India’s top IT services companies are beginning to face a clear shift as artificial intelligence starts to push down the value of their traditional business.
Executives across the sector say AI-led efficiencies are compressing deal sizes and lowering billing rates, even though overall demand for technology services remains steady. The change is gradual but visible, and companies are now adjusting to a new pricing reality.
At HCLTech, chief executive C Vijayakumar said the impact is already being felt. “AI deflation could be 2 to 3% a year,” he said during the company’s Q4 earnings press conference on, adding that pricing is being reset as automation improves productivity.
This shift is reflected in how contracts are now being signed. Deals that were earlier valued at $100 million are now closer to $80 million, not because demand has fallen, but because the same work can be done faster and with fewer people.
The pattern is not limited to one company. Over the past two weeks, leaders at Tata Consultancy Services, Infosys, Wipro, and Tech Mahindra have all pointed to similar trends.
“You would expect AI revenues to increase going forward, along with some of the traditional revenues to slowly taper down and AI revenue to overcompensate for the reduction in the revenue in other parts of the service line,” said K. Krithivasan, chief executive of TCS.
Infosys chief executive Salil Parekh described the shift in simpler terms. “So, the compression is coming on some of the services, and the growth is coming on other services, and the compression is typically in the areas where the AI foundation models and some of the tools are very efficient,” he said.
As AI tools take over routine work such as coding, testing, and maintenance, projects require less human effort. This reduces the time spent on tasks and, in turn, lowers the amount clients are willing to pay.
At the same time, companies said that demand itself has not weakened. HCLTech said it has been able to keep its total contract value run-rate broadly steady, even as individual deal sizes shrink.
The company also outlined a broader change in the market. Traditional services are facing pricing pressure, while areas such as data, cloud, cybersecurity, and modernisation are growing, supported by AI. A third segment called AI-native services is emerging as a new source of growth.
HCLTech reported about $620 million in annualised revenue from its advanced AI services, which include AI factories, physical AI, semiconductor design for inferencing, AI-led marketing services, and platform-based solutions. This business is growing steadily and is expected to expand further in the coming years.
Alongside this, pricing models are also changing. Clients are increasingly moving away from time-and-material contracts to outcome- and output-based agreements, driven by the measurable productivity gains from AI.