Five of the country’s 13 large IT solutions providers—Infosys Ltd, HCL Technologies Ltd, Tech Mahindra Ltd, Persistent Systems Ltd, and L&T Technology Services Ltd (LTTS)—have cited offshoring and nearshoring as one of the reasons for improved operating margins in the September quarter and expect it to continue to do so in the future.
Higher offshoring or nearshoring helps boost margins by lowering employee costs, particularly salaries. While offshoring involves relocating work to countries farther from a client’s base, nearshoring involves shifting employees to neighbouring countries.
While offshoring has always been integral to their operations, tech services providers are relocating employees to India, Canada, or Mexico to counter tighter US visa regulations.
US President Donald Trump signed a Presidential Proclamation on 19 September, requiring companies to pay $100,000 annually for every new foreign worker brought to America under the H-1B work visa, up from $1,000.
Margin boost
Infosys, HCLTech, Tech Mahindra, Persistent Systems and LTTS reported operating margins of 21%, 17.4%, 12.1%, 16.3%, and 13.4%, respectively, during the second quarter of 2025-26.
HCLTech, the country’s third-largest IT firm, booked the highest quarter-on-quarter jump of 110 basis points (bps), followed by Tech Mahindra’s 100bps, Persistent’s 80bps, Infosys’ 20bps, and LTTS’ 10bps. One basis point is one hundredth of a percentage point.
“Project Ascend helped us obtain 50bps gain from a higher utilization during the quarter,” said Shiv Walia, HCLTech’s chief financial officer, during the 13 October analyst call.
Project Ascend is HCLTech’s margin expansion programme announced last August during its Investor Day presentation. One of its key pillars is the reliance on a global delivery model aimed at strategically increasing the number of nearshore and offshore locations.
Mid-sized IT outsourcers earning between $1 billion and $5 billion also highlighted a margin push. “We benefited to the extent of 30bps from planned offshoring for one of our large customers in the healthcare domain,” said Vinit Teredesai, Persistent’s chief financial officer, during the post-earnings analyst call on 14 October.
Smaller peer LTTS also called out offshoring as one of its margin levers. “Operational efficiencies such as optimization of pyramid, leveraging AI, and automation and project delivery, review of low-margin portfolio and tail accounts, higher offshoring and optimization of G&A (general and administrative) costs are going to further help us in terms of improving margins,” said Amit Chadha, LTTS’ chief executive, during the 17 October post-earnings analyst call.
Meanwhile, two of the country’s five largest IT services firms saw higher offshoring boosting operating margins in the future.
“As you know, we have a large capability to deliver from the Americas locally, whether it’s from Canada, Mexico, or Brazil. So, we look at strengthening these operations in case some of the work could be done from there,” said Mohit Joshi, Tech Mahindra’s chief executive, in response to a question on margin levers during the 14 October post-earnings analyst call.
Infosys, the country’s second-largest IT outsourcer, expressed a similar stance. “Mathematically, if you do more nearshoring and more offshoring, it should mean more margin, but it depends on the extent of offshoring, nearshoring and to what extent we will end up doing more local hiring,” said Jayesh Sanghrajka, Infosys’ chief financial officer, during the 16 October post-earnings analyst call.
Infosys’ chief executive Salil Parekh said the company will continue growing in nearshore locations. “We are building the nearshore centres, whether those are in the US and around the US, such as Canada or Mexico or other places in Latin America or in Europe and so on. So that part has gone extremely well. We feel quite confident, and that will scale even further with all the changes,” he said during the 16 October post-earnings press conference.
Long-term playbook
At least one expert said companies that have refrained from publicly criticizing offshoring are engaging in it. “Even larger players such as Tata Consultancy Services Ltd and Wipro are quietly using these levers to stabilize margins amid a muted demand environment,” said Phil Fersht, chief executive of global business research consultancy HFS Research.
Fersht added that moving delivery to offshore or nearshore locations will continue to bolster margins over the next few quarters, as onshore costs climb amid the visa fee hike and talent inflation in the US—Indian IT firms’ largest market, which accounts for more than three-fifths of their revenue.
Homegrown IT services firms are the biggest beneficiaries of H-1B visas, as some of their largest clients, including Microsoft, Apple, JPMorgan Chase, Bank of America, and Walmart, are based in the US.
From lawmakers to lawyers, the chorus of opposition to Trump’s sweeping visa reforms—including a $100,000 application fee for new H-1B applicants—is growing.
However, this strategy alone can’t shield the long-term growth. “The long-term margin story will depend on how well these firms use the savings to reinvest in automation, AI, and higher-value services. Offshoring may defend margins, but it won’t drive growth,” said Fersht.
A second analyst agreed. “The two firms that are aggressively increasing offshoring are TCS and Wipro. They are both ruthlessly cutting costs from their operations. However, both of these firms are struggling with growth more than the rest of the industry,” said Peter Bendor-Samuel, founder of Everest Group.
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