Homegrown Indian IT services companies are once again proving their agility in navigating shifting global business landscapes. Faced with rising H-1B visa fees and tighter immigration policies in the US, major technology firms have found a silver lining—by doubling down on offshoring and nearshoring strategies, they’re not just cutting costs but also strengthening their operating margins.

The Offshore Advantage

When the US government increased the H-1B visa fee to a steep $100,000 per foreign worker annually, Indian IT companies—long reliant on sending skilled professionals onsite—were forced to rethink their delivery models. The solution? Move work back to offshore and nearshore centers.

Offshoring involves relocating work to faraway countries such as India, while nearshoring places teams in nearby regions like Canada, Mexico, or Latin America. This approach allows companies to maintain close proximity to clients while avoiding the heavy costs of onshore talent and visa compliance.

In the September quarter of FY2025–26, five Indian IT majors—Infosys, HCL Technologies, Tech Mahindra, Persistent Systems, and L&T Technology Services (LTTS)—reported improved operating margins directly attributed to this shift. Infosys led with 21%, followed by HCLTech (17.4%), Tech Mahindra (12.1%), Persistent (16.3%), and LTTS (13.4%).

Margin Expansion: By the Numbers

Among the top performers, HCLTech saw the sharpest quarter-on-quarter improvement, with a 110-basis-point (bps) rise in operating margin. This was largely driven by its Project Ascend initiative—a program launched to improve profitability through higher utilization rates and an expanded offshore delivery footprint.

Similarly, Tech Mahindra and Persistent Systems reaped the rewards of targeted offshoring efforts. Persistent’s CFO, Vinit Teredesai, noted a 30bps margin benefit from offshoring for a key healthcare client. LTTS’s leadership also emphasized operational efficiency, pyramid optimization, and automation alongside offshoring as drivers of profitability.

Even Infosys and Tech Mahindra highlighted their plans to grow nearshore presence in Canada, Mexico, and Brazil—strengthening global delivery capabilities while cushioning against rising US costs.

The Strategic Shift: Nearshoring on the Rise

While offshoring has been central to the Indian IT model for decades, nearshoring is emerging as a critical new pillar. Companies are building delivery hubs not only in traditional low-cost locations like India but also in regions closer to the client—North America, Europe, and Latin America.

Infosys CEO Salil Parekh reaffirmed this during the October analyst call:

“We are building nearshore centres in the US and around the US—such as Canada, Mexico, and Latin America. That part has gone extremely well and will scale even further.”

This geographic diversification offers multiple benefits: shorter time zones for collaboration, easier compliance with local regulations, and resilience against geopolitical risks.

Quiet Adopters and Industry-Wide Trends

While Infosys, HCLTech, and Tech Mahindra have been vocal about their offshoring push, analysts note that TCS and Wipro—two of India’s largest IT players—are also quietly optimizing costs through similar strategies. According to Phil Fersht, CEO of HFS Research, even the biggest players are using offshoring as a “silent lever” to protect margins amid muted demand.

He predicts that this trend will continue, especially as talent inflation in the US and visa fee hikes erode profitability for onshore-heavy operations.

However, there’s a caveat. As Peter Bendor-Samuel of Everest Group points out, while offshoring helps stabilize profits, it doesn’t necessarily fuel growth. Firms must reinvest these savings into automation, AI, and high-value digital transformation projects to sustain long-term competitiveness.

Looking Ahead: The Balance Between Cost and Capability

The renewed focus on offshoring and nearshoring marks a strategic realignment for Indian IT companies. In the short term, it’s proving to be an effective cushion against regulatory and cost headwinds. But the industry’s next chapter will depend on how well these firms channel the savings from operational efficiencies into innovation.

As AI and automation reshape global delivery models, cost arbitrage alone won’t guarantee leadership. Those who invest in digital engineering, cloud, and AI-led transformation services will emerge stronger—turning the current margin defense into a platform for future growth.

Takeaways

• Visa fee shock = margin opportunity: The H-1B fee hike accelerated offshoring, inadvertently boosting profitability.
• Offshore + Nearshore = Hybrid resilience: Firms are blending distant and nearby centers for optimal cost and agility.
• Short-term gains, long-term challenge: Margin boosts must be reinvested in innovation to drive sustainable growth.

In essence, India’s IT giants are mastering the art of turning global challenges into local advantages—proving once again that adaptability remains their greatest competitive edge.

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