The new model would involve billing only for successful transactions

Increasing competition and fragmentation of maintenance contracts are forcing iGATE to throw out standard IT deals, even if it means killing the goose that lays the golden egg for the outsourcing industry.

The four-million dollar advertising campaign the California-based firm released on Wednesday takes an aggressive stance against the “dated-yet prevalent ‘Time & Materials’ outsourcing model” used by IT services firms globally.

It argues instead for a more client-friendly ‘business outcomes’ model. The Time & Materials (T&M) model, which charges clients based on hourly efforts regardless of the results, makes up 50 – 60 percent of revenues of most Indian IT companies.

The new scheme would involve the company billing only for successful transactions and not for the number of hours put in.

“The old model of IT vendors getting paid on a flawed metric of effort without any risk being shared is dying in today’s times. We are trying to change the way business is transacted, the T&M model has curbed innovation for too long,” said Phaneesh Murthy, CEO, iGATE.

The campaign is aimed at North American corporations, which account for nearly 60 per cent of iGATE’s business. The shift away from a T&M model could mean a higher price tag for the company’s services as more risk is involved.

“Since we will be taking on more risks in this model and the clients will be paying only for outcomes achieved rather than the inputs or efforts, the pricing of the outcome based services will be higher compared with the traditional T&M model,” said Hemant Bhardwaj, Sr. VP, Marketing, iGATE.


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