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Outcome Over Effort: The New Revenue Model for IT Companies

Articles Written By – Surendra Jauhari

From the last many decades- India has been recognized as the world’s back-office. Many large Indian IT companies like TCS, Infosys, Wipro, etc. serviced to global business through BPO’s/KPO’s and many global large players like Accenture, KPMG, Deloitte has the largest workforce in India.

Now, we are witnessing a generational change from long decade back-office experience for global giants to AI driven critical asset building.

India’s shift from primarily back-office of the world to AI era and moved beyond outsourcing, also shift towards as ‘Product Name’ model, actively balancing which focus on creating, manufacturing and exploring high-value products.

Let’s understand with an example that how traditional work process, which has critical function in healthcare sector that include process like insurance eligibility verification --------medical coding----claim submission and follow-up, which handled by large labor intense work force in India.

Now, what is happening approx. 50% of Fortune 500 companies outsource business process to India because they need lots of manual work like coding, billing and documentation at low costs.

Now, AI (LLM’s) can do work faster than manual – like reading documents, suggesting codes and drafting filings.

But AI alone is not perfect, if there is small error can convert it into big money or legal loss.

How new model would work?

 AI will do 70%-90% of work and then it reviews, correct and approve by human, this would called AI + human in the loop.

What change will happen for Indian IT/Service Companies?

This change has given a shift from cheap labor outsourcing to AI enable managed services. This new model enable – fewer people doing repetitive tasks, more people doing QA, exceptional handling and compliance checks.

What opportunities for India?

It would not be just a BPO. Now will become first AI led services companies. Will sell outcomes, like accuracy, speed and compliances not just headcount.

Indian talent will become AI supervision and domain experts, not manual process.

If I say in one line – Outsourcing is not dying – it is just upgrading from people only to AI led, human – verified work.

Impact on revenue for IT/services companies?

Yes, revenue will be impacted but rarely.

During first one to three years pressure would be on revenue per employee. Clients have option to renegotiate contracts as AI reduce manual efforts, traditional based FTE based pricing shrinks and long decade legacy of BPO may see declining growth.

Who would be the long-term winners?

Firms, those who stay out from labor intensive workforce, otherwise may see revenue erosion. Shifting towards AI led platform lead to higher-margin, more defensible revenue.

Is AI – led work one – time or recurring revenue?

So, answer – if it is well structured, revenue would be consisted.

One – off AI implementation, custom model training without ownership and fixed price automation projects are looks like traditional IT services and that is low margin, non – recurring. AI – led service become stickily when sold as:

Managed AI services – which would be done on monthly fee par claim/documents/transaction.

Out – come based pricing - Percentage of revenue improvement and to reduction in claim denials or compliance risk.

It would be done with continuous monitoring, audits and updates.

Regulators change rules-------models must be updated -----------------recurring work means AI + human compliance operations.

Platform + Service Hybrid – SaaS license + mandatory human review layer

Net effect on Indian IT Companies:

Key takeaways:

AI reduces volume – based labor revenue but enables recurring, higher quality, outcome – linked revenue for firms that reposition fast.

How this AI revolution will impact large IT companies like TCS/Wipro/Infosys:

So, if I check today’s reality – big revenue comes from FTE – based long-term contracts, Now AI cuts efforts,

So, client ask:

Why should I pay for 500 people when AI + 150 people can do this work?

Then what will happen obviously revenue growth slows, even if productivity improves, margins may rise, but top line looks work doing more work for the same money then it would be major risk.

Firms with deep domain verticals like own AI IP sell managed services, not staffing and who move to per transaction/ outcome pricing.

So, finally how AI – led contracts change.

Old models:

$x per FTE per month with large intensive workforce.

New model:

Revenue model would be based on per transaction like claim, filing, documents, accuracy base SLAs (service level agreement) and risk sharing.

Example: $0.80 per claim processed with 99.7% accuracy guaranteed ----------vendor absorbs remark cost-------client trust you--------long contracts.

This can be done through annual compliance subscription which includes AI monitoring, human audits and regulatory updates and last one Revenue = recurring, AI – led operations would be recurring.

Recurring creates annuity – style revenue, not project revenue. Which includes a I explained earlier that regulations change, models need retraining, human must review edge cases, and audits never stop.

In one line - Ai will shrink headcount – based revenue, but expand outcome – based recurring revenue for Indian IT companies that pivot fast.

Impact on revenue of Indian IT Companies

Short – term (1-3) years:

Client demand ---low prices and faster turnaround.

Large firm struggle because existing contracts are FTE - based and AI reduces required manpower result would – top line revenue growth slows; margin improve but investor care about growth.

Long – term (3-10) years:

Companies that don’t change would be out of the market.

Companies those adapt will be having higher revenue, stickier, multi-year contracts and better margins and defensibility.

What can be done for the lost/ at – risk headcount?

At this current situation, people and youngster’s have lot of confusion about job and job security, but remember one thing every time when new generational change brings new opportunity. Just we need to check, reskilled.

So, how we can address job losses and at- risk headcounts with the AI adoption, the most effective way is to upskilling at large -  scale, practical skills rather than deep AI research, that would be available for many roles to transit smoothly like BPO staff can become AI reviewers, QA analysts, medical billing professional can move into AI -  assisted coding auditor roles, and compliance operations team can evolve into AI compliance analysts.

In short, if it can be put like focused on 8-12 weeks training program which includes domain refresher, AI tool using, exception handling and audit and quality framework can enable this shift. No one needs to be data - scientist.

A I explained AI + Human means humans in the loop, in that scenario companies also need and reskilling such as AI validator analysts, audit specialist which improve and preserve jobs further.

Workforce further can be increased by moving employees from processing to reviewing to decision making roles.

Government and industry also have a critical role to play in India through public – private reskilling initiatives, tax incentives and for AI upskilling, subsidies for healthcare and compliance certificates, and NSDC – style AI plus domain programs, similar to what successfully supported the earlier IT boom.

The realistic truth is that some low-skill jobs will not return, but millions of mid-skill roles can be upgraded, shifting India’s long-term advantage from cheap labour to trusted human oversight.

Articles Written By – Surendra Jauhari

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