AI reshaping deal contours between IT firms, clients

Global corporations embracing artificial intelligence are reshaping their outsourcing deals with Indian software giants, moving away from traditional fixed-price contracts.

- Jas Bardia

The shift reflects AI's disruptive influence on India’s $280 billion IT services industry, as focus shifts away from human labour and towards faster project completion.

Fortune 500 clients waking up to AI's gains from fewer people and faster work are considering so-called time and material contracts which are based on actual time and labour spent—At least, before committing to the traditional fixed-price pacts.

A time and material (T&M) contract is an agreement where a client pays a service provider based on the actual hours worked by their team and the cost of materials or resources used, rather than a fixed upfront price for the entire project.

“There are some (contracts) where we do based on the outcome. There are some customers that expect that this is better to do it on T&M (time and material),” said K. Krithivasan, managing director and chief executive of TCS, during the company’s post-earnings conference call with analysts on 10 July.