Hours are losing value as a billing unit
The traditional outsourcing model links revenue to teams and time. Generative tools that automate coding, support, testing, and business processes make clients less willing to pay for the same hours. Providers are responding with fixed fees and contracts tied to measurable outcomes.
TCS said roughly 80 percent of its business-services agreements now use outcome-performance pricing. Persistent Systems said some clients want the same scope for 25 to 30 percent less and expect faster delivery.
The market is punishing uncertainty
Reuters reports that the Nifty IT index has fallen about 20 percent this year, erasing around 73 billion dollars in market value among its constituents. Large firms have grown slowly while some midsize providers have expanded faster by pursuing narrower opportunities and newer delivery models.
Some work is also moving in-house. Shorter contracts and competitive guarantees weaken the visibility that made large outsourcing companies attractive, even as the demand for AI implementation creates new work.
A price promise can become a hidden liability
Tech Mahindra described rivals assuming 70 to 80 percent productivity gains over five to seven years and offering price guarantees despite uncertain chip and delivery costs. Infosys has said it will walk away from deals whose economics do not work.
Clients should demand a transparent baseline, quality and security measures, workforce effects, model costs, and a method for sharing upside and downside. Otherwise, outcome pricing can turn a speculative productivity forecast into layoffs, degraded service, or a loss that appears only after the contract is signed.
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Reuters — AI reshapes India's IT services contracts
