The information technology sector is facing a pivotal shift in its pricing strategy as global clients push for tighter deal structures. While per-unit pricing has remained largely stable, the overall size of contracts is declining, with clients increasingly expecting the same scope of services for lower overall costs. This trend, driven in large part by the rising adoption of generative AI (GenAI), is reshaping revenue models for domestic IT vendors.
Industry leaders suggest that the pressure is not on individual rates but on achieving greater value through improved efficiency. Venu Lambu, CEO-designate of LTIMindtree, confirmed that while unit pricing is stable, overall deal sizes are shrinking. “When you look at AI, it’s not really the pricing per unit as such but the overall deal size… the size of the deal definitely is reduced,” he said.
This sentiment is echoed by Pareekh Jain, CEO of Pareekh Consulting, who observed that clients now expect up to 20% cost reductions for the same level of output. “They are expecting that what 100 people did can now broadly be done with 80,” he said. Jain cautioned that unless companies can truly reduce the effort needed, this shift could pose a risk to profit margins. However, he also noted that for experienced vendors, revenue per full-time equivalent (FTE) is rising, suggesting that margins may not necessarily erode in all cases.
Client demand for cost-efficiency is beginning to reflect in the composition of large client accounts at several major IT firms. Tata Consultancy Services (TCS), for example, saw the number of clients contributing over $50 million annually drop from 139 in Q4 FY24 to 130 in Q4 FY25. Wipro experienced a similar dip, with its $100 million-plus clients falling from 22 to 17 in the same period. HCLTech’s $50 million+ client count slipped slightly from 53 to 52 between December and March.
According to Jain, these changes are a direct result of GenAI’s impact on productivity. “Many of these companies are seeing their client buckets decline because the same work now has to be delivered with 20% less effort,” he said. This could lead to a decrease in revenue per client, prompting vendors to pursue new growth strategies such as expanding into new regions or increasing the range of services offered to existing clients.
The dual impact of GenAI is being acknowledged across the industry. HCLTech CEO C Vijayakumar remarked during the company’s Q4 press conference that generative AI influences both pricing negotiations and revenue opportunities. “We expect both pricing pressures as well as new revenue opportunities,” he said.
Despite concerns around shrinking deals, margins may remain protected, thanks to stable or declining hiring trends. Jain pointed out that headcount growth remains flat even as revenue edges upward, helping to preserve profitability.
Brokerage firm Motilal Oswal echoed this perspective in its review of Infosys, noting that pricing remained firm and that the company anticipates potential upside through value-based pricing models.
Still, the competitive environment is intense. Accenture CEO Julie Sweet acknowledged in the company’s Q4 FY25 earnings call that pricing across the board had softened, underscoring the challenges ahead for service providers navigating a transformed demand landscape.