Navigating India’s IT Titans: The WITCH Playbook for Sustainable Growth
An overview of how India’s IT giants use built-to-order models, revenue mix and cost discipline to sustain high margins.
In the last publication, I covered the business models used by the tech startups of today. Let us take a step back and understand how to view the journey of the Tech incumbents - Wipro, Infosys, TCS and HCL (colloquially referred to as WITCH).
India’s IT story began with the inherently sustainable “built to order” model, in which the WITCH companies designed, developed and maintain IT systems for large, global clients. The US dominates with 55% of India's software exports, while Europe grabs 30% - that's ₹10+ lakh crore flowing from just these two regions. The sector hit $282.6 billion revenue in FY25 and is gunning for $300 billion by FY26. Beautiful part? This entire ecosystem employs 5.8 million people and contributes 7% to India's GDP.
The Revenue Models Behind India's IT Billions
There are 3 core revenue models designed around the “built to order” philosophy -
Time & Materials (T&M): The Original Cash Cow
Most clients still get billed on T&M contracts where companies charge based on actual hours worked. Think ₹2,000-4,000 per hour for senior developers, with rates varying by technology stack. TCS prefers this model because they can charge for overtime while keeping most work offshore at 70/30 ratios. The beautiful part? They bill in dollars but pay salaries in rupees - that's pure arbitrage magic.
Fixed-Price: The Margin Game
Infosys leads with 53% of revenue from fixed-price contracts, up from 52% last year. HCL and Wipro push 60%+ of revenue through fixed contracts. Here's the genius - clients pay a lump sum (say $1.5 million for 5,000 hours) regardless of actual effort. If they finish in 3,000 hours using automation? Pure profit. If it takes 7,000 hours? They absorb the loss but learn for next time.
Outcome-Based: The Future Model
All four are aggressively shifting toward outcome-based pricing where they get paid for business results, not effort. Infosys saw 3.6% price realization boost from their Project Maximus value-based selling. TCS CEO confirms they're doing both - "some based on outcome, some customers want T&M initially, then move to fixed-price".
Maximizing Operating Gross Margin in IT Services
IT services companies sustain robust gross margins of approximately 42.2%, driven by efficient management of their core operational expenses.
Manpower Expenses (51.8%)
The largest cost component, manpower expenses - including salaries, benefits and training, account for just over half of revenue. Strategic workforce planning, utilization optimization, and selective outsourcing can help contain this category without compromising service quality.
Travel & Communication (1.5%)
Travel and communication related to project delivery represent a modest share of revenue. Leveraging virtual collaboration tools and centralized travel procurement can further reduce costs while maintaining client engagement and responsiveness.
Equipment & Facilities (~2%)
This category covers hardware, software infrastructure, and office overhead. Cloud adoption, right-sizing of physical space, and preventive maintenance programs help cap these expenses at around 2% of revenue.
Other Costs (2.5%)
Encompassing licensing, compliance, and miscellaneous administrative expenses, this bucket typically runs at 2.5% of revenue. Continuous vendor negotiations and process automation are effective levers for trimming these costs.
By keeping total operational expenses to 57.8% of revenue, IT services firms preserve a strong operating gross margin of 42.2%, to support corporate functions and enable reinvestment in innovation, talent development, and market expansion.
Winning New Business in IT Services
IT services companies attract enterprise clients through a blend of credibility, partnerships and targeted outreach. They publish thought leadership—white papers, case studies and webinars—to demonstrate domain expertise. Alliances with hyperscalers (AWS, Azure, Google Cloud) and ISVs (SAP, Oracle) unlock co-sell channels and referrals. Account teams employ account-based marketing and executive briefings to tailor value propositions. High-visibility at industry conferences and VIP roundtables builds brand trust, while successful project deliveries generate referrals and upsell opportunities. Agile presales teams win RFPs with bespoke demos and ROI analyses. SEO-driven content, LinkedIn campaigns and global sales offices ensure inbound leads and regional engagement for sustained growth.
Variable marketing spend to acquire enterprise IT‐services clients typically sits at 2–4% of revenue. This budget powers digital campaigns—paid search, display ads and retargeting—to drive inbound interest. Account‐based marketing further personalizes outreach through custom microsites, direct mail and executive‐level touches. Since high‐touch channels dominate deal sourcing, events and ABM often absorb 60–70% of the variable marketing budget. By allocating spend this way, IT services firms build targeted pipelines while preserving healthy margins.
Fixed marketing expenses in IT services typically cover trade shows and industry events—booth rentals, sponsorships and travel—ensuring face-to-face engagement. Thought-leadership production—white papers, case-study videos and webinars—establishes domain authority and fuels lead nurturing. Alliance co-marketing with hyperscalers and ISVs leverages joint campaigns and partner events to unlock shared opportunities. By investing in these stable channels, firms maintain brand visibility, strengthen credibility among enterprise buyers and create a consistent platform for pipeline generation, while anchoring variable marketing efforts.
Navigating Working Capital in IT Services
Dealing with enterprise clients adds a layer of working capital complexity for IT services firms—more intricate than SaaS but simpler than merchandise businesses. With an average 85-day cash conversion cycle, revenue sits in accounts receivable longer, while expenses fall due every 30 days. To bridge this gap, firms must maintain at least two months of operating expenses in reserve to keep the business running smoothly. Continuous cash-flow monitoring and proactive receivables management are essential to ensure the lights stay on.
Strategic CAPEX Priorities in IT Services
IT services leaders consistently allocate 1.2–2.0% of revenue to capital expenditures that drive innovation, scalability and security.
First, data-center and cloud infrastructure—including on-prem servers, colocation racks and private-cloud builds—accounts for roughly 0.5–1.0%. Edge-compute expansions and multi-region capacity also feature prominently, enabling high-performance AI workloads and compliance with data-sovereignty mandates.
Next, digital studios and innovation labs absorb 0.2–0.4% of revenue. These client-facing hubs—equipped with VR/AR environments, AI/ML Centers of Excellence and 5G testbeds—accelerate proofs-of-concept and foster co-development of intellectual property with marquee accounts.
Network, telecom and endpoint hardware upgrades, at 0.2–0.3%, cover SD-WAN rollouts, private 5G networks and conferencing equipment. Many firms treat these as right-to-use assets under lease accounting.
Meanwhile, office fit-outs and real-estate enhancements consume 0.1–0.2%, funding hybrid-work hubs, secure workspaces and sustainability improvements such as green certifications and modern HVAC systems.
Finally, security, compliance and back-office platforms, at 0.1–0.2%, ensure robust cyber-risk defenses through next-gen firewalls, SIEM/XDR appliances and GRC suite licenses.
By balancing these strategic investments, IT services companies maintain a modern, secure delivery platform while preserving gross margins—ensuring they remain poised for the next wave of digital transformation.
The Road Ahead for IT Services Company Leaders
By mastering a “built to order” ethos and blending Time & Materials, Fixed-Price and Outcome-Based models, IT Services Companies’ leaders have crafted a high-leverage revenue engine. Disciplined cost controls—capping manpower at ~52%, travel and equipment below 4%—support a 42%+ gross margin. Layered on this are targeted marketing investments (2–4% of revenue) and two-month working capital cushions, ensuring operational resilience. Strategic CAPEX of 1.6% of revenue in cloud, innovation labs, networks and security keeps delivery platforms modern and scalable.