Tech Explained: AI impact on IT services; Seed-strapping gains traction in Simple Terms

Also in the letter:
■ UIDAI mulling seed fund
■ India’s deepfake crackdown
■ ETtech Done Deals

Agentic AI breaking IT’s billing model

The rise of agentic AI is changing the economics of the IT services industry, hammering seat-based billing rates and squeezing total contract values (TCV).

Experts told ET that the launch of tools such as Claude Cowork and OpenAI’s Agent platform will further push this trend.

Deep dive: Blended billing rates slid steadily over the past 24 months across the US and India for roles like web and mobile developers, full-stack engineers, remote desktop support, and cyber defence professionals.

Even premium technology consulting rates, traditionally shielded from pricing pressures, have begun to soften, with US billing ranges slipping to $138-181 per hour from $141-182 during the same period.

Tell me more: Clients are increasingly demanding massive productivity-linked discounts, which must be ploughed back to either expand project scope or build new AI use cases, analysts said.

Industry watchers added that it is not just lower rates, but also fewer billable hours per unit of work, that will follow as AI slashes effort before prices fully reset.

Also Read: Claude Cowork’s debut signals start of enterprise automation

Expert take: “You will see the rates have a modest decline, but the bigger issue is how for like-for-like scope the TCV is declining,” said Jimit Arora, chief executive, Everest Group. “It is 30-70% productivity on baseline fees, which tend not to be rate card-based, but managed services constructs,” he said.

Less is more for AI companies scaling their revenues with a lean workforce

AI-native startups are hitting revenue milestones with skeletal teams. AI tools reduce headcount on tasks that previously needed larger engineering, support and sales benches, founders told ET.

ARR per employee jumps: Voice AI startup Yoodli AI said typical SaaS benchmarks put ARR per employee at around $175,000, but AI-native teams are reaching $300,000 to $400,000 or higher. The company operates with around 50 employees, has raised close to $60 million, and has seen its valuation triple to about $300 million in six months.

Scale now has a new metric: Startups are also tracking token consumption as a proxy for scale, as AI usage replaces work that would earlier require more headcount. This is feeding into “seed-strapping”, where founders raise one early round and then grow on revenues without frequent follow-on fundraising, aided by India’s DPI rails that reduce onboarding and compliance costs.

India’s lean-launch advantage: Ankur Capital’s Deep Science Report, 2025, said Indian startups can move faster and burn less because SMEs mainly buy on product performance and price, unlike enterprises, where sales cycles can stretch due to legal and procurement processes. The report also said Indian startups build pilots at a fraction of global costs.

Also Read: Over 100 Indian AI startup founders moving to US for funds and talent

UIDAI mulls seed fund to back startups building Aadhaar-linked solutions: Chairperson

The Unique Identification Authority of India (UIDAI) is mulling a fund to provide seed capital to startups developing technology and services around the Aadhaar ecosystem.

Driving the news: UIDAI chairperson Neelkanth Mishra told ET that this initiative aims to promote critical areas such as fraud detection, biometrics, and digital identity.

• On the sidelines of the Bharat Fintech Summit, he said the proposed fund would back early-stage companies building solutions either for UIDAI’s own requirements or for wider use cases leveraging Aadhaar.
• “Our objective will be to provide seed capital so that they can get to the proof of concept and then raise money from private investors. So, we do not need a large sum of money,” he explained.

Big picture: This comes as UIDAI seeks to deepen Aadhaar-based digital authentication and reduce reliance on physical identity verification, which carries a higher risk of document fraud and data privacy breaches.

UIDAI is also positioning itself as an authentication layer that can be embedded into business workflows, including for gig economy platforms and MSMEs.

Also Read: Govt launches updated Aadhaar app with focus on privacy

Other Top Stories By Our Reporters

India cracks down on deepfakes: India has directed social media platforms such as Facebook, Instagram, and YouTube to clearly label all AI-generated content and ensure that such synthetic material carries embedded identifiers, according to an official order.

Care.fi raises $8 million: Healthcare-focused fintech platform Care.fi has raised $8 million in a mix of equity and debt. The equity portion of $5 million was led by July Ventures, with participation from Peak XV Partners, Accion Venture Lab, and Sadev Ventures, while Trifecta and Vivriti contributed $3 million in debt.

PadCare raises funds: Sanitary waste recycling startup PadCare Labs has raised $3 million in a funding round led by Zerodha cofounder Nithin Kamath’s Rainmatter. The company plans to deploy the capital to ramp up its recycling capacity, expand its operations across Bengaluru and Delhi NCR, and strengthen its leadership and core operating functions.

Udaan’s FY25 financials: According to regulatory filings in Singapore, where the startup is domiciled, Udaan reported a 37% decline in net loss to Rs 1,055 crore. Its operating revenue fell 20% in FY25 to Rs 4,561 crore.

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