Our Take
Sikka is betting the IT services margin collapses; the industry is betting the market expands enough to sustain both models, and so far the market is right.
Why it matters
The $230 billion IT services industry faces its first credible internal threat from someone who built it from inside. Whether AI replaces bodies or multiplies addressable work will shape investor valuations and hiring plans for the next 18 months.
Do this week
Enterprise buyers: audit your current IT services contracts for work that could be automated by agentic tools before your next renewal cycle, so you can negotiate from a position of known alternatives.
Sikka launches Hang Ten to replace IT services margin with AI automation
Vishal Sikka, former CEO of Infosys, raised $32 million in seed funding for Hang Ten Systems, a startup that uses AI-driven code generation and automation to handle enterprise software customization, integration, and maintenance (per TechCrunch). Mayfield led the round, with strategic backing from Aramco Ventures and participation from angels. Yahoo co-founder Jerry Yang sits on the board.
The startup, founded one month prior to the funding announcement, is already working with customers including Siemens Gamesa Renewable Energy and Fresenius (company-reported). Hang Ten's team includes executives from SAP, Infosys, and Sikka's previous venture, VianAI, across roles spanning delivery, engineering, and leadership. Co-founders include Navin Budhiraja (CTO), Sanjay Rajagopalan (chief design officer), and Tao Liu (senior vice president of forward deployed engineering).
Mayfield's conviction is structural: "Traditional services scale linearly with headcount. Hang Ten is built so its leverage grows with every project" (per partner Navin Chaddha to TechCrunch). This is distinct from VianAI, Sikka's 2019 AI startup, which focused on enterprise analytics and decision-making tools and raised $140 million in a 2021 SoftBank Vision Fund 2 round.
The IT services industry's first internal disruption play
Hang Ten lands in a heated debate. Analysts at Jefferies flagged IT services as among the first sectors facing meaningful AI disruption earlier this year. Infosys chairman Nandan Nilekani countered this week that AI expands the industry's addressable market. Infosys itself projects an "AI-first services" market of $300 billion to $400 billion by 2030 (company-reported).
The strategic tension is real: does agentic software development destroy the labor economics that made Infosys and its peers billions, or does it enable them to serve new customers at lower cost? Sikka's bet is the former; the industry's public position is the latter. Infosys shares are down 35% this year (per TechCrunch), suggesting the market is pricing in disruption risk regardless of which narrative proves correct.
Hang Ten's appeal lies partly in Sikka's resume. Twelve years at SAP building enterprise software, board time at Oracle, a decade at Infosys. He has seen the margin structure from both sides of the table. If anyone can design an alternative, his track record suggests he can execute it.
Watch customer adoption speed as the real signal
Hang Ten's claim to "already have customers" after one month of operation is a credibility marker, but customer count and deal size remain undisclosed. Practitioners should track whether Hang Ten's customer base grows within existing Infosys/Accenture/TCS accounts (a sign of competitive displacement) or wins new greenfield deals (a sign of market expansion). The margin pressure on IT services will be determined by adoption speed, not by the existence of the technology.
For enterprises: the presence of Hang Ten, backed by serious capital and staffed by industry insiders, means you now have a named alternative to traditional services for discrete software projects. Whether that alternative is cheaper, faster, or safer than incumbent vendors will become clear in the next 12 months as case studies emerge.