As more businesses use digital technologies like artificial intelligence, internet of things (IoT), IT services contracts will change from long-term to pay-as-you-use model, says Atul Kunwar, chief technology officer, Tech Mahindra.
Customers of the these IT services providers are reallocating their budgets to focus on new technologies that can improve efficiency.
"The traditional budgets are getting reorganised and reallocated. Some money is put into IoT or Cloud too. There is a shift that is happening. Contracts will definitely undergo changes as things go across. There are certain contracts which have particular obligations and timeline, but when customers are revisiting those contracts they are looking at new ways," said Kunwar.
While total IT budgets of businesses were earmarked towards heavy-duty technology like enterprise resource planning before, a portion of that are now used to invest in emerging areas like IoT, cloud or artificial intelligence.
"Contracts in the new generation are also not linked to the model of number of people or fixed price they are linked to per asset," said Aloke Palsikar, global head of manufacturing, Tech Mahindra.
Kunwar believes businesses are not squeezing IT budgets rather spending at technologies that can deliver a solution on time at a better price and with commitment.
Tech Mahindra has set up a lab called 'factory-of-the-future' at its Bengaluru office to drive innovation for next generation of manufacturing. This centre jointly with clients create "concepts" to improve efficiency at factory floors using artificial intelligence, robotics and analytics. The company is already working with three customers and using data from the factories to generate smart ideas for manufacturing sector.
"Industries world over are going through a massive transformation, a transformation that is driven by the advances in newer technologies, especially things like internet of things (IoT) and robotics," said L Ravichandran, chief operating officer, Tech Mahindra.
The company is also working with IBM at its newly-opened Watson IoT centre in Munich where a team of six developers and engineers are deployed. This is aimed at co-creating solutions around manufacturing, farming, healthcare and banking for Tech Mahindra's customers in the Europe.
By 2020, almost two-thirds of all work in factories will be completed by collaborative robots and robotics will have five times capability at one-fifth of the cost than in 2015, estimates research firm IDC.