Indian IT firms in sweet spot for now despite attrition, margin challenges

The demand environment for the Indian IT industry remains robust for the current financial year with a strong deal pipeline, prompting a few to raise their annual revenue growth guidance. The second-quarter performance of the top five IT services firms also reflects that broad-based geographical and vertical-led growth is coming back for the industry as the impact of the Covid-19 pandemic fades.

However, concerns over acute shortage of talent, high attrition numbers, and pressure on operating margin remain. Also, there is a fair amount of uncertainty over how the next year’s IT spending budgets will pan out along with the impact of a hybrid work environment on productivity as most IT firms are readying to bring back a major chunk of their employees to offices.