IT services

Business model

Indian IT services companies sell technology talent - engineers, project managers, consultants - to large global enterprises. Revenue comes from time-and-materials billing, fixed-price projects, and increasingly multi-year managed-services contracts. Roughly 70-80% of revenue is exports (US, Europe), the rest domestic.

The fundamental margin equation: client billing rate × utilisation rate × pyramid (junior:senior ratio) − employee cost. Profitability depends on keeping highly-utilised, leveraged teams of cheaper junior engineers selling at senior-level rates.

Key metrics

• Revenue growth (constant currency) - strips out USD-INR moves so you see real demand growth. Industry has been 5-12% in recent years.
• EBITDA margin - 22-28% is the band for large-caps.
• Utilisation rate - what % of billable employees are working on chargeable projects. 80-85% is healthy.
• Attrition rate - high churn raises hiring costs; 18-24% has been the recent norm.
• Total contract value (TCV) wins - quarterly bookings of new contracts. Leading indicator for revenue.
• Top-5 client concentration - over-dependence on a few clients is risky.