Non-Linear Revenue Strategy for Indian IT industry Key to Survival

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.