World’s top companies are realizing AI benefits. That’s changing the way they engage Indian IT firms

Fortune 500 customers think of the time and material contracts based on real time and labor, at least before committing traditional fixed -priced pacts, at least the real time and labor spent.

The Time and Material (T&M) contract is an agreement in which a customer pays a service provider based on the real clocks and the cost of the materials or resources used by his team rather than a fixed price for the whole project.

TCS General Manager and General Manager K. Krithivasan, on July 10 during the company’s post -ear conference, “There are some (contracts) based on the results. There are some customers expecting to do it on T&M (time and material),” he said.

As the agent AI develops, customers want to see how they can benefit from the results. “He said.

“So, they want to do this in T&M, and then after a while, move towards the fixed price model. So we see both options here.”

The amendment reflects the deductions that AI causes India’s $ 280 billion information technology services industry. And when customers are still cautious about optional expenditures between the global uncertainty and AI risks.

LtimindTre also saw similar changes in his contracts with customers.

“I have seen a positive response to the debate, some time and material contracts into the services managed and output -based structure,” LimindTre General Manager and General Manager of LimindTre said. Mint On July 18th. According to Lambu, it was directed by a solution led by AI by the company.

“Our customers are excited about this, so they want to hear more than us, and we want to see how we can help them to move to the structure based on more results or managed services than time and material contract, and we see it as a great opportunity.”

In the first quarter of both TCS and LIMindree, the first quarter was in 26 financial years. TCS ended with a revenue of 7.42 billion dollars in three months until June, while the LTI MindTree reported an increase of 1.15 billion dollars with an increase of 1.97% on a three -month basis.

India’s fourth largest IT Services company Wipro Ltd shows how IT sector agreements have changed in the last two years.

Wipro’s share in fixed price agreements fell from 56% to 52% of the total revenue from 56% until June at the end of three months at the end of April-June 2023. At the same time, its share in time and material agreements increased from 43% to 48%.

Peter Bendor-Samuel, the founder of Everest Group, said, “Customers accept this because it shifts the risk to IT service providers for cost excesses and scope crawling and forces the service providers to create the productivity promised by AI.

As of now, IT service providers receive a gradual payment instead of a collective amount at the end of the year. Examples of postponement of such payments arise due to macroeconomic uncertainties that can force companies to serve their obligations to pay to IT vendors at a later date.

According to Phil Fersht, General Manager of HFS Research, the change in the ways of interacting with customers with IT companies emerges when customers are looking for lower prices than IT outsourced resources.

“Corporate customers demand lower prices from service partners, which shifts the focus to real work from human -based effort to real work, Fers said Fersht.

AI also leads companies around the world to use less people in operations as automation replaces manual, unnecessary workmanship. For this outsourcing users, this creates a difficulty as it is traditionally billed on the basis of the number of employees deployed for the customer.

“If Net-Net demands a price cut of 20%, TCS and LIMINDTree’s appreciation are wisely used to provide the same services with less people while maintaining their profit margins, TC “This means that these contracts should be moved to a consumption -based model with payment per FTE (full -time equivalent), which we call ‘Services as Software’ in HFS. ‘

However, Bendor-Samuel awaits to fill the tendency of contracts to change: “Conclusion and constant pricing are more complex and FTE or time-based models that are much simpler over time, it is unlikely that there is a permanent tendency.”