Indian IT’s New Workforces Come with a Margin Challenge

More than 20,000 employees have moved from global capability centres (GCCs), enterprise IT subsidiaries and product operations to IT services providers over the past 12 months, estimates Pareekh Jain, CEO of EIIRTrend, a market research firm. 

Around 3,000 were part of pure GCC transitions, with the rest coming from internal operations, third-party services, enterprise IT subsidiaries and product carve-outs. Job cuts across Indian GCCs provide further context on workforce pressures affecting these centres.

In the past year, Tata Consultancy Services (TCS) completed its acquisition of Best Buy’s Indian entity, BBY Services India LLP, HCLTech acquired Guardian Life’s India operations, while Wipro completed its acquisition of Olam Group’s IT and digital services business, Mindsprint.

The challenge is to integrate these workforces into global delivery networks while retaining the expertise that made them valuable.

Why Indian IT Firms Are Buying Existing Teams

Acquiring a technology operation gives a provider an experienced workforce, an established client relationship and revenue when organic growth is difficult to sustain.

In a captive-to-provider transition, a company transfers an existing technology team to an IT services firm while continuing to outsource work to it. Acquiring a specialist technology business can bring expertise across clients and industries.

“The immediate priority is business continuity, which often means retaining employees with critical knowledge of the client’s systems and processes,” Saravanan Balasundaram, Founder and CEO of Han Digital Group, tells AIM.

Infosys’s 2023 deal with Danske Bank shows how workforce transfers can secure long-term services revenue. More than 1,400 employees moved from the bank’s India IT centre to Infosys under a five-year agreement estimated at $454 million. The acquisition price for the centre was reported at approximately $2 million. Danske Bank said the transfer did not include plans for redundancies and that employees would continue supporting its digital transformation. The companies have not disclosed Infosys’s margin on the contract or the cost of integrating the workforce.

Wipro completed its acquisition of Mindsprint, which employs more than 3,200 professionals, in May. The deal is tied to an eight-year strategic transformation engagement with Olam Group.

Persistent Systems’ proposed Nagarro acquisition adds scale and European reach. By October 9, Persistent had secured approximately 94.04% of Nagarro’s share capital through its takeover offer and existing stake. The deal, which would expand Persistent’s technology services business rather than transfer a captive operation, was expected to close by the end of the first quarter of calendar 2027, subject to regulatory approvals.

The Pressure to Move Work Offshore

Providers can consolidate overlapping roles and move suitable work to lower-cost locations, particularly when acquired businesses have sizeable workforces in Europe or other higher-cost markets.

“Many of the large India heritage firms by default want to offshore as many acquired roles as possible,” Yugal Joshi, Partner at Everest Group, tells AIM. Providers generally retain architects, sales teams and client relationship managers in customer regions, he says.

European clients may still require local or nearshore delivery. The balance depends on the role, client and business segment, with language skills, local expertise and regulatory requirements influencing where work is performed. The global delivery model provides context for how providers distribute work across locations.

Nearshore leverage among India-heritage providers has risen from approximately 27% to 29% over the past three years, Joshi says. The increase reflects targeted hiring and acquisitions, although some employees in these regional operations are Indian staff deputed from India rather than locally hired workers.

LTM’s proposed acquisition of Randstad’s Technology and Consulting Services business in Europe and Australia illustrates the value of regional delivery capabilities. The business generated approximately €469 million in revenue in 2025 and operates centres in Romania and Portugal. The proposed deal has an enterprise value of €160 million and remains subject to closing conditions and regulatory approvals.

Employment laws and individual contracts also constrain relocation. Joshi says some acquirers wait for contracts to expire before moving roles offshore. The timing depends on the relevant legal and contractual obligations.

What Happens to the Employees?

Transferred employees may continue supporting the original client, particularly when they hold critical knowledge of its systems. HCLTech’s acquisition of Guardian India Operations brought nearly 2,000 employees into the company under a seven-year agreement, with the team organised as a dedicated strategic business unit focused on Guardian.

TCS’s agreement with Best Buy similarly transfers the retailer’s India GCC and its employees to TCS under a multi-year arrangement. The companies have not disclosed the number of employees involved.

Neither announcement establishes how many employees will change roles, serve other clients or move between delivery locations.

Balasundaram says providers assess employees based on their domain knowledge, future skills demand, redeployment potential and opportunities for automation. The five largest Indian IT services firms added just 17 net employees in the first nine months of FY26, down from 17,764 in the same period a year earlier. These sector-wide figures do not establish the employment outcomes of transferred workers.

AI Changes the Skills Equation

As AI changes software development, testing and infrastructure management, providers must assess which skills remain in demand and where employees need retraining.

Balasundaram says manual testing can evolve into AI-assisted quality engineering, while infrastructure monitoring increasingly incorporates automation. AI deployment is also creating demand for forward deployed engineers (FDEs) and solution engineers who help clients implement AI systems.

A Boston Consulting Group report estimates that AI-led services could generate $100 billion to $200 billion in net new work globally by 2030, after accounting for the decline in traditional services. It argues that technology services firms can meet much of this demand by reskilling existing employees.

“AI adoption does not automatically mean job cuts,” Balasundaram says. Outcomes depend on business demand, contractual commitments and opportunities to reskill or redeploy employees.

In September, Wipro said its AI initiatives had generated productivity equivalent to the work of 20,000 employees and that it redeployed the affected workers to other projects, training and new roles. The figure covers Wipro’s operations generally, rather than employees transferred through acquisitions.

Ravi Vasantraj, Global Delivery Head at Mphasis, told AIM in an earlier conversation that Mphasis expects to continue hiring as clients tackle legacy technology debt and modernisation projects. He said AI-driven productivity gains have yet to remove the need for technology services work.

For IT services firms, the financial outcome of these transitions depends on how effectively they integrate teams, redeploy skills and shift suitable work to lower-cost locations. Public disclosures do not yet show how much these changes save on individual deals or how AI will affect the employees transferred.