The Great IT Pricing Reset: Contracts Cut, Vendors Squeezed, Margins Under Fire

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Pricing pressures and cost optimisation demands from various industry verticals are having an effect on the performance of IT companies, and this is being seen as a larger global trend that is intensifying, leading enterprises to prioritise operational cost rationalisation over discretionary technology spending.

The commentaries by companies are in line with Greyhound Research’s observations that pricing pressure is most acute in capital-intensive sectors, where technology costs have to directly compete with core operational investments.

According to the Greyhound Sector Pulse 2025, 66 per cent of manufacturing CIOs and 61 per cent of BFSI CIOs renegotiated technology contracts mid-term to preserve margins.

The manufacturing CIOs now insist on shorter contract durations (under three years) while the BFSI CIOs favour elastic, usage-based pricing models over fixed annual licensing. Both sectors are championing pay-as-you-go pricing models over traditional capex-heavy deployments.

“Notably, 39 per cent of manufacturing CIOs are blending IT procurement with operational procurement teams to enforce financial discipline—a significant structural shift in enterprise IT governance. Sector dynamics are amplifying technology cost scrutiny,” said Sanchit Vir Gogia, Chief Analyst and CEO at Greyhound Research.

“That is a sense we have based on just doing some analysis on how each customer is impacted and what will that impact mean to both upstream and downstream in their value chain. I think it’s something which is going to be broad-based. It might show up in Retail and Manufacturing to start with, but it’s only a quarter lag before it has an impact on other verticals,” he said.

In terms of a solution, companies appear to be turning towards GenAI to help with cost optimisation. Data from Greyhound showed that among Fortune 2000 CIOs, 58 per cent are renegotiating current contracts, while 43 per cent are actively considering best-of-breed over bundled platform purchases to control costs. Meanwhile, 34 per cent are experimenting with hybrid procurement models such as FinOps-managed IT consumption to reduce unpredictable outlays.

As quoted in The Hindu Business Line, in an article authored by Vallari Sanzgiri published on April 27, 2025.

Additional comments by Greyhound Research analyst:

Global Pricing Pressure Trends in the IT Sector

Greyhound Flashpoint – Pricing pressure in the IT sector is intensifying globally as enterprises prioritise operational cost rationalisation over discretionary technology spending. Per the Greyhound CIO Pulse 2025, 58% of CIOs across Fortune 2000 enterprises cite active vendor negotiations to secure deeper discounts or alternative pricing structures, including consumption-based models. The trend reflects a broader shift toward contract flexibility amid macroeconomic uncertainty.

Greyhound Standpoint – According to Greyhound Research, global IT vendors are facing the sharpest pricing pressure in over a decade, driven by a combination of economic caution, tightening capital allocation frameworks, and accelerated vendor benchmarking by enterprises. While pricing used to be primarily a negotiation at renewal stages, it is now an active lever in mid-cycle renegotiations and competitive re-bidding exercises. Vendors that cannot demonstrate both immediate value realisation and strategic cost avoidance are seeing a higher risk of contract churn.

Greyhound Pulse Insights – Data from Greyhound CIO Pulse 2025 reveals that among Fortune 2000 CIOs, 58% are renegotiating current contracts, while 43% are actively considering best-of-breed over bundled platform purchases to control costs. Meanwhile, 34% are experimenting with hybrid procurement models such as FinOps-managed IT consumption to reduce unpredictable outlays. This shift is reshaping how CIOs view long-term vendor lock-in versus shorter-term flexibility.

Greyhound Fieldnotes – Per a recent Greyhound Fieldnote from a client advisory in Singapore’s financial services sector, a leading multinational bank cancelled a multi-year enterprise SaaS renewal in favour of modular, consumption-driven licensing. Despite a prior 7-year strategic partnership, executives cited “inflexibility in price recalibration” as a critical failure point. Across Asia-Pacific financial services, similar instances are increasing as enterprises weaponise procurement discipline against inflexible legacy vendors.

Sector-Specific Pricing Pressure: Manufacturing and BFSI

Greyhound Flashpoint – Pricing pressure is most acute in capital-intensive sectors like manufacturing and financial services (BFSI), where technology costs must now compete directly with core operational investments. In the Greyhound Sector Pulse 2025, 66% of manufacturing CIOs and 61% of BFSI CIOs reported renegotiating technology contracts mid-term to preserve margins. Sector dynamics are amplifying technology cost scrutiny.

Greyhound Standpoint – According to Greyhound Research, manufacturing and BFSI verticals are exerting disproportionate pricing pressure on technology providers compared to other sectors. In manufacturing, unstable demand cycles and cost volatility in raw materials are forcing CIOs to reprioritise technology investments strictly around operational efficiency and automation paybacks. Meanwhile, in BFSI, tightened regulatory compliance costs and thinning net interest margins are making IT expenditure a direct target for CFO interventions. Both sectors are championing pay-as-you-go pricing models over traditional capex-heavy deployments.

Greyhound Pulse Insights – Greyhound Sector Pulse 2025 data shows that 66% of manufacturing CIOs now insist on shorter contract durations (under three years), compared to 48% two years ago. Similarly, 61% of BFSI CIOs favour elastic, usage-based pricing models over fixed annual licensing. Notably, 39% of manufacturing CIOs are blending IT procurement with operational procurement teams to enforce financial discipline—a significant structural shift in enterprise IT governance.

Greyhound Fieldnotes – Per a Greyhound Fieldnote from a major European automotive manufacturer, a global ERP migration project was paused midway after internal audits flagged noncompliance with newly instituted per-use costing guidelines. Despite significant sunk costs, executives decided to restart vendor negotiations rather than accept future opex escalation risks. This case highlights the growing friction between historical technology project timelines and contemporary financial governance models in manufacturing.

Global Margin Trends in the IT Sector

Greyhound Flashpoint – Margins across the global IT sector are under visible strain, with even historically resilient vendors reporting profitability compression. The Greyhound Vendor Pulse 2025 shows that 71% of global IT providers are experiencing gross margin pressures compared to pre-2022 levels, driven largely by rising cost-to-serve and a tighter pricing environment.

Greyhound Standpoint – According to Greyhound Research, the IT sector’s margin compression reflects a fundamental realignment of the value equation between enterprises and vendors. Rising employee costs in key delivery hubs, slower deal closures, prolonged discount negotiations, and higher cloud operational costs are converging to erode vendor profitability. Furthermore, the shift to modular, consumption-driven buying is pushing vendors to decouple long-tail services from core platforms, exposing inefficiencies previously hidden under bundled deals. We believe margin resilience will increasingly depend on vendors’ ability to pivot toward operational excellence, IP-led delivery, and regionalised service models.

Greyhound Pulse Insights – Greyhound Vendor Pulse 2025 reveals that while revenue growth among the top 50 global IT vendors has stabilised post-2024, average gross margins have declined by 2.4 percentage points year-over-year. The most pronounced drops are among vendors heavily reliant on legacy managed services models. In contrast, vendors with stronger IP licensing portfolios, particularly in AI and cybersecurity, are seeing margin preservation or slight gains—highlighting a bifurcation between service-heavy and IP-heavy business models.

Greyhound Fieldnotes – Per a Greyhound Fieldnote from an engagement with a North American mid-tier IT services firm, senior leadership disclosed that despite a 12% year-over-year revenue increase, operating margins fell by nearly 5 points due to escalated delivery costs and pressure to meet aggressive pricing benchmarks in BFSI and healthcare deals. Leadership acknowledged a strategic pivot was underway to rebalance the portfolio toward advisory and IP-led services—a challenging transition requiring near-term margin sacrifices.

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