Bangalore: A clear separation is emerging between leaders and laggards in India’s information technology (IT) sector, placing Tata Consultancy Services Ltd (TCS) and Cognizant Technology Solutions Corp. at the top with incremental revenue of at least $1 billion in the last three years.

TCS’s revenue in calendar years 2012 over 2011 increased $1.4 billion and Cognizant expects revenue to rise by $1.2 billion, trumping Infosys Ltd’s incremental revenue of $406 million and Wipro Ltd’s $382 million. Incremental revenue, a measure of market share growth, has evolved as the new benchmark for the Indian IT sector, with profit margins—the keenly tracked metric until now—eroding as firms push aggressively to gain a bigger share of their clients’ outsourcing budgets.

The new benchmark also serves to highlight the changes in an IT industry that’s trying to shed its dependence on traditional low-cost businesses to build their strengths in more specialized, and lucrative, tasks.

TCS’s revenue over the last four years has nearly doubled, with its incremental revenue well above $1 billion consistently in the last three years, according to data compiled by Mint.

Cognizant, too, has made strides in terms of incremental revenue, consistently outpacing Infosys, Wipro and HCL Technologies Ltd, and staying above $1 billion in the past two years. The US-headquartered firm has forecast incremental revenue of $1.22 billion for 2012, just marginally below TCS’s. Cognizant will report results on 7 February.

For Infosys, incremental revenue has dropped from over $1 billion in 2010 and 2011.

Importantly, traditional low-margin services such as software application development and maintenance are contributing less than half of the total business of IT firms such as TCS and Infosys, Mint’s analysis shows.

Instead, TCS’s percentage of revenue from the more lucrative consulting business has nearly doubled over the last four years, and was 3.2% in the October-December quarter, while revenue contribution from infrastructure services increased from 8.3% a year ago to 11.7%, indicating the bellwether of the Indian IT sector has been consistently grabbing market share from rivals.

TCS, Infosys and Wipro did not respond to email requests for comments for this story. Cognizant did not comment ahead of its results announcement.

TCS has also been increasing its share of new contracts, as evident in the steady decline in revenue from application development and maintenance (ADM) business that typically flows from existing customers. In the latest third quarter, ADM contribution to TCS’s revenue dropped to about 42% from about more than half traditionally.

Infosys’s ADM revenue share has declined 4% percentage points over the past four years, while revenue contribution from its consulting and system integration businesses has increased by about 10% percentage points.

HCL’s ADM revenue contribution has been constant at around 50%, but contribution from its infrastructure services business has nearly doubled to 28.4%. For Wipro, though, revenue share from ADM increased from 43% four years ago to 53% in the latest third quarter, while infrastructure revenue share rose a modest 4% percentage points.

“Our channel checks suggest that for most customers where TCS is among the top vendors, it invariably is the lowest cost vendor. This helps it win more volume share with low risk to its existing billing rates," analyst Aniruddha Bhosale of Deutsche Bank Securities wrote in a note in October. “It can also exact operating efficiencies by having large exposure to customers."

Industry experts expect TCS to hold on to its crown in 2013. “I don’t think there’s a challenge to TCS still holding on to its No.1 position. The other two (Cognizant and HCL) will try to close the gap with TCS; and to do that, they’ll have to win deals against TCS," said Arup Roy, principal research analyst at technology researcher Gartner Inc. “Let’s not forget TCS is the biggest, base-wise, compared with the others; so they’re quite heavy. So for them to post a much higher growth rate compared to the others is actually quite difficult."

At the end of 2008, during the height of the global recession, TCS had a 9.1% slice of the domestic IT services pie, the highest among the top five Indian service providers, data from IT industry lobby Nasscom show.

Four years on, TCS has increased its market share to 10.1%, as have Cognizant (from 3.7% to 6.4%) and HCL (from 2.8% to 4%). Analysts see Cognizant outpacing other Indian service providers, including TCS, this year in terms of revenue growth.

“Cognizant may continue growing faster, thanks to its niche in the healthcare sector. And the fact they are a US-based firm with a local sales force has also helped," said Hitesh Shah, director at IDFC Securities.

Cognizant’s “strengths in traditional areas—app testing and development—are being augmented effectively with its growing consultative competency and focus on new tech areas such as mobility and analytics," said Phil Fersht, founder of HfS Research, an US-based outsourcing advisory firm.