Indian software firms have faced pricing pressures for a while, and if executives in IT firms are to be believed, it could get worse, as top-tier American and European clients tighten purse strings. Indian vendors will find it tough to protect margins this quarter, unless more of them start adopting outcome-based pricing models.

As predatory pricing sets in, a bluechip player like Infosys ? which traditionally keeps a 30% margin ? is facing pressures. Companies like Wipro and HCL have started showing some pricing aggression to gain volumes. In fact, the quarter has started to see an engaging price war, with several players willing to cut prices by almost 40% for a deal.

As predicted by Infosys in its quarterly earnings call, customers deferred decisions in the early weeks of 2012. Clients have started trimming IT spends and seeking new pricing models. Companies like TCS and Infosys feel they need to offer integrated packages, including IT services, maintenance and support, besides BPO offerings.

Some like iGate have moved from fixed price contracts to outcome-based models, signalling a larger global shift in outsourcing models.

Outcome-based pricing, which is based on actual performance, does not follow the linear model which banks only on the number of people deployed for a contract. This year, 15-20% of offshore contracts are expected to run on the outcome-based model, in which the vendor gets rewarded for reduction in product costs, increased working capital, volume of sales and improvement in bottom line.

TK Kurien, CEO, Wipro Technologies told FE: ?We are seeing a great uptick in outcome-based pricing. There is a clear increase in outcome-based models among customers, who want to have their business outcome linked to the actual work done. Most of them love to go for long-term, but you are not sure of the long-term perspective. Not all of them are going for long term.?

NV Tyagarajan, Genpact CEO and president, said: ?Our clients are going for it more than before. Currently, it is still a small proportion of our business. But it should be a much larger portion of business in the long run.?

Raman Roy, founder, Quattro BPO, added, ?We are seeing huge traction in outcome-based pricing. For us, it is early days of the implementation. But thanks to this, we were able to get more contracts than competitors.?