LevelFive launches with fixed-price AI software model

LevelFive has launched in Newcastle as an AI-focused digital product studio, founded by former hedgehog lab executives Sarat Pediredla and Alan Morris.

The business is entering the market with a model that rejects the billable hour in favour of fixed-budget software projects with defined outcomes. It says engagements will reach production within eight to 12 weeks, without time tracking, published day rates or a junior staffing pyramid.

Pediredla and Morris previously served as Chief Executive Officer and Chief Technology Officer at hedgehog lab. Pediredla co-founded the business and led it for 19 years, while Morris spent two decades in production software and, more recently, worked on agent-based delivery in healthcare.

LevelFive is targeting mid-market businesses and private equity-backed companies, arguing that buyers want software delivered faster without compromising quality. The studio will sell work across three service lines: Advise, Build and Teach.

Pricing model

A central feature of the launch is a commercial structure under which LevelFive prices for an agreed result rather than billing for staff time. It will absorb any overruns itself while keeping any additional margin if software is delivered more efficiently through AI tools.

The approach reflects a broader debate in the technology services sector over whether AI can materially change the economics of software development. Consultancy and agency groups have traditionally relied on day rates and time-based billing because of the uncertainty involved in custom software projects.

Pediredla said clients have long asked for a different arrangement.

"Mid-market clients have been asking for fixed-price outcomes for as long as we have been selling them digital services. Our industry has always said no, because the uncertainty and risk of building software made fixed prices impossible to commit to," said Sarat Pediredla, Co-Founder and Operator, LevelFive.

"AI-native delivery is what finally changes that. We can ship in eight to 12 weeks what used to take six months, price the outcome instead of the days, and both sides come out better. That is not a marginal improvement, it is a different business. I have not seen a commercial opening this clean in 20 years."

AI agents are embedded in every engagement rather than sold as a separate service. LevelFive also runs its commercial and delivery back office on an in-house operating system called Helix.

Wider market

LevelFive arrives as investors, software groups and consultancies try to understand how AI agents might affect the services economy. The company pointed to estimates from McKinsey Global Institute that AI agents could carry out tasks accounting for 44% of US work hours at current capability, while AI and robotics together could create about USD $2.9 trillion in annual US economic value by 2030.

It also cited Sequoia Capital's view that the addressable services market reshaped by AI could be worth as much as USD $10 trillion. The argument is that much of the spending at stake would come from labour budgets rather than traditional software budgets.

Another data point came from Salesforce, which reported in late May that agent-based AI tools increased the value of code shipped by its engineers by 151% over a year and helped one team complete a migration estimated at 231 person-days in 13 days.

Supporters of this view argue that cheaper software production will increase, rather than reduce, demand for software. That would echo the Jevons paradox, the economic theory that efficiency gains can lead to higher overall consumption.

Founder view

Morris said the shift will change the balance between human judgement and machine execution in engineering teams.

"AI is the next generational shift in technology after cloud and mobile," said Alan Morris, Co-Founder and Engineering Lead, LevelFive.

"A senior engineer's value is in knowing what to build and how to build it, gained through years of experience solving problems across domains. Agents multiply that experience to unlock a step change in both productivity and quality, letting two senior engineers ship faster than whole teams once did. The interesting questions move up the stack: which decisions belong to a senior human, which belong to an agent. That is the opportunity for builders who join us, and for the clients we ship for."

Pediredla also argued that AI should now be treated as part of standard delivery rather than as a stand-alone offer.

"Listing 'AI implementation' as a service in 2026 is like a carpenter listing 'using tools,'" said Pediredla.

LevelFive is headquartered in Newcastle and has senior associates across the UK. Its launch adds to signs that smaller specialist firms are trying to use AI to challenge established consulting and digital product development models built around larger teams and time-based billing.