For decades, India’s IT services sector has thrived on a simple equation: more projects meant more people. The industry’s meteoric rise was powered by armies of engineers who coded, tested, and maintained systems for clients across the world. But the dawn of artificial intelligence (AI) is rewriting that equation, fundamentally transforming how technology companies grow—and what that means for India’s 1.5 million engineering graduates.
The End of Linear Growth
In the traditional IT services model, revenue growth was directly tied to headcount expansion. If a company gained $100 in new business, it would typically hire around 30 employees to deliver that work. However, with the increasing deployment of AI-led automation, that ratio is shrinking fast.
Automation tools, AI coding assistants, and generative AI models are allowing the same amount of work to be done with fewer people. This shift has created a disconnect between revenue growth and employee additions—a phenomenon that HCLTech CEO C. Vijayakumar calls “non-linearity”.
HCLTech, which reported a 2.8% sequential increase in quarterly revenue to $3.64 billion, saw its workforce remain largely stagnant. “If you see our revenue in the last couple of years, we have grown 4-5% and our headcount has not grown,” said Vijayakumar. The company reported a 1.8% increase in revenue per employee year-on-year—an unmistakable sign of AI-driven productivity gains.
Redefining the Delivery Model
Cognizant and TCS echoed similar sentiments, confirming that this shift is systemic and here to stay. Cognizant CEO S. Ravi Kumar described how AI is “compressing time, cost, and complexity,” making the old linear growth model obsolete. “For much of the last 30 years, IT services grew through a linear model. More people and more projects drove incremental growth. AI is reshaping that equation,” he explained.
TCS, India’s largest IT services company, is also experimenting with outcome-based projects—a model where clients pay based on results rather than the number of people deployed. According to Aarthi Subramanian, TCS’s COO, “We are starting to make commitments on outcome-based projects with select customers… this model will increasingly evolve and become mainstream.”
This evolution represents a structural transformation in the industry’s DNA. The long-held practice of billing clients by manpower is being replaced by value-based engagements, where automation, software platforms, and AI tools drive outcomes—reducing the need for human labor in repetitive or maintenance-heavy work.
AI’s Impact on the Workforce
The implications of this transformation are significant, especially for India’s engineering graduates who have long seen IT services as a gateway to stable employment. AI is eating into roles in coding, customer support, and application maintenance—the very areas where fresh graduates typically start their careers.
In the July–September 2025 quarter, TCS, Cognizant, and HCLTech employed 593,314, 349,800, and 226,640 people, respectively. Yet, TCS recorded a net reduction of nearly 19,755 employees—the largest layoff in its history—while Cognizant and HCLTech added modestly to their headcount.
Brokerage firm Motilal Oswal Financial Services attributed this trend to productivity gains powered by AI, noting that “revenue grew faster than headcount (2.4% vs. 1.6%), reflecting AI-led efficiencies.”
Colleges and universities are now racing to adapt, offering AI certifications and reskilling programs to keep graduates employable in a rapidly changing environment. The new demand is for engineers who can design, manage, and deploy AI systems, not just maintain existing ones.
Revenue Per Employee: A New Efficiency Metric
Revenue per employee has become the new barometer of efficiency. HCLTech, which derives about 10% of its business from software products, leads the pack with $61,388 per employee. Cognizant follows at $57,665, while TCS trails slightly at $49,902.
As Phil Fersht, CEO of HFS Research, aptly puts it: “The era of one-to-one growth between people and revenue is over. AI and automation are breaking that link by embedding productivity and repeatability into the delivery model. The new game is about turning services into software and driving more value from the same workforce.”
The Road Ahead
The IT services industry, once defined by its manpower strength, is now pivoting toward efficiency, automation, and AI-led innovation. This shift challenges India’s education system and policymakers to rethink how talent is trained and deployed.
For engineering graduates, the message is clear: the jobs of tomorrow won’t just require coding—they’ll require creativity, critical thinking, and fluency in AI tools.
As India’s $283 billion IT industry evolves, its greatest challenge will not be finding work for engineers, but redefining what work means in an age where machines can code, test, and troubleshoot faster than humans ever could.
Takeaways
- AI has broken the linear growth model between headcount and revenue in IT services.
- Roles in coding, support, and maintenance are most affected by automation.
- Outcome-based project models are replacing headcount-based billing.
- Revenue per employee is now the key indicator of productivity.
- Engineers must upskill in AI, analytics, and automation to remain relevant.
The IT services engine that once fueled India’s white-collar boom is being rewired. The future belongs not to those who can merely write code, but to those who can teach machines what to write next.
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