GenAI Intensifies Pricing Pressure on IT Sector

The rapid adoption of generative AI (GenAI) is reshaping spending patterns in the IT services industry; however, this technological shift is intensifying pricing pressures for providers.

- PADMINI DHRUVARAJ

Despite the growing demand for GenAI-related services, clients are increasingly demanding that efficiency gains be passed on to them, creating a challenging pricing environment.

"People are spending more money on new technologies like GenAI, but we now have to do more for the same amount," said Venkatraman Narayanan, managing director and CFO, Happiest Minds.

Narayanan explained that as GenAI tools, such as copilot, enhance coding efficiency and reduce training time, clients are leveraging these advancements to demand greater value for their investments.

"For example, if 20 people were previously required for a project lasting a year, the expectation now is that the same project can be delivered by 18 people due to efficiencies from generative AI," he said.