Indian mid-sized IT firms shift focus to AI-driven growth and specialised skills

Mid-sized Indian IT service companies are evolving their business models to prioritise AI-powered productivity and specialised talent, signalling a major shift in the sector’s growth strategy amid changing labour dynamics.

Mid-sized Indian IT services firms are signalling a fundamental change in how they scale: growth is increasingly being powered by AI-driven productivity gains rather than proportional increases in staff. According to a report by Communications Today...

, Coforge, KPIT Technologies, Mphasis, Hexaware and LTIMindtree together added roughly 2,000 employees in the December quarter, down from more than 4,000 in the previous quarter, while KPIT actually trimmed its workforce by 155, highlighting how quickly delivery models are shifting.

Company disclosures and management remarks point to rising revenue-per-employee metrics as evidence of the transition. Communications Today notes Coforge’s revenue per employee has climbed to about $70,000–$71,000 a year, a trend executives attribute to outcome-based contracts and the deployment of proprietary platforms that embed generative AI and automation into delivery. Management at Coforge has linked tools such as Code Insight AI and BlueSwan with the ability to compress effort on projects, enabling legacy modernisation and transformation work with smaller teams.

KPIT’s finance chief framed the change in blunt terms. Speaking to investors, CFO Kripa Hardikar described a move away from a headcount-linked revenue model toward “transformative solutions” aligned with the company’s AI and software-defined mobility strategy and said the firm is “beginning to separate personnel and revenue.” She added KPIT will still recruit but will “prioritise a select group of critical skills,” underscoring a tilt toward specialised hires over volume recruitment.

The labour market implications are already apparent. Recruitment firms and industry executives quoted in Communications Today and the Financial Express argue the market is splitting: demand remains strong for AI-adjacent, domain-specific capabilities, people who can design, orchestrate and apply AI across business contexts, while traditional, execution-heavy roles such as repetitive coding and routine testing face sustained pressure as those tasks are automated.

Analysts caution this is an evolution rather than an instantaneous revenue bonanza. ICICI Securities analysts told the Financial Express that generative and agentic AI are widening addressable markets and helping mid-caps compete on pricing and deal size, but the full impact on top-line growth will play out over the medium term as new delivery models and fixed-price, outcome-based contracts scale.

The competitive landscape among mid-tier players is tightening as firms leverage AI to climb the rankings. Business Standard reports Coforge has nudged past some rivals to become a larger mid-tier player, while Livemint and Communications Today coverage of recent quarterly results shows continued churn , Persistent Systems overtook Hexaware in one quarter, and Coforge has in turn displaced other peers in sequential rankings. These shifts reflect both differing rates of AI adoption and concentration in high-value verticals such as banking, financial services and healthcare, where companies including Hexaware derive a large share of revenue from the US market.

For corporate leaders the calculus is becoming clearer: investing in AI and platforms can raise utilisation, enable outcome-based pricing and lift margins while keeping headcount growth modest. For employees the consequence is a more selective hiring market that rewards expertise in AI, product engineering and domain-specialist skills, even as aggregate hiring slows across the mid-cap IT sector.

Source: Noah Wire Services