The linearity of revenues and headcount for IT Industry

One bugbear faced by TCS and most of its Tier-I peers is what the IT industry nattily calls ‘the linearity of revenues and headcount’. In plainspeak, it means that revenue growth for companies such as TCS, Infosys and Wipro has become synonymous with employee addition. In TCS, for example, revenues moved up from Rs 9,727 crore in 2004-05 to Rs 18,685 crore last financial year — a 92 per cent jump. Headcount, meanwhile, has almost doubled from 45,714 to 89,419 employees.

S. Ramadorai, a TCS lifer and CEO & MD for 11 years, concedes that breaking this linearity is an important issue for the company. “We never wanted headcount and revenues to be linear. So, if we look at the number of people we had when we were a billion in revenues and the number of people we have now at $4.3 billion, you will see that the ratio has changed,” says Ramadorai who adds that the company’s focus on R&D will eventually help it break the linearity.

“So, the question we continue to ask ourselves is, ‘when we achieve $10 billion or $6 billion, should it be on the current ratio of headcount?’ And I believe it will be achieved more efficiently,” he says.