AI is everywhere. Now IT firms need to prove it

A recent report from the Boston Consulting Group (BCG) titled "Now That (Almost) Everyone Has AI" suggests that technology services companies are grappling with the next challenge as AI becomes more widespread. Rather than debating whether AI can be deployed, firms are now questioning how to take ownership of the results the technology produces.

Over 90% of surveyed technology services providers were discussing similar themes, such as agents, orchestration, autonomy, and platforms, indicating a lack of differentiation in their messaging. Karan Chaddha, a managing director at BCG India, elaborated, "Over 90% are crowding around the same handful of themes: agents, orchestration, autonomy, platforms. That is not differentiation, that is noise."

The report analyzed over 40 technology services providers and 100 brand positioning claims across websites, earnings calls, and investor presentations. Six recurring priorities emerged during CXO interviews with BCG, including measurable impact on business P&Ls, fit with existing processes, integration with technology stacks, data control and governance, flexibility for companies to retain in-house control, and proof that a provider can stand behind the outcome.

Clients increasingly demand outcomes, while providers continue to focus on capabilities. Chaddha observed, "Clients are asking for outcomes. Providers are still selling capabilities. That gap is the whole problem."

Moreover, pricing pressures are intensifying as the cost of GPT-4-class inference has plummeted by roughly 60 times in less than two years. As the economics of technology services shift, it becomes more challenging to charge based solely on access to technology or the number of personnel employed. Operations-heavy businesses like BPO, managed services, and customer experience are likely to be the first to experience this transition, given their measurable outcomes and high labor costs.

Software engineering, however, faces significant pricing pressure as well, though shifting towards outcome-based pricing remains more difficult due to the complexity of measuring software quality.

India's IT services companies must also confront this evolving landscape. While the scale of the industry and a large talent pool have historically been advantages, AI's impact on labor intensity could change this dynamic. The falling cost of GPT-4-class inference and agents' unique characteristics, such as not requiring physical space like traditional employees, may diminish the relevance of per-seat and headcount-based pricing models.

However, BCG does not anticipate India's competitive edge evaporating. Instead, Chaddha believes the real advantage will lie in a company's ability to capture and reuse knowledge through AI-driven processes, such as runbooks, process maps, and libraries of exceptions. This approach could transform institutional knowledge into a durable source of competitive advantage rather than leaving it tied to individual projects.

BCG believes that the timing of this transformation could be crucial for technology services firms. A substantial portion of enterprise AI contracts signed during the 2023-24 boom is set to be renegotiated by late 2026. This presents an opportunity for enterprises to reassess their contracts, pricing structures, and delivery models.

Providers that adapt swiftly, reorganizing teams around process ownership and linking commercial models to outcomes rather than headcount, are likely to differentiate themselves most effectively. One notable example cited was a US healthcare payer that, through an AI operations company, reduced labor-intensive prior authorization processes, achieving $23 million in annual savings tied to outcome-based pricing.