Global AI Conclave: IT companies that change the inefficient 'Time & Material' model will succeed, says Premji Invest's TK Kurien

T K Kurien, CEO and Managing Partner at Premji Invest in conversation with Moneycontrol's Chandra R Srikanth

The Time and Material (TNM) model used by IT services companies needs a change and those who implement it will be successful, according to Premji Invest CEO and industry veteran TK Kurien. He criticised the model for allowing the tech companies to pass inefficiencies onto customers while profiting from them.

"It’s (TNM) a wrong economic model," Kurien said in his address at the CNBC-TV18 and Moneycontrol Global AI Conclave on November 22. He believes the IT companies must refactor their pricing strategy as the TNM model will be completely disrupted.

He made this remark when questioned about the impact of artificial intelligence (AI) on IT jobs, given that the sector is the largest private-sector job creator.

Kurien, who leads Wipro founder Azim Premji's fund, believes that the opportunity in code generation is huge, however, jobs in any IT company will not decrease in a “hurry”. This is because AI is capable of generating code very well in “bits and pieces” but the ultimate process still requires a huge amount of “engineering debt”, he said.

Kurien, who served as the chief executive officer of Wipro from 2011 to 2016, said he maintains a “Chinese Wall” when asked whether he has spoken about the inefficient TNM model to Wipro. In business, a Chinese Wall implies an informational barrier designed to prevent the flow of sensitive information to minimize the risk of conflicts of interest.

Kurien's perspective appears to be resonating in the market, in all probability, as IT major Cognizant recently said that it has been winning large deals by sharing AI-induced productivity benefits with clients. The company said it displaced incumbents in certain deals by proving its ability to leverage AI-driven productivity gains.

Hypocratic & Navan

Citing examples from Premji Invest's portfolio, Kurien explained how businesses are leveraging AI to scale and optimise operations.

When Premji Invest entered Navan, a corporate travel portal, the company was generating a gross margin of around 56 percent. Through AI-led process optimisation, Navan not only scaled its revenue but also drastically reduced its reliance on manual customer support.

"Initially, Navan had 4,000 people managing customer support. Today, that number has dropped to just 140," Kurien told a packed hall in Bengaluru. Adding that Premji Invest will exit the company when the company achieves its peak gross margins in the range of 65-68 percent.

Hypocratic, a healthcare-focused startup, is tackling the US nursing shortage. With nearly 1 million nurses expected to leave the workforce in the coming years, Hypocratic addresses this gap by automating routine tasks such as patient follow-ups and medication queries.

"Hypocratic was started in our office and is scaling rapidly," Kurien said. The platform has built proprietary AI models from the ground up, which have become essential in managing demand from healthcare providers.

Also read: Unlikely to invest in companies that are building LLMs, says Premji Invest’s TK Kurien

CNBC-TV18 & Moneycontrol present Global AI Conclave 2024, Co-Powered By Intel AI, Associate Partners Adobe & Reliance Industries Limited, Ecosystem Partner TiE Bangalore, and Event Technology Partner Townhall.