By Poulomi Chatterjee
Indian IT firms’ transition from manpower-led outsourcing to AI-native, outcome-based delivery is becoming more explicit, with top-tier firms setting the tone and mid-sized players using acquisitions to accelerate the shift. Analysts said the change reflects a broader reset underway across the sector as revenue growth moderates and clients demand measurable productivity gains rather than incremental headcount.
That shift is most clearly visible in the latest wave of consolidation. Coforge‘s $2.35-billion all-stock acquisition of US-based AI engineering firm Encora, late last week, has emerged as the most forceful mid-tier endorsement of this new model. The transaction lifts Coforge into the $2.5-billion revenue bracket and significantly alters its revenue mix, with close to $2 billion now coming from AI-led digital engineering and product services.
Value-add faciliated by Encora
Encora brings a strong North American client base and a nearshore delivery footprint in Latin America, allowing Coforge to pivot decisively away from offshore, labour-intensive delivery towards higher-margin engineering R&D and platform-centric work. Analysts describe it as the largest acquisition by an Indian IT firm in the engineering services space, explicitly aimed at repositioning the company around outcome-driven, IP-backed engagements rather than headcount deployment.
This strategy closely tracks the direction already laid out by the sector bellwether, Tata Consultancy Services. At its Analyst Day earlier this month, TCS for the first time explicitly disclosed an annualised AI revenue run-rate of $1.5 billion. Chief Executive K Krithivasan said more than 5,500 AI projects and over 200 platform deployments were underway, with a majority of large clients now using TCS for AI-related work.
TCS’s recent acquisition
TCS’s recent acquisitions and infrastructure investments reinforce this stance. Its purchases of Salesforce-focused firms and its push to build large AI data-centre capacity are designed to give it control over the full delivery stack, from infrastructure and platforms to agents and industry solutions, reducing dependence on commoditised, effort-based outsourcing.
After TCS, the broader industry is beginning to align with the same logic, albeit through smaller and more targeted moves. Mid-tier firms such as Persistent Systems, Mphasis and LTIMindtree have executed capability-led acquisitions in areas such as agentic AI, automation and data engineering. These bolt-on deals are intended to shorten AI adoption cycles and help clients demonstrate faster returns on investment at a time when discretionary technology spending remains cautious.
Analysts say the common thread across these moves is the growing realisation that AI will disrupt traditional services revenue before it creates new growth streams. “Indian IT firms are still using AI revenue disclosures to demonstrate momentum and reassure markets they are in the game,” Phil Fersht, founder of HFS Research, told Fe.
Pareekh Jain, chief executive of Pareekh Consulting, said the shift would force firms to rethink pricing and delivery models built around junior-heavy teams. “Headcount-led delivery models will give way to AI-driven execution, narrowing the scope of projects and putting pressure on margins,” he said, adding that companies would need to compensate through platforms, software-led offerings or licensing models.
Global peers are already further along this curve. Accenture recently said it would stop breaking out AI revenue altogether, arguing that advanced AI is now embedded across nearly all client engagements rather than being treated as a standalone line item.