Gone are the days of double-digit revenue growth for the Indian
IT industry as companies have focused on the digital transition and
cloud-led disruption that impacted revenue growth negatively. Digital
businesses currently 20% -30% of Indian IT firms revenue, will continue to
drive future growth and contribute 50% of revenue by 2021.
Digital is different from offshoring which is nonlinear revenue
model compared to off shore’s linear revenue model as the number of employees
increase the revenues will also increase. In the nonlinear model, a smaller number
of employees more revenues or revenue per employee much higher. How Indian IT
Industry adjusts to nonlinear revenue model, reducing dependence on large
clients and adopting latest technologies is key to success of large and medium companies.
Margins also improve if a company has a
non-linear revenue model such as revenue based on outcome-based work. Indian tech players have been very proactively
responding to customer and market demands for reskilling and non-linear
approach of growth.
There had been 30% to 40% fall in net headcount addition in Indian IT
services firms over the past few quarters indicate a positive trend of
non-linear growth. Net employee addition by the top four Indian information
technology (IT) services companies in 2017-18 dropped
by more than three-fourths. Despite this companies showed good revenue, as the non-linear revenues drove the
industry that also led to margin increase and profitability. Even though
non-linearity strategy is being aggressively adopted, companies still hire the
required number of people when there is a client demand for certain
technologies or skill sets.
Non-linear disruptive revenue per employee growth
will increase in coming years for Indian IT services as there will be higher
Billing Rates for IoT services, Digital Transformation Deals and companies will
keep up the growth at steady pace. Company officials and industry experts are of the opinion that factors
like automation, rise of fixed price contracts and emergence of new levers of
revenue flows are aiding the nonlinear drive. Indian IT firms are focusing
their efforts towards non-linear growth, including
investments in technology platforms, steps taken to consolidate, and automating
of processes.
