AI reshapes India's IT services sector contracts as clients demand more for less

BENGALURU, August 21: Artificial intelligence is transforming India's IT services sector, forcing outsourcing giants like Tata Consultancy Services, Infosys, Wipro, HCLTech and Cognizant to revamp their business models. Clients are demanding more productivity for less money, with contracts now tied to measurable outcomes rather than hours worked.

The shift is particularly challenging for traditional IT companies, as AI automates more tasks and reduces the advantage of having a large employee base. Industry executives report shorter contracts and a loss of some work as clients use AI to shift tasks in-house. Despite the challenges, smaller competitors are thriving as they quickly deploy senior leaders and offer flexible pricing.

Some firms are taking risks by guaranteeing prices despite rising chip costs, while others are cutting back on hiring new engineers. The traditional pyramid model of big IT companies hiring large numbers of entry-level engineers may be fading away.