Despite the hype, AI-led IT deals still make up a modest portion: CEO of Zensar

Zensar Sees AI Deals as Profitable but Small Amid Traditional IT Pressures

New artificial intelligence (AI)-driven deals are increasingly profitable but still form a small portion of the overall IT business, Zensar Technologies’ CEO and Managing Director Manish Tandon told The Economic Times.

“Traditional projects continue to dominate our portfolio, although they face steep discounts and margin pressures,” he said. Highlighting the ongoing AI trend in the IT industry, Tandon noted that 20% of Zensar’s order bookings were “AI-influenced”, leveraging AI toolsets either to deliver or differentiate services.

The Pune-headquartered company, part of the RPG Group, posted a 25% year-on-year rise in Q3 net profit to ₹199.8 crore, despite a ₹25.4 crore charge related to labour code changes. Sequentially, profit grew 9.6%. Revenue for the December quarter stood at ₹1,430.7 crore, up 8% YoY but only 0.6% QoQ, affected by the seasonally weak quarter and fewer billing days.

Tandon said while Zensar is exploring acquisitions to strengthen capabilities, the company is cautious about what assets to buy and at what price, with the ultimate goal of becoming an “AI-native” organization. “We are rethinking the organization from the ground up and asking what we would do with AI tools if we were to start from scratch,” he said.

The rise of AI deals is also reshaping pricing models. Non-linear or outcome-based pricing remains a challenge for the industry, despite being considered a “holy grail.” Tandon explained that the smaller size of AI-led deals, risk allocation, and client preference for simpler people-based models limit the adoption of complex pricing structures.

Zensar reported a total contract value (TCV) of $180 million, up 13.5% sequentially and 12.2% year-on-year. However, Tandon highlighted a “leaky bucket” effect, where traditional business is being cannibalized. “The leakage rate was around 10-12% earlier, and today it is 15-20%,” he said, noting that older, large outsourcing deals continue to face intense cost pressures.

Despite these challenges, Tandon expressed optimism about AI-driven deals: “We hope the size and attractiveness of profitable AI business will grow more pronounced over time,” he said.