1 week ago
AI Reshapes India’s IT Contracts as Clients Demand More
AI is changing how Indian technology companies sell their services.
In the past, clients often paid for the number of hours employees worked.
Now, more contracts connect payment to results, such as savings or faster work.
Clients also want the same work for 25% to 30% less money.
Some companies are using AI to do tasks themselves instead of hiring outside providers.
This has made it easier for smaller IT firms to compete with large companies.
Large providers are trying to win new AI-related work to replace lost revenue.
Some firms have rejected contracts they considered unprofitable.
The changes could reduce the need for large numbers of entry-level coding workers.
Indian IT providers are increasingly tying fees to measurable outcomes rather than hours worked.
Clients are seeking 25% to 30% price cuts, faster delivery and higher productivity as AI automates tasks.
Some customers are bringing work in-house, shortening contracts and reducing the advantage of large workforces.
Mid-sized firms such as Persistent Systems and Coforge are gaining business through agility and flexible pricing.
Large providers face margin pressure, possible workforce reductions and risks from aggressive productivity assumptions.
- Who
- Indian IT services companies including Tata Consultancy Services, Infosys, Wipro, HCLTech, Cognizant, Persistent Systems and Coforge, along with their clients.
- What
- AI is changing IT services contracts, pricing, competition, revenue growth and workforce needs.
- Where
- India’s IT services industry, serving clients in international markets.
- When
- The report was published on August 21, 2026; the shift accelerated after AI became mainstream in late 2023.
- Why
- Clients want lower costs, faster delivery and measurable productivity gains as AI automates more work.
Clients and Mid-Sized Firms
Large IT Service Providers
Pricing and payment
Clients and Mid-Sized Firms
Clients want lower prices, faster delivery and payments tied to measurable results rather than hours worked.
Large IT Service Providers
Large providers are adapting contracts to outcome-based pricing while trying to protect revenue and avoid economically unviable commitments.
Competition and scale
Clients and Mid-Sized Firms
Clients can use AI internally or choose smaller firms that offer rapid deployment, senior staff and flexible pricing.
Large IT Service Providers
Large providers are using their resources and client-embedded engineers to pursue AI adoption work, but their traditional workforce advantage is weakening.
Productivity expectations
Clients and Mid-Sized Firms
Clients expect AI to deliver substantial efficiency gains and more value for the same or lower spending.
Large IT Service Providers
Tech Mahindra CEO Mohit Joshi warned that some competitors may be making risky commitments based on productivity gains of 70% to 80% over five to seven years.
Key facts
- Industry value
- India’s IT industry generates about $315 billion in annual revenue.
- Market performance
- The Nifty IT index has fallen by about one-fifth this year, while its 10 constituents lost a combined $73 billion in market value.
- Tata Consultancy Services contracts
- About 80% of its contracts in finance, human resources and other business services are based on outcome-performance measures, according to Chief Executive K. Krithivasan.
- Client price demands
- Persistent Systems said clients are seeking the same work for 25% to 30% less, with faster delivery and higher productivity.
- Mid-sized company growth
- Persistent Systems’ April-June revenue rose 16%, while Coforge’s sales increased by one-third.
- Large-provider growth
- Tata Consultancy Services, Infosys, Wipro and HCLTech reported subdued growth of 1% to 3%.
- Tata Consultancy Services layoffs
- Tata Consultancy Services implemented cuts of more than 12,000 employees last year, according to the report.
Quotes
Cognizant representative
Spokesperson for Cognizant Services
“With AI, the fundamentals are shifting. Clients now expect more value and measurable outcomes, and we are re-forging our model for that reality.”
deccanchronicle.com
“"Clearly, there is a ton of competition out there, and our competition at times is doing irrational things."”
thehindubusinessline.com
Sources
Related news
AI Reprices Indian IT as Smaller Firms Challenge Giants
AI Expands Indian IT Opportunities, Demanding New Business Models
Kotak Warns IT Sector Faces Tough Year Amid AI Deflation
Outcome-based IT services no longer optional, says Nasscom's Rajesh Nambiar
TCS vs Infosys: Competing AI Strategies in Indian IT
Indian IT sector bucks AI stock sell-off as investor sentiment shifts
Indian IT Eyes AI Deployment Spending For Next Growth Cycle
India's Tech Jobs: AI, Cloud & Cybersecurity Roles Offer High Pay
Indian IT Firms Invest $1.1 Billion as H-1B Fees Rise
Cognizant Warns Customers of Potential Personal Data Exposure
