Is the US Market Dead for Indian IT? The End of an Old Playbook—and the Beginning of a New One
B2B Technology, Market Strategy and Growth
AI is rewriting service economics, US immigration policy is changing talent mobility, and enterprise buyers are demanding clearer business outcomes. India’s IT industry does not necessarily need a new market. It needs a new way to compete.
For decades, the US–India technology relationship has been one of the most consequential partnerships in the global technology industry.
American enterprises gained access to skilled technology talent, scalable delivery and competitive costs. Indian IT companies built global businesses by combining engineering capabilities, offshore delivery centres and the ability to deploy specialists across client locations.
The model worked. It created global technology leaders, generated export revenue and made India a central player in enterprise technology.
But what happens when the assumptions that powered this model begin to change?
AI is reducing the time required for certain software development and testing tasks. US clients are scrutinising discretionary spending. Immigration policy is introducing new uncertainty around the movement and retention of skilled workers. Meanwhile, buyers increasingly expect technology investments to demonstrate measurable business value.
Is the US market dead for Indian IT?
The evidence suggests a more nuanced answer: the market remains substantial, but the traditional model of capturing value from it is under pressure.
The challenge is no longer simply to deliver technology services efficiently. It is to rethink what is being sold, how it is delivered and why a client should choose one provider over another.
1. The data tells a more complicated story than a market in decline
Consider the numbers.
According to the Reserve Bank of India’s annual survey, reported by Business Standard in September 2026, India’s software services exports reached $221.4 billion in FY2025–26, growing 8.2% year-on-year.
The United States remained the largest destination, accounting for 54.1% of exports.
US-bound software services exports increased from $108.3 billion in FY2024–25 to $119.7 billion in FY2025–26, an increase of approximately 10.5%.
IT services exports reached $147 billion, while IT-enabled services exports rose to $68 billion.
These figures do not support the claim that US demand for Indian technology services has simply disappeared.
However, export growth alone does not tell us whether every service line, provider or business model is thriving.
Aggregate exports can rise while individual companies face slower growth, pricing pressure or weaker demand for particular services.
That distinction is critical.
On October 8, 2026, Tata Consultancy Services reported September-quarter revenue of $7.642 billion. Constant-currency revenue grew 0.5% sequentially, while annualised AI revenue reached $3.1 billion.
The company also reported quarterly deal wins with a total contract value of $9.6 billion.
This is an interesting combination: modest sequential revenue growth, substantial contracted deal value and rising AI revenue.
It illustrates why the market cannot be understood through a single headline.
The US opportunity remains significant. The question is how much value Indian IT companies can capture as client priorities and delivery economics change.
2. AI is challenging the economics of traditional IT services
For much of the industry’s history, growth was closely linked to workforce expansion.
A client needed a new application. The service provider assembled a team of developers, testers, architects and project managers. More work generally meant more people, more billable hours and more revenue.
This model was not without innovation. Indian IT companies developed sophisticated delivery processes, reusable frameworks, automation capabilities and global delivery networks.
However, the commercial relationship often remained closely connected to the amount of work performed.
AI challenges that relationship.
Consider a hypothetical application-modernisation project that traditionally requires 20 engineers working over six months.
If AI-assisted coding, automated testing and code analysis allow a smaller team to complete substantial portions of the work faster, the client may still receive the desired outcome—but through fewer billable hours.
For the service provider, the consequences depend on its commercial model.
Under a conventional time-and-materials contract, reduced effort can mean lower revenue unless the saved capacity is redeployed.
Under an outcome-based contract, faster delivery and better productivity may strengthen profitability and client satisfaction.
The technology is the same. The economics are different.
This is why AI adoption cannot be treated merely as an internal productivity initiative. It also requires a rethink of pricing, contracting, talent development and value communication.
The industry is already seeing both sides of this transition.
TCS’s $3.1 billion in annualised AI revenue in its September 2026 quarter demonstrates the scale of the emerging opportunity. At the same time, analysts have warned that AI-led productivity may put pressure on traditional services revenue.
An illustrative anecdote: The 20-person team that no longer needs 20 people
Imagine a US software company asking its Indian technology partner to improve an ageing application. Historically, the vendor might have proposed a 20-person team for a six-month engagement. The buyer now asks a different question,
“We have already invested in AI development tools. Why do we need the same number of engineers for the same duration?”
A provider that responds by defending its headcount risks making itself part of the client’s cost-reduction problem.
A provider that proposes an AI-enabled modernisation programme—with defined milestones, quality benchmarks, security controls and a measurable reduction in delivery time—changes the conversation.
It is no longer selling 20 engineers. It is selling a better way to modernise the application.
This is an illustrative scenario, not a reported client case. But it captures the commercial challenge facing service providers across the industry.
The strategic implication: Indian IT companies must learn to monetise expertise, speed, risk reduction and outcomes, not just effort.
3. US immigration policy is changing the talent equation
AI is not the only force affecting the industry. US immigration policy has become another important variable in workforce planning.
Three developments need to be distinguished because they affect different parts of the employment system.
The H-1B selection system
A US Department of Homeland Security final rule introduced a weighted H-1B selection process effective February 27, 2026, for the FY2027 registration season.
The process generally favours higher-paid, higher-skilled roles while retaining opportunities across wage levels.
For Indian IT firms, this makes workforce planning more complicated, particularly where US-based projects depend on moving large numbers of employees into lower-paid or entry-level roles.
The policy does not eliminate the H-1B route. It changes the selection framework and the incentives surrounding it.
The proposed $100,000 payment requirement
The US administration introduced a $100,000 payment requirement for certain new H-1B petitions in September 2025 and extended the proclamation in September 2026.
However, federal courts have blocked implementation of the fee in separate cases. As of October 9, 2026, the fee remains blocked by court orders.
This is an important distinction: the proclamation exists, but the fee’s implementation is subject to the court orders. Companies should not treat the proposed payment as an uncomplicated, currently collectible charge.
The PERM suspension
On October 8, Reuters reported that the US government had suspended several technology and IT companies, including TCS, Infosys, Wipro, HCLTech, Cognizant, Microsoft, Adobe and Capgemini, from participating in the Permanent Labor Certification programme.
PERM is an employment-based labour-certification process that can form a key step in an employer-sponsored route to permanent residency.
It is different from the H-1B programme, which provides temporary work authorisation. The reported suspension does not itself cancel existing H-1B status.
The immediate effects will vary by company and employee population. However, restrictions affecting permanent-residency sponsorship may influence talent retention, recruitment and the willingness of skilled workers to relocate.
There is also an important counterpoint.
On October 9, Reuters reported that TCS did not expect the PERM suspension to have a material impact on its workforce strategy or client engagements. The company said its PERM applications had been in single digits over the preceding two years and reiterated plans to hire 15,000 additional employees in the US over five years.
This suggests that the impact will not be uniform across the industry.
What should Indian IT companies learn from this?
Immigration policy is no longer something to leave entirely to HR and legal teams. It belongs in workforce strategy, financial planning and go-to-market decisions.
Companies need to assess:
- Which client engagements genuinely require on-site deployment?
- Which activities can be delivered remotely without compromising quality or collaboration?
- Where should local US hiring be expanded?
- How can offshore and nearshore teams complement client-facing specialists?
- How should contracts account for changes in staffing availability and delivery costs?
The objective is not to abandon global talent mobility. It is to reduce unnecessary dependence on any single route for delivering value.
4. The rise of local hiring changes the competitive equation
For years, the offshore delivery model gave Indian IT companies a structural cost advantage.
That advantage still matters. The RBI survey found that off-site delivery accounted for 91.7% of India’s software services exports in FY2025–26, representing approximately $203 billion.
But global delivery is evolving.
Major Indian technology firms have expanded local US workforces, acquired overseas businesses and developed delivery models combining client-facing teams with offshore engineering capabilities.
TCS’s stated plan to hire 15,000 additional US employees over five years is one example of this direction.
Local hiring can help companies understand client needs, manage relationships, respond to local requirements and reduce dependence on cross-border deployment.
It can also increase costs, making it essential to identify the roles where local presence creates genuine value.
A US-based enterprise architect, industry specialist or transformation leader may be valuable because of customer proximity and decision-making responsibilities. A large team performing repeatable development tasks may be more efficiently distributed across delivery centres.
The right model is not necessarily all onshore or all offshore.
It is a deliberate allocation of work based on expertise, customer requirements, economics and risk.
An illustrative anecdote: The consultant who changes the deal
Imagine two Indian technology firms pitching to a US manufacturer.
The first leads with a team of 30 engineers, an attractive hourly rate and a six-month delivery plan.
The second begins by examining production downtime, integration failures and the cost of fragmented operational data. It proposes a small client-facing team supported by offshore engineering, with milestones tied to system reliability and reduced manual reconciliation.
The second firm may still use offshore delivery extensively. But it has given the buyer a stronger reason to engage beyond price.
Again, this is an illustrative scenario rather than a documented client story.
The lesson is straightforward: offshore delivery is a competitive advantage, but it is not a complete value proposition.
5. The next opportunity lies in specialised, AI-enabled business outcomes
At its June 2026 US CEO Forum, NASSCOM highlighted opportunities in enterprise modernisation, data readiness, AI governance, cybersecurity, agent management and industry-specific solutions.
The organisation’s central argument was that AI changes how technology services are delivered and scaled; it does not automatically make technology service providers irrelevant.
This points to several areas where Indian IT companies can differentiate.
AI transformation: Help enterprises move beyond experiments to production-grade systems, governed deployments and measurable returns.
Data engineering and integration: Resolve fragmented data environments, connect legacy and modern systems, and establish reliable foundations for analytics and AI.
Cybersecurity and resilience: Address identity, cloud security, operational resilience, recovery and regulatory requirements.
Industry-specific technology: Combine engineering expertise with knowledge of manufacturing, life sciences, BFSI, retail or other industries.
Application modernisation: Help clients reduce technical debt, improve system reliability and accelerate transformation without creating unnecessary operational risk.
The opportunity is not to add “AI-powered” to every service description.
It is to identify a problem that matters to a buyer, demonstrate why it matters and prove that the provider can solve it.
6. Five turnaround strategies for Indian IT companies
The industry does not need one universal response. Large service providers, mid-sized IT companies and specialist firms have different resources and constraints.
However, five strategic moves can help organisations respond to the changing environment.
Strategy 1: Rebuild the value proposition around business outcomes
Replace generic descriptions such as “end-to-end digital transformation” with specific business problems and measurable results.
Instead of:
“We provide AI-enabled application development services.”
Consider:
“We help manufacturers connect production and supply-chain data to reduce manual reconciliation and improve operational visibility.”
The second statement identifies a buyer, a problem and a business objective.
It also creates a more useful foundation for sales conversations, proposals and marketing campaigns.
Strategy 2: Re-engineer pricing and delivery economics
Companies should review where time-and-materials contracts remain appropriate and where fixed-fee, milestone-based or outcome-linked models could better reflect the value delivered.
This does not mean abandoning hourly billing overnight. Outcome-based contracts also introduce risks: unclear baselines, dependencies outside the provider’s control and disputes over attribution.
A sensible transition begins with services where outcomes can be defined and measured reliably.
Track both client value and provider economics. Productivity gains that benefit the client but destroy provider margins are not a sustainable business model.
Strategy 3: Build a talent model resilient to policy changes
Develop a workforce plan that balances local hiring, offshore expertise and specialist on-site deployment.
Map critical roles, client dependencies and immigration exposure. Identify which activities require physical presence and which can be delivered through secure distributed teams.
Build local leadership and client-facing capabilities where they influence trust, sales and delivery quality.
The aim is resilience, not merely reducing visa applications.
Strategy 4: Specialise instead of competing everywhere
For smaller Indian IT companies, trying to compete with large providers across every technology and industry is rarely a compelling strategy.
A more focused approach might combine:
- One or two target industries.
- A clearly defined buyer persona.
- A specific, high-value problem.
- A differentiated solution.
- Evidence of delivery capability.
For example, a specialist firm could focus on data integration for life sciences, industrial automation for manufacturers or application modernisation for mid-market financial services companies.
Specialisation can improve relevance, shorten sales conversations and make expertise easier to communicate.
It must, of course, be supported by real capability and credible proof.
Strategy 5: Make marketing an instrument of commercial strategy
A sophisticated technology capability is not enough if buyers cannot understand why it matters.
Marketing must translate technical expertise into business relevance.
That means developing:
- Industry-specific points of view.
- Buyer-focused case studies.
- Practical guides addressing costly business problems.
- Executive content explaining risks, trade-offs and opportunities.
- Webinars featuring practitioners rather than product pitches.
- Searchable content that answers questions buyers ask across traditional search and AI-powered discovery tools.
- Account-based campaigns aligned with sales priorities.
The objective is not simply greater visibility. It is to make the company easier to understand, trust and shortlist.
7. A practical 90-day turnaround roadmap
A turnaround does not need to begin with a complete organisational restructuring. It can begin with a focused commercial programme.
Days 1–30: Diagnose
Review revenue by geography, industry, service line, client and contract type. Identify where margins are under pressure and where AI could change delivery costs.
Interview sales leaders and selected clients to understand why deals are won or lost, what buyers are prioritising and which capabilities they value most.
Map workforce dependencies, immigration exposure and critical delivery roles.
Deliverable: A prioritised list of target segments, business problems and commercial risks.
Days 31–60: Reposition
Select one or two market opportunities where the company has credible expertise.
Refine the value proposition, define measurable outcomes and develop a focused sales narrative. Create a proof asset such as a case study, diagnostic framework, industry report or demonstration.
Align sales and marketing around a shared ideal customer profile and buying committee.
Deliverable: A differentiated offer, a defined target-account list and sales-ready messaging.
Days 61–90: Test and scale
Launch targeted outreach to selected accounts. Use executive content, personalised engagement, webinars and focused campaigns to start relevant conversations.
Test different messages, measure qualified meetings and evaluate which problems generate the strongest response.
Work with delivery teams to develop commercial models that capture productivity gains without compromising quality or profitability.
Deliverable: Evidence of market response, a repeatable campaign approach and a prioritised scale-up plan.
The metrics should extend beyond impressions and clicks. Track qualified pipeline, opportunity conversion, sales-cycle progression, gross margin, deal quality and the proportion of revenue generated by differentiated services.
8. The deeper lesson: Market access is not the same as market relevance
Indian IT companies have already demonstrated that they can compete globally through engineering expertise, operational scale and delivery discipline.
The next phase demands another kind of capability: the ability to continually reinvent how value is created and communicated.
Consider the broader shift.
A company once differentiated itself by having a larger engineering workforce. It later differentiated itself through cloud expertise, automation and digital transformation. Increasingly, it must show how it combines technology, domain knowledge and AI to solve a business problem better than alternative approaches.
That is a more demanding proposition.
It also creates opportunities for companies willing to develop distinctive capabilities rather than simply follow the industry’s largest players.
The US market will not reward every provider equally. Nor will AI create growth for every company that adopts it. Outcomes will depend on customer needs, execution, pricing, differentiation and the ability to adapt.
The right response is neither panic nor complacency.
It is strategic reinvention.
Conclusion: Indian IT needs a new growth narrative
The US market is not simply dead for Indian IT.
India’s software services exports to the US grew in FY2025–26. Technology leaders continue to secure major contracts, while AI is creating new opportunities alongside pressure on traditional services. Immigration policy is adding complexity to workforce planning, and delivery models are evolving.
These developments do not point to a single outcome. They point to a market in transition.
For Indian IT companies, the priority should be to move beyond a value proposition built primarily on cost and capacity.
The next competitive advantage will come from combining engineering excellence with industry knowledge, AI-enabled delivery, resilient talent strategies and a clear demonstration of business value.
The companies that make this transition will be better positioned to compete.
The ones that continue selling yesterday’s delivery model without explaining tomorrow’s value may find the market increasingly difficult to win.
The question is not whether American businesses will continue buying technology services from India.
It is whether Indian technology companies will evolve fast enough to become indispensable to the businesses they serve.
Research note: This article reflects publicly reported information available as of October 9, 2026. Immigration rules and litigation can change; companies should seek qualified US immigration counsel for decisions affecting individual employees or petitions.
