AI pushes mid-sized IT firms to rethink sales playbook

Summary

As AI reshapes client demand and competition for contracts intensifies, mid-sized IT services firms are revamping sales incentives and exploring new channels to win business.

BENGALURU: Hexaware Technologies wants its salespeople to get "really, really rich". The IT services company has replaced target-based sales incentives with commissions linked directly to the revenue employees bring in, betting that bigger rewards will translate into more business.

It is not alone in rethinking how it wins contracts. As artificial intelligence (AI) reshapes client demand and competition intensifies, mid-sized IT services firms are changing how they motivate sales teams and reach customers. LTM Ltd is offering separate incentives for AI-native deals, while Coforge Ltd is turning to external deal advisors to access new opportunities.

For IT services firms with $1-5 billion in annual revenue, the challenge is to find new sources of growth as AI changes technology spending, while competing against larger rivals for the business that remains.

Pay for performance

Hexaware has shifted its sales team from a quota-based to a commission-based model, removing several performance thresholds that previously determined payouts.

"If you recall on our AI day, Shantanu presented that very recently we transitioned for our hunting team from a quota-based plan to a commission-based plan. And that's something which we expect is going to work out well," said Vikash Kumar Jain, chief financial officer of Hexaware Technologies, during the company's post-earnings analyst call on 29 October.

The change was first outlined at the company's AI Day on 21 August by president Shantanu Baruah.

"We believe that we have the best hunting incentive plan in the area that we operate in," Baruah had said. "Just to give you a quick colour to that, our incentive plan has gone from many gate-based criteria of TCV (total contract value), ACVs (annual contract value) and all, to completely commission-based. Even if you're making a dollar for the company, you actually get a commission on that, simply put," he said.

Baruah joined the company in August 2025 as its global head of healthcare, life sciences and insurance business as well as its North America business.

The commissions are separate from employees' variable pay, with additional payouts for selling certain solutions.

"Obviously, there are more riders. If they are selling one of our solutions, there are more riders on top of it. They can make huge amounts of money as well. It is (a) multiplier of what their bonus is. So, we want our sales team to be really, really rich...Very simple logic. You get a deal, you bring revenue to the company, you get a cut out of it," said Baruah.

Hexaware ended the July-September quarter with $412 million in revenue, up 2% sequentially. The company doesn't disclose its order intake.

Selling the AI shift

LTM is using incentives to push sales teams towards AI-native services, rather than relying on offerings they have traditionally sold.

"For AI native deals, for example, we have a different sales incentive for our salespeople because we want them to sell more of these deals. It is a change management exercise, right? There is a lot of comfort that you get to sell the same thing that you have been selling over the years. So hence, we are making an effort by incentivizing salespeople, to sell the new AI-native deals," said Venu Lambu, chief executive of LTM, during the company's post-earnings call on 16 October.

Lambu said different commission structures apply to different solutions.

"There are different sales commission structures for the solutions that we sell in the new-age partners. And those are the things that, when you have a program driven like that, it gets reflected in the way you book your orders," he said.

An email sent to LTM on Monday seeking further clarity on its commission structure went unanswered.

LTM ended the September quarter with revenue of $4.76 billion, rising 1% quarter-on-quarter. Order intake was at $1.26 billion, down 25%.

Beyond traditional channels

Coforge is widening its approach to winning contracts. Traditionally reliant on sole-sourced deals rather than competitive bids, it has begun using external deal advisors and consultants to reach prospective clients.

"The only thing I will add to that is that, in parallel to leveraging the solutions capability for proactive deals, we have also started of increasingly use some of the more advisory channels, and we are starting to see deals come in through those routes, which traditionally we have never had," said John Speight, president and executive director of Coforge, during the company's post-earnings analyst call on 23 October.

The company said advisory costs are accounted for under sales or other sales and marketing expenses, rather than traditional marketing budgets.

"Advisory costs will sit as part of either sales costs or other S&M (sales and marketing) costs. It is largely around that. It is not that the advisory cost is very, very significant, it is more about how they take us to clients, and how they recommend us to clients," said Saurabh Goel, chief financial officer of Coforge, during the analyst call.

Coforge ended the last quarter with $652 million in revenue, up 10% from a quarter earlier. Order intake rose 51% to $1.04 billion.

Larger peers, including Tata Consultancy Services Ltd and Infosys Ltd, said they were investing in their sales processes but did not elaborate on those investments.

The changes at mid-sized firms also reflect the importance of sales talent in a market where winning new business is becoming more challenging.

"A more attractive commission structure allows these firms to attract better sales teams and also increases the motivation and performance of theses teams. With growth such a premium and a moribund market, top sales talent is a premium," said Peter Bendor-Samuel, founder of Everest Group.

Namratha Dharshan, chief business leader for India Research at ISG, said the changes could also help companies retain key account personnel, whose relationships with clients are important in winning and maintaining business.

"Sales and business development is also high touch relationship led engagements and retention of key account personnel matters significantly in driving these engagements. This new incentive system will possibly also address retention," she said.