Software services providers are seeing a change in the pricing model of their deals due to higher artificial intelligence (AI) adoption, and companies are seeking multiple price points to maintain profitability, said a top executive at LTIMindtree.
“Most of this vendor consolidation is going to be assisted with AI adoption. It's not just about economies of scale that they leveraged, which used to happen before… you add more volume, get more discount,” said Venugopal Lambu, chief executive designate for India's six-biggest outsourcing company.
Clients at the $280-billion-plus IT industry are continuing to focus on vendor consolidation due to tariff-triggered concerns that continue to build macro uncertainties further pushing down non-urgent technology demand from corporates.
“Once you bring AI adoption, the pricing model also changes...It's not just the price per FTE (full-time equivalent), it may be price per engagement. So, that you might do it at a different price point, but you still make it more profitable. In my view, that’s the way things will evolve over the next few quarters and years,” Lambu explained.
Lambu, who was appointed in January this year, has laid out a five-year plan to look at new business opportunities.
In the past quarter, the contribution from across its top clients dropped indicating the impact of AI-related revenue cannibalisation, as previously stated by Debashis Chatterjee, CEO of the company.
Chatterjee, whose term ends in November this year, told ET, the productivity gains that it passed on to one of its large clients in Q3 and Q4 of FY25 is over.
On further impact of such gains being passed on, he said, “That's behind us…I don't think we can use a broad brush and say everything will be impacted. Wherever there is a possibility, we are individually, proactively working on it, in some situations, we can even bring the productivity gains to get more work from the same client,” Chatterjee said.
The Larsen & Toubro Group’s software services arm, last week, reported its fourth and final quarter earnings impacted by continued uncertainties and cautious client spending, along industry lines.
Amid the ongoing uncertainties, both the leaders said LTIMindtree has not received any “material requests” for pause or cancellation of projects. But the demand situation remained the same in the last two quarters, clients’ conversations are to build the technology landscape with cost savings.
“Most of this vendor consolidation is going to be assisted with AI adoption. It's not just about economies of scale that they leveraged, which used to happen before… you add more volume, get more discount,” said Venugopal Lambu, chief executive designate for India's six-biggest outsourcing company.
Clients at the $280-billion-plus IT industry are continuing to focus on vendor consolidation due to tariff-triggered concerns that continue to build macro uncertainties further pushing down non-urgent technology demand from corporates.
“Once you bring AI adoption, the pricing model also changes...It's not just the price per FTE (full-time equivalent), it may be price per engagement. So, that you might do it at a different price point, but you still make it more profitable. In my view, that’s the way things will evolve over the next few quarters and years,” Lambu explained.
Lambu, who was appointed in January this year, has laid out a five-year plan to look at new business opportunities.
In the past quarter, the contribution from across its top clients dropped indicating the impact of AI-related revenue cannibalisation, as previously stated by Debashis Chatterjee, CEO of the company.
Chatterjee, whose term ends in November this year, told ET, the productivity gains that it passed on to one of its large clients in Q3 and Q4 of FY25 is over.
On further impact of such gains being passed on, he said, “That's behind us…I don't think we can use a broad brush and say everything will be impacted. Wherever there is a possibility, we are individually, proactively working on it, in some situations, we can even bring the productivity gains to get more work from the same client,” Chatterjee said.
The Larsen & Toubro Group’s software services arm, last week, reported its fourth and final quarter earnings impacted by continued uncertainties and cautious client spending, along industry lines.
Amid the ongoing uncertainties, both the leaders said LTIMindtree has not received any “material requests” for pause or cancellation of projects. But the demand situation remained the same in the last two quarters, clients’ conversations are to build the technology landscape with cost savings.
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