AI Forces Indian IT Firms To Shift Toward Performance-Based Contracts
· Business · Economic Times, The Hindu, Reuters
Major Indian IT outsourcing firms, including TCS, Infosys, Wipro, HCLTech, and Cognizant, are restructuring their business models as clients demand lower prices and higher productivity. Contracts are increasingly tied to performance outcomes rather than traditional billable hours, a shift accelerated by the mainstream adoption of AI since late 2023. Industry executives report that some clients are moving tasks in-house, while the uncertainty surrounding AI has led to shorter contract durations. The Nifty IT index has declined by 20% this year, with its 10 constituents losing a combined $73 billion in market value. TCS CEO K Krithivasan stated that approximately 80% of the company's finance and HR business services contracts are now based on outcome measures.
Why it matters
This shift threatens the traditional revenue model of India's $315 billion IT services sector, forcing companies to move away from billable hours to remain competitive against smaller, AI-agile rivals.
Read the original report — Economic Times
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