Indian IT Industry at an Inflection Point: Time for a Reboot?

By Narry (Narsimha Rao Mannepalli)

It’s the Annual earnings season for most of the Indian IT industry and would be a good checkpoint to reflect on where we are and what lies ahead of us. By all indications, FY 2026 is shaping up to be another year of muted growth for the Indian IT industry—likely in the low to mid-single digits. That would make it the third consecutive year of sluggish performance, a scenario the industry has never encountered before. Recent tariff announcements in the US have only worsened short-term prospects.

This raises a pressing question: Is this a temporary slump driven by cyclical factors, or are we witnessing deeper structural issues? Has the industry reached a point where a fundamental reset—across business models, investment strategies, and growth philosophies—is overdue?

A Look Back: The Rise of Indian IT Services

The Indian IT services industry rose spectacularly over the past three decades, evolving into a $250+ billion powerhouse. Much of this success stemmed from a few early, game-changing innovations:

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  • Global Delivery Model: The ability to serve clients across continents, combined with on-site support through a mobile talent pool, gave Indian firms a unique edge.
  • Talent Innovation: Leveraging India’s vast engineering talent, firms trained fresh graduates (often with 20–40 weeks of upskilling) into globally deployable IT professionals.
  • Strong Foundations: Early investments in world-class infrastructure, employee-friendly HR policies (like ESOPs), and robust governance practices attracted top talent.

Visionary leadership and consistent execution helped the industry scale globally. But after three decades of largely linear growth, it’s perhaps time to step back and ask—what needs to change?

The Current Landscape: Some Troubling Trends

Over the past five years, a few patterns have emerged—some self-inflicted, others driven by external forces:

1. Shrinking Services Pie

If we track Tech evolution, we notice that with every new tech wave, the quantum of services needed for the Tech adoption has come down. This coupled with the current large size of the companies / Industry now begs the question, can revenues from Services alone sustain the growth appetite for these companies. If we recall, earlier ERP implementations (which Fuelled growth during the 2000-15 timeframe) required services worth 2–3x the software cost.

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