For three decades, the Indian information technology (IT) industry ran on a simple growth engine. Hire more people. Win more work. Add layers of delivery. Repeat.
That model created global giants, but it is now being dismantled in real time. In the last couple of quarters, the country’s largest IT firms are signalling a structural reset. The industry that once scaled through people is now scaling through intelligence.
AI, automation, and platform delivery have become the new oil for the $280 billion industry.
Strategy has shifted to AI factories, agentic systems, and platform-infused engineering. And executives speak of productivity gains rather than fresher hiring now.
Shashi Tharoor, India’s former Minister of State for Human Resource Development, argued in a recent op-ed in The Hindu that the old digital assembly line has outlived its usefulness, a warning that mirrors the pressure driving this transition.
The new mandate is clear, i.e., companies must do more with less.
“Yes, overall, the Indian IT and technology services industry is entering a new phase, and this is a healthy evolution. The old linear model - more people, more revenue - is giving way to AI-led delivery models that create a non-linear relationship between headcount and revenues. AI-driven code generation, digital twins, and shop-floor automation are improving throughput and quality while optimizing team size,” Amit Chadha, MD & CEO, L&T Technology Services, told Moneycontrol.
Also, read: India’s top IT firms lean towards IP-led growth as Gen AI shrinks the pyramid
The Data Shows the Flip Has Already Happened
India’s top technology firms have quietly decoupled revenue growth from hiring.
TCS, with more than 6 lakh employees, barely discusses scale anymore. Instead, it speaks of becoming the world’s largest AI-led technology services company.
To that end, India’s largest IT services firm announced plans to build a 1 Gigawatt (GW) capacity data center in India.
The K Krithivasan-led services exporter has trained more than 3 lakh employees on AI. The Mumbai-headquartered firm has already built over 150 AI agents.
Interestingly, its operating margins expanded by 70 basis points to 25.2 percent in Q2FY26, even as sequential revenue grew just 0.8 percent in constant currency.
Meanwhile, Infosys added over 8,000 employees in the quarter, but volume growth remained soft. The company’s revenues grew through higher realization instead of people addition. "Volumes continue to remain soft with the bulk of the revenue growth driven by realisation increase," CFO Jayesh Sanghrajka told analysts over a conference call on October 16.
This effectively means revenue growth came on the back of efficiency and better pricing rather than an increase in effort hours or the number of projects.
The company’s focus is now on its AI Foundry, AI Factory, and forward-deployed engineers who work directly inside client transformation programmes.
Cross-town rival Wipro’s FY25 IT services revenue declined 2.3 percent to $10.5 billion, and yet it held margins at 17.1 percent through operational discipline.
The company delivered 81 hours of technology training per employee and expanded its WeGA 2.0 agentic AI platform across delivery.
HCLTech reported more than $100 million in advanced AI revenue in Q2FY26, the first one to do so in Indian IT. The Noida-headquartered firm expanded operating margins by 116 basis points to 17.5 percent and booked $2.6 billion in new contracts.
CEO C Vijayakumar said revenue per employee continues to rise as AI-led delivery becomes standard.
Vijayakumar, in February, didn’t mince words when he said time is already out for the old model of business in the IT industry, which was running for the last 30 years.
According to estimates from UnearthInsight, revenue per employee has risen across TCS, Infosys, HCLTech and Wipro since GenAI entered the mainstream even though headcount growth has remained essentially flat.
The contrast is sharper when set against the previous three years, during which revenue per employee consistently declined.
Also, read: Infosys, HCLTech CEOs call for an overhaul in IT business models amid AI disruption
Teaneck-based Cognizant showed the shift most clearly.
Revenue per employee rose 8 percent year on year. Adjusted operating income per employee rose 10 percent, and about 30 percent of its internal code is now AI-generated.
Also, read: Cognizant calls time on the IT era, bets future on AI built delivery
Mid-tier firm L&T Technology Services added the same story from the engineering side.
Chadha described the industry as moving from labour arbitrage to intelligence advantage. In a project for global automotive parts manufacturer Marelli, digital twin engineering cut software development time by up to 70 percent and prototype costs by 30 percent.
Here’s the bigger picture: the difference is that companies are now delivering them with leaner pyramids, smaller teams, and heavier automation.
BPMs Outpace IT in the AI Wave
A parallel shift is playing out in the back office, too.
Companies like Genpact, EXL, and Firstsource are reporting some of their strongest growth phases in years as AI-infused business process management takes off.
What was once seen as low-end work is being rebuilt through automation, data engineering, and domain-rich AI models.
These BPM players are now outpacing several IT peers, winning integrated technology operations that were traditionally the stronghold of large IT services firms.
AI Has Moved Into the Factory Floor of Delivery
A year ago, AI was a headline in investor presentations. Whereas today it sits inside the boardroom of every major IT and ER&D firm.
TCS has infused AI across all service lines and reorganised delivery around a human plus AI model.
Infosys has built a full stack that includes an AI Lab, AI Foundry, and AI Factory, and is inserting AI into application development, testing, telecom modernisation, and design.
Also, read: From 4 weeks to 5 days: How Infosys’ AI agents are boosting enterprise operations
HCLTech has deployed AI Force across 47 clients and is working closely with Nvidia, Dell, and HPE to build AI Factories.
Wipro has shifted to WeGA 2.0, launched an Agentic AI Acceleration Pod, and embedded more than 200 AI agents across HR, risk management, operations, and IT.
Cognizant has integrated Generative and agentic AI across its software development lifecycle through Flowsource and expects half of all internal code to be AI-generated in the future.
Cognizant CEO Ravi Kumar S, on October 29, said the company’s latest performance marks a fundamental shift in how it delivers work. “We are transitioning ourselves from a system integrator to an AI builder. We invested in capability, intellectual property platforms, and a culture of working alongside machines.”
In every case, AI is not an additional layer but the new production layer for delivery.
Analysts Take: Industry Scaling Intelligence, Not Labour
Analyst commentary mirrors what the companies are reporting.
Phil Fersht of global tech research firm HFS calls this a clear shift into an efficiency-first phase. According to him, the best performing firms are scaling intelligence, not labour.
Fersht is blunt: “The days of growth driven by massive headcount addition are behind us.”
Ashutosh Sharma of tech research firm Forrester says every layer of IT services is being rebuilt around automation. Moreover, benches are shrinking, and the middle layer is under maximum pressure to reskill.
Added to it, clients want faster turnarounds, outcome-based pricing, and smaller teams that deliver larger output.
Oishi Mazumder, senior analyst at Everest Group, adds that efficiency has clearly taken priority over expansion, with firms now measured less by topline growth and more by margin protection, cash discipline, and value delivered per engagement.
Across the board, analysts see productivity-led growth replacing people-led growth.
The Real Meaning of Less Inside Companies
The transformation is visible in how firms describe their operating models.
Hiring is slower and more selective.
Pyramids are flattening as mid-level roles are reskilled and redeployed, even terminated at worst. Benches are shrinking as internal mobility increases, and on-site mix is falling as companies hire more locally in global markets.
Additionally, renewals are increasingly infused with AI productivity targets.
Interestingly, HCLTech highlighted that some renewals had smaller scopes due to AI efficiency gains. This is visible in another form as Infosys confirmed that volume growth remains soft and that pricing and execution are driving revenue.
Everything points to a system that is being rebalanced from within.
The Contrarian View
Despite the changing hiring strategies and delinking of revenue-headcount addition, AI is yet to reflect on the IT industry’s revenue growth.
“While there is a 30 per cent productivity improvement for IT firms from AI and coding, the remaining 70 per cent is still people-dependent,” Gaurav Vasu, founder of market intelligence firm UnearthInsight, remains wary of AI hype at the moment.
The past three years of the AI and Gen AI wave coincided with the overall growth of global IT services diminishing.
“In the past three years, global IT revenue growth has been 3-6 percent. Only a few of them have been outliers like Persistent Systems, but their revenue size is much smaller,” said Vasu.
Vasu added that Indian IT companies haven’t made that big an impact on AI applications or AI services either. “If they had, it would have shown in their revenue growth. AI and Gen AI, as of now, haven’t accelerated Indian IT services revenue growth.”
The Tension Between Tharoor’s Warning & Industry’s Response
Tharoor warned that the old model of thousands of engineers performing routine maintenance and development is unsustainable in the current environment. Budgets are tight, along with restrictive immigration.
The companies themselves acknowledge the same shift.
Their response has been to retool talent, rebuild service lines, and industrialise AI at unprecedented scale.
They are training engineers in generative AI, agentic systems, and digital engineering.
The internal numbers now mirror Tharoor’s argument.
The New Promise:
Indian IT is not shrinking but compressing and compounding simultaneously.
How? It is compressing cost structures, delivery layers, and repetitive workload.
“Companies are automating repetitive delivery layers and compressing management overhead while investing in stronger domain and consulting capabilities. The goal is not simply to reduce headcount but to create leaner, AI-augmented structures where smaller teams can deliver larger outcomes,” Fersht said.
Doing more with less is no longer a cost strategy but a principle of the industry’s next decade.
“Until very recently, this business was a very people-driven driven, but now service delivery models are changing. With this new model, people will still be needed, but the ability to hold a larger bench will be reduced. The future growth will be more productivity and efficiency-led growth,” Sharma sums up.
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