AI forces Indian IT services firms into outcome-based contracts and price cuts

Indian IT services giants are shifting from traditional billable-hour models to outcome-based contracts as clients demand steep price reductions and higher productivity enabled by AI. TCS reported that about 80% of contracts in certain business services segments are now performance-linked. Mid-tier firms are gaining share by offering agility and flexible pricing, while larger players face revenue pressure, shorter contracts and reduced need for large entry-level engineering workforces. The Nifty IT index has declined sharply amid the structural change.