Cognizant Pivots to AI-Driven Outcomes, Digital Labor Model

Key Points

• Cognizant is shifting to an AI-driven delivery model that combines human and digital labor, platforms and services, and outcome-based pricing rather than billing primarily for hours worked.
• AI demand is expanding beyond productivity improvements into new business applications, including cloud migration, finance transformation, pharmacovigilance, wealth management and other operational workflows.
• Outcome-based and fixed-price work now represents 58% of Cognizant’s mix, while the company is investing heavily in AI capabilities and taking greater responsibility for model capacity and deployment costs.

Cognizant Technology Solutions NASDAQ: CTSH is repositioning its delivery model around artificial intelligence, with Chief Executive Officer Ravi Kumar describing a shift from a business centered on human capital to one that combines human and digital labor and increasingly sells outcomes rather than hours.

Speaking at a Truist Securities event with AI Digital Platforms and IT Services Analyst Arvind Ramnani, Kumar said the IT services industry faces a fundamental change as AI becomes more capable of performing action-oriented work. He said the company has made more than $1 billion in generative AI investments, according to Ramnani’s introduction, and is pursuing a broader role in clients’ business operations as well as technology systems.

AI Expands Focus Beyond Software Engineering

Kumar said traditional IT services models focused on building custom systems, integrating software and supporting cloud-based technology. AI, however, allows providers to embed digital labor into business processes, expanding the potential market beyond conventional software engineering.

“This is a business which is no longer going to be about human capital,” Kumar said. “It’s going to be about human and digital labor coming together to deliver a tech-led transformation.”

He said Cognizant sees three major elements in the evolving model:

• Human and digital labor working together in client operations;
• More outcome-based commercial arrangements; and
• A “platforms plus services” approach.

Kumar cited Cognizant’s TriZetto healthcare platform as an example of its platform strategy, saying the business now manages 200 million insured lives in the U.S. He said the company’s opportunity is larger if it expands into business operations rather than remaining focused solely on software engineering.

Client Work Moves From Productivity to New Use Cases

Kumar characterized the initial phase of AI adoption in 2024 and 2025 as largely productivity-driven, with companies using the technology to complete existing work more efficiently. He said this can be deflationary for IT services revenue when providers pass productivity gains to clients.

More recently, he said Cognizant has seen a second category of demand emerge: applying AI to perform existing functions in new ways. Examples included helping an Asia-Pacific telecommunications client migrate mainframe systems to the public cloud, using AI to lower the cost of refactoring COBOL code.

He also pointed to “frontier finance,” in which AI is used to shift finance functions toward growth and real-time decision-making rather than controls, as well as pharmacovigilance, or drug safety. Cognizant has won four drug-safety deals, Kumar said, allowing the company to compete for work that had previously been handled in part by clinical research organizations.

In another example, Kumar said Cognizant is building agentic capabilities for independent wealth advisers at a U.S. wealth-management firm. He said financial services has activated AI demand across productivity, redesigned existing spending and new discretionary projects, contributing to double-digit year-over-year growth in Cognizant’s financial-services business for three consecutive quarters.

Pricing Mix Shifts Toward Fixed and Outcome-Based Work

Kumar said Cognizant’s mix of fixed-price and outcome-based work has risen to 58%, while time-and-materials work represents 42%. He described outcome pricing as a spectrum ranging from managed services and transaction-based pricing to arrangements in which Cognizant assumes responsibility for a measurable business result.

For TriZetto, Kumar said the company has moved from perpetual software licenses to subscriptions and transaction-based pricing. Some clients are now considering pricing based on the number of insured lives managed rather than the number of transactions processed.

He also described an AI-infused rate-card framework ranging from A0, or fully human effort, to A3, or autonomous effort. While some clients accepted premiums for AI-enabled work, Kumar said clients have increasingly asked Cognizant to include AI model inference and pre-training costs in its rates rather than paying those costs directly to model providers.

Cognizant has pre-purchase arrangements with three frontier-model companies, Kumar said. He added that the company has begun taking responsibility for the AI capacity used in certain client engagements, including a publicly disclosed Travelport engagement involving operations and software engineering.

Deployment Capacity and Business-Process AI

Kumar said Cognizant has 18,000 Claude-certified architects, 6,000 Codex badges and 5,000 Gemini certifications. But he said certifications are not the company’s ultimate goal; rather, Cognizant aims to make its workforce of more than 300,000 employees “frontier-led” while lowering the cost of deploying AI at scale.

He argued that clients do not need Cognizant simply to purchase AI capacity. Instead, they seek a provider that can determine the appropriate mix of human labor, digital labor, open-weight models and frontier models to deliver an outcome.

Kumar said business workflows most suitable for agentic AI generally have structured inputs, measurable outcomes, high transaction volumes and short feedback loops. He identified healthcare operations, billing, mortgage operations, legal operations and finance functions as potential areas of focus.

Looking ahead, Kumar said investors should focus primarily on growth. As additional measures, he identified revenue per person and margin per person as potentially useful indicators of how effectively IT services companies combine human and digital labor.

About Cognizant Technology Solutions (NASDAQ:CTSH)

Cognizant Technology Solutions Corporation is a professional services and information technology company that helps organizations modernize their technology infrastructure, operations and customer experiences. The company provides consulting, systems integration, application development and maintenance, and business process services to clients across industries.

Its offerings include cloud enablement, software engineering, data and analytics, artificial intelligence, cybersecurity, automation and digital workplace solutions.

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