Over the past eight years, most Indian IT companies have reported a compound annual growth rate (CAGR) of revenue per employee (RPE) in the range of 3% to 5% between 2016 and 2024, analysts observed.

In the last decade, Tier I Indian IT companies have gradually increased their profit and RPE due to a shift in how they operate, Devroop Dhar, the co-founder & managing director at Primus Partners noted. Earlier in the decade, these service-oriented IT giants relied heavily on large workforces for outsourcing projects, which kept RPE on the lower side.

However, with the shift toward digital transformation, cloud services, and AI-driven solutions, they are focusing on high-margin digital offerings. For example, for top Tier-I IT companies, RPE in FY23 averaged between ₹3.66 million and ₹4.4 million, marking an approximate growth of 10-15% compared to previous years. This increase reflects the industry’s shift toward higher-margin digital services and more efficient resource use, he said.

Maya Nair, the executive director of Elixir Consulting (GI Group Company), said, “Larger software product firms have seen decent RPE growth even with a rapid increase in the workforce. Mid-sized firms have had more increase in RPE even with the workforce increase. With the evolution of technology, in the early 2000s, RPE and PPE were moderate, with the move from hardware to software and the shifting of focus to adopting offshore models. The following decade, till about 2010, saw a huge spike in RPE as cost of labor was optimised; due to economies of scale, large IT firms could drive high margins, keeping operational costs low.”

Neeti Sharma, the CEO of TeamLease Digital, said certain firms have exhibited a notably higher RPE CAGR of approximately 4.4% from 2016 to 2024, and others, a decline of -1.36% within the same period. “Over the past 7-8 years, our analysis of RPE among leading Indian IT firms indicates a CAGR averaging between 2% and 2.5%. Generally, most Indian IT companies have reported a CAGR of RPE in the range of 3-5% during the 2016 to 2024 timeframe.” 

Upskilling

She attributed this to factors like rapid hiring, where, in FY22, the top five IT firms in India added 2,73,000 employees. This rapid expansion often outpaced revenue growth, impacting per-employee metrics. The shift towards digital services required much investment in upskilling employees and developing new capabilities, thereby affecting short-term profitability. 

Implementing automation and AI tools also improved operational efficiency, contributing to recent increases in RPE and profit per employee (PPE). Alongside, economic slowdowns in key markets like the US and Europe influenced client spending on IT services, affecting revenue streams and profitability.

Global comparison

However, she explained that  Indian IT firms  generally exhibit a lower RPE compared to their global counterparts. This discrepancy mostly stems from the high-value consulting services and diverse, specialised portfolios offered by many global firms, which tend to generate higher RPE. 

Indian IT companies, by contrast, have traditionally emphasised cost-effective solutions and large-scale outsourcing. While this model is profitable and scalable, it results in relatively lower RPE compared to high-margin consulting services.

Dhar added that global giants benefit from established markets, high-value consulting, and intellectual property-driven services. “For many large product-based giants, the RPE globally can be around $1 million, underscoring the difference a product-based revenue model can make. The RPE of Large global tech and consulting firms is estimated at around $80,000, largely due to the premium client base in developed markets.”

Indian service companies are still evolving to match these figures. He noted that the service model inherently limits RPE compared to firms prioritising proprietary software and consulting. However, Indian firms are expected to close this gap with the shift toward digital and higher-margin projects, helped by investments in upskilling and digital innovation.

“In the product sector, Indian companies are beginning to make a mark globally. Their RPE, boosted by subscription models and product sales, brings them closer to global software companies,” Dhar said.

Sarbojit Mallick, the co-founder of Instahyre, pointed out that a high RPE means the company achieves more revenue with fewer employees. As most top Indian IT companies have benefitted from layoffs, this metric has risen. “Every employee removed from a company’s payroll increases the RPE. The more people laid off, the higher the RPE.” 

Sharma echoed this sentiment, indicating that between FY18 and FY23, several major Indian IT firms faced declines in RPE—up to 11% in some cases over five years—leading to restructuring initiatives to protect  profit margins. These initiatives usually included cost-cutting measures and workforce reductions. 

“Over the last few years, while the top four Indian IT firms reported an 8.6% QoQ increase in net profit per employee, they also saw a 0.9% YoY decline, underscoring challenges in sustaining the PPE. Companies turned to automation and strategic realignment, reducing roles that contributed to lower margins. This shift, aimed at boosting per-employee metrics, has further reinforced the link between declining RPE/PPE and workforce optimization efforts, including layoffs,” she said.  

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