation ecosystems rather than massive campuses, would encourage denser, mixed-use urban pockets, not sprawling residential expansions on the city’s outskirts. With growth coming from new lines like AI-first services and data modernisation, Bengaluru’s population growth will become localised, intensifying in certain neighbourhoods.
The city’s advantages, its educational institutions, start-up culture, global connectivity and lifestyle appeal (and of course the weather) remaining strong, I doubt if Bengaluru’s population will reduce dramatically. Growth will, however, become slower, smarter and more selective ending willy-nilly the unchecked, linear population expansion tied purely to IT services hiring.
Artificial intelligence is not just altering India’s IT scenario and start-up culture, but recalibrating Bengaluru’s urban destiny, positioning the city from being a magnet of mass migration to a hub of concentrated talent. Whether this leads to a more liveable, sustainable Bengaluru or a more exclusive one will depend on how policymakers, companies and the city itself adapt to this new technological reality.
(Priyan R Naik is a columnist and independent journalist based in Bengaluru.)
