Many Indian IT companies now station their CEOs where the grass is greenest

India's technology services companies are increasingly stationing chief executives close to their biggest customers in the US and Europe, even as the companies host the bulk of their workforce back home.

Chief executives of eight out of 10 Indian IT services companies now work from cities in the US and Europe, a sharp change from 2019 when only five did so, a Mint review found. In comparison, two-thirds of their workers are based in India.

Last week, LTIMindtree Ltd announced that CEO-designate Venu Lambu would work out of London, as against current CEO Debashis Chatterjee who works from Bengaluru. This makes Lambu the eighth chief executive to be working outside of India. Mint could not independently ascertain when Lambu would officially take over from Chatterjee. Europe accounted for 14.9%, or $639 million of LTIMindtree's $4.29 billion revenue in FY24.

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CEOs of most IT companies in the last quarter century operated from India since the majority of their workers were in the country. Now, even though India accounts for the bulk of the workforce, many companies believe that having senior management in key markets helps them get better growth.

At least one analyst subscribed to this view.

“North America is where the money is. If you want to be closer to the customer, you have to embed yourselves in their social lives, or you put a great executive leadership team to operate at that level," said R “Ray" Wang, chief executive of Constellation Research.

American revenue

On average, business from the Americas fetches IT services companies 30-50% of their revenue, while Europe contributes about a third at most.

However, a second analyst said that location is a choice of the executive chosen for the top job.

“When companies choose people to head a company, the location is the CEO’s prerogative because they prefer to work from where they were previously," said Ashutosh Sharma, vice-president at Forrester Research. “The location of the chief executive is not paramount because they travel most of the time, and easy connectivity today enables them to talk to clients across the globe," said Sharma.

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Six of India's 10 largest listed software services companies have had new CEOs since March 2019. Three of these -- Tech Mahindra Ltd, LTIMindtree and Sonata Software Ltd -- have stationed new CEOs in their biggest markets, as opposed to the outgoing CEOs who were based outside India.

Mohit Joshi took over as CEO of fourth-largest Tech Mahindra in December 2023. He works from London as against his predecessor C.P. Gurnani, who was based in Mumbai. The script followed at Sonata Software, where Samir Dhir took over from P. Srikar Reddy in April 2022. While Reddy was based out of Bengaluru, Dhir is based out of New York.

Tech Mahindra and Sonata Software ended last fiscal year with $6.3 billion and $1 billion in revenue respectively. Revenue from Europe made up roughly a fourth of Pune-based Tech Mahindra’s revenue, whereas the US, where Sonata’s Dhir is stationed, made up about 70% of the company’s revenue.

Staying put

At the remaining companies, including Tata Consultancy Services Ltd, Wipro Ltd and Persistent Systems Ltd—their chief executives remain in the same locations as their predecessors.

Even as some India's largest software services companies pick outstation CEOs, the biggest two -- TCS and Infosys Ltd -- are not impacted by this trend -- Both TCS’s Krithivasan and Infosys’s Parekh, are based out of their Mumbai and Bengaluru headquarters respectively.

TCS and Infosys ended the last fiscal with revenues of $29.1 billion and $18.6 billion respectively.

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Since the CEOs operate from outside the country, many top executives also tend to work in the overseas offices. This signifies that the company’s leaders want to be closer to their biggest clients, even as the junior employees handling their projects are based in offshore locations such as India.

The trend of CEOs working closer to their biggest clients comes at a time when IT services companies are growing at a slower clip than they did pre-covid, when the country’s largest IT services companies would report double-digit full-year revenue growth.

IT services companies get about a third of their total revenue from their top 25 clients, most of which are generally based in the US and Europe.