CEOs ramp up AI investment amidst data security vigilance: EY CEO Pulse Survey

• Two-third of respondents prioritize investment in technology, including AI
• Two in three CEOs optimistic about revenue and profit growth
• Despite its paramount importance, CEOs and investors deprioritizing sustainability due to financial constraints and shifting boardroom agendas

Mumbai, 18 June 2024: In the face of global economic uncertainty and geopolitical tensions, Indian CEOs are doubling down on technology transformation, with a keen focus on artificial intelligence (AI) to drive productivity and business growth, according to the latest India-specific insights from the EY CEO Outlook Pulse Survey.

A robust 80% of the CEOs surveyed express optimism regarding their companies' revenue prospects, while an even higher 88% are confident about profitability. This buoyant sentiment is mirrored in the mergers and acquisitions (M&A) landscape, with a staggering 96% of respondents actively eyeing transactions in the coming year, predominantly through initial public offerings (IPOs).

Amit Khandelwal, Managing Partner, Strategy and Transactions, EY India, said, "In M&A landscape, a higher percentage of CEOs and investors are seeming to be bullish, actively seeking deals, driven by tech acquisition, market expansion, consumer shifts, and supply chain security. However, the survey also indicated that some challenges persist in terms of the organization’s strength in shareholder engagement and alternative deal structures.”

When asked what the top strategic drivers were for pursuing acquisitions, the survey found that acquiring technology, new production capabilities or innovative startups (44%), growing market share (36%), reacting to changing customer behavior (32%), and Securing supply chains (32%) stood out as the top four key ones. 

Indian CEOs prioritizing technology investment, including AI, but stays guarded amidst data security challenges.

The survey reveals that a significant 70% of CEOs are channeling investments into technology, including AI, to catalyze growth and enhance productivity over the next 12 months, which is much higher than their global counterpart at 47%. Yet, it's important to note that fortifying data management and cybersecurity (56%) and pursuing cost optimization across business facets (50%) also stand out as critical strategic imperatives in the near term. Moreover, the acquisition of technology, new production capabilities, or innovative startups (44%) emerges as the leading strategic driver for M&A activities.

“ Commitment to tech investments is not just a response to the present but a strategic leap towards future. The survey underscores this momentum, revealing that a substantial majority of CEOs are actively aligning their organizations with an AI-centric blueprint for innovation and productivity. CEOs must navigate this landscape with a dual focus: accelerating growth through high-value tech investments while simultaneously fortifying data with integrity and cybersecurity." said Mahesh Makhija, EY India Technology Consulting Leader.

Sustainability slips as CEOs struggle to showcase real financial benefits to investors

Despite a majority of CEOs (60%) acknowledging the growing importance of sustainability compared to a year ago, there's a trend of sustainability slipping down the priority list for almost 16% of CEOs, overshadowed by financial constraints and a shift in boardroom focus. This is more evident among global CEOs, where one in four (26%) responded that they are deprioritizing sustainability. The survey indicates a stark dichotomy: while 44% strongly recognize the impact of sustainability issues on their supply chains, a comparable 40% acknowledge to 'Green hushing' - fearing being accused of 'Greenwashing'. Furthermore, 42% admit to challenges in articulating a compelling financial case for sustainability investments.

To bolster the sustainability agenda, corporate India advocates for technology incentives, including AI, as well as subsidies and tax breaks for green technology investments, coupled with governmental backing of sustainable infrastructure projects.