By Himanshi Lohchab
Copyright indiatimes
As artificial intelligence (AI) disrupts the traditional service delivery at India’s largest IT firms, clients are experimenting with new billing strategies as hourly worker rates and headcount swaps are becoming obsolete. However, the lack of new benchmarks means the shift from time-and-material (TNM) pricing model to outcome-based is still evolving, according to analysts.”Outcome-based pricing in IT deals is a promising approach but presents challenges in benchmarking outcomes, especially for long-term projects, as success metrics can be ambiguous and vary across industries,” said Biswajeet Mahapatra, principal analyst, Forrester. He added that clients often seek measurable outcomes such as cost savings, improved efficiency, scalability, faster time-to-market, and enhanced customer satisfaction.”We don’t yet have industry-wide hard benchmarks in the way we did with hourly rates but some clear patterns are emerging,” said Phil Fersht, CEO of HfS Research. For instance, many large IT and BPO renewals are moving to structures where 20-30% of fees are linked to defined business outcomes such as faster claim cycles, higher straight-through processing, or improved customer NPS, Fersht explained.ETtech
“In AI-heavy engagements, we are starting to see productivity gains priced at 25%-40% below legacy run costs, with providers absorbing some delivery risk,” he added.Subscription-style models are also emerging where contracts are priced with flat monthly or quarterly fees covering a set of AI-enabled service components. “Benchmarks here often range from 10-15% of the client’s equivalent FTE (fixed-time) costs for that function,” Fersht said. Forrester’s Mahapatra said some clients are willing to absorb infrastructure costs like GPU expenses for AI development. “Other evolving approaches include subscription models for access to AI/ML tools, pay-per-use pricing for cloud services, and co-investment models where both parties share upfront costs,” he said. Shared-savings constructs are also emerging in process-heavy domains like finance, supply chain, or HR, where the provider takes a share of the realised savings, HfS’ Fersht said.
