AI Adoption Tweaks Pricing Models For IT cos

Definitely, pricing strategy is changing and it is going through a change. It is going for a re-engineering. So, certain evolution is going on - Rahul Nawab, President (data & AI), Prowess Consulting, tells Bizz Buzz

Bengaluru: Pricing models of technology outsourcing deals are slowly changing with faster adoption of AI & generative AI solutions as clients are asking for more outcome-based pricing in recent quarters.

According to industry experts, such pricing models are bringing in changes to the traditional T&M (time and material) models, followed by Indian IT firms. Though a portion of all projects have been following performance-linked pricing for quite some time now, the pace is likely to accelerate in coming quarters.

“Definitely, pricing strategy is changing and it is going through a change. It is going for a re-engineering. So, certain evolution is going on,” Rahul Nawab, President of Data & AI of Prowess Consulting, told Bizz Buzz.

“Deal construct is also changing as enterprises are looking for outcome-based model. That is the reason that we see many small size deals coming to the market,” he added.

According to sources in the know, confusion prevails around right pricing of projects as the AI component gets added for delivery.

“There is confusion among service providers that how to price a solution powered by AI. This is because right pricing of the AI tools can’t be determined. Different AI models have different pricing. So, this is an evolving space as of now,” said a senior leader, who handles sales functions at an IT firm.

Meanwhile, Indian IT firms are facing intense selling pressure as investors are worried over their growth prospects in the next financial year (FY26).

Nifty IT index has been one of the worst performers this year so far. It has given a negative return of 16.2 per cent year-to-date (YTD). Most of the fall has been witnessed in the last one month, when the index fell close to 13 per cent.

Global geopolitical uncertainties coupled with the threat of possible trade war triggered by US President Donald Trump’s tariffs are weighing on the stability of the IT sector.

“Sentiment has turned cautious, with enterprises taking a ‘wait-and-watch’ stance,” brokerage firm, Motilal Oswal said in a note.

Industry experts are of the opinion that higher adoption of AI may cannibalise a part of IT firms’ revenue. Operating margins are also likely to be under pressure as clients seek efficiency-led savings to be passed on to them. Currently, top-tier IT services firms of India have the highest level of operating margins as compared to their global peers.