How Indian IT Companies Make Money from Foreign Consultancies
Indian IT firms are global leaders in software services, and a large part of their income comes from foreign consultancies. But how does it all work? Let’s explore the entire process.
Introduction
India is home to some of the largest IT service companies in the world. These include TCS, Infosys, Wipro, and HCLTech. They serve clients across North America, Europe, and other global markets. But what most people don’t know is that a large share of their business comes from foreign consultancies. These include big names like Accenture, Capgemini, and Deloitte.
This blog explains how these relationships work. You’ll also learn about how Indian IT companies get paid, what services they offer, and how they maintain long-term contracts with global clients.
Why Foreign Consultancies Work with Indian IT Firms
Foreign consultancies handle high-value projects for multinational companies. These projects include software development, cloud migration, ERP implementation, and digital transformation. Instead of hiring thousands of employees in-house, these consultancies partner with Indian firms to get the work done efficiently.
The reasons are simple:
- Lower labor costs in India
- Access to a huge talent pool
- Time zone advantage
- High-quality engineering graduates
- Process maturity in Indian IT firms
Source: EY India on how India is preparing its IT sector
Business Models Used
There are several ways Indian IT companies earn revenue from foreign consultancies:
1. Time and Material Contracts
This is the most basic model. The Indian firm charges based on hours worked or resources allocated. This model is flexible and allows for scope changes.
2. Fixed Price Projects
Here, the Indian IT firm agrees to deliver a project for a fixed price. This requires good planning and understanding of scope.
3. Managed Services
In this model, the Indian firm handles ongoing support or operations for a system or platform. Payments are recurring, and the client benefits from cost predictability.
4. Outcome-Based Billing
This is a newer model where the IT company gets paid only when certain results are achieved—like faster deployment or cost savings.
Source: NASSCOM FY23 Indian IT-BPM Overview
Key Services Offered
Indian IT firms offer a range of services to foreign consultancies. These include:
- Software Development
- Application Support & Maintenance
- Cloud Migration
- Cybersecurity
- Data Analytics
- Enterprise Resource Planning (ERP)
- IT Infrastructure Services
Real Example: TCS and Nielsen
In one well-known case, TCS signed a $2.25 billion deal with Nielsen for IT outsourcing services. TCS took over all IT operations for Nielsen, helping them cut costs while maintaining global operations.
This is just one of many multi-year, multi-billion dollar contracts Indian IT companies sign with global consultancies or their clients.
Revenue Share from Export Markets
According to NASSCOM, about 78% of Indian IT revenue comes from exports. Of this, more than 60% is from the United States alone. The rest comes from Europe, the Middle East, and Asia-Pacific regions.
This proves how important foreign clients and consultancies are to the Indian IT industry.
Source: NASSCOM Strategic Review 2024
How Money Flows from Client to Indian IT Firms
- The foreign client gives a project to a consultancy like Accenture
- Accenture outsources part or all of it to an Indian firm like Infosys
- The Indian team delivers the work (on-site or remotely)
- The consultancy bills the client
- The Indian IT company sends an invoice to the consultancy
- Payment is received in USD, EUR, or GBP
- Payment is converted into INR as per RBI norms
Source: RBI FAQs on Export of Services
Tax and Compliance
Export of IT services is exempt from GST in India. This gives Indian companies a clear cost advantage. Also, IT companies follow transfer pricing guidelines to stay compliant with Indian and international tax laws.
They must file invoices under the Foreign Inward Remittance Certificate (FIRC) format and report income in Form 15CA/CB.
Source: Indian Income Tax FAQs on Form 15CA/CB
India’s Global IT Talent Pool
India produces over 1.5 million engineering graduates each year. Many of them specialize in computer science, IT, and electronics. This gives Indian IT firms a constant supply of young, skilled talent. Most foreign consultancies prefer to partner with Indian firms due to this advantage.
Source: AICTE Engineering Education Report
Growth of GCCs
GCC stands for Global Capability Center. Many global consultancies now set up GCCs in India to work with Indian IT vendors. These centers help in better control and smoother integration. This is a growing trend that benefits Indian IT service providers.
Challenges in the Model
While the partnership model works well, it has some risks:
- Over-dependence on a few large clients
- Pricing pressure from consultancies
- Currency fluctuations
- High employee attrition
To reduce these risks, Indian companies are now focusing on automation, cloud services, and product-based solutions.
Future Outlook
The global IT outsourcing market is growing. According to Statista, it will reach $682 billion by 2027. India is expected to remain the top destination due to its talent, cost advantage, and process maturity.
Source: Statista on Global IT Outsourcing Market
Summary Table
| Aspect | Details |
|---|---|
| Clients | Consultancies like Accenture, Deloitte, Capgemini |
| Services | Cloud, software, maintenance, AI, support |
| Models | Time & material, fixed, managed, outcome-based |
| Payment | USD/EUR billing; converted to INR |
| Export Share | ≈78% of revenue comes from outside India |
Conclusion
Indian IT companies earn billions each year by working with foreign consultancies. They offer quality services at low costs. Their talent pool, tech skills, and execution models are top-class. With growing demand for digital services, this model is expected to scale even further.
If you’re planning to invest, work, or partner in this space, now is a great time to understand how it works and join the journey.
Further Reading
Ankit Joshi
