Revenue per employee won't rise immediately despite AI intervention: Banga

Nitesh Banga discusses the company's growth plans and why measuring revenue per employee as an indicator of organisational efficiency is still some time away

Nitesh Banga, chief executive officer and president of Virtusa — a global IT services and consulting company — took charge earlier this year. In a virtual interaction with Avik Das, Banga, an old hand at Infosys, discusses the company’s growth plans and why measuring revenue per employee as an indicator of organisational efficiency is still some time away. Edited excerpts:

 

How has your strategy played out over the last 10–11 months? And what will be your main growth levers going ahead?

 

When I joined, we wanted to double down on our core product and platform engineering heritage, instead of focusing on system integration services. That is our core, and that’s how we wanted to go to market. This helped us sharpen our positioning and strengthened us meaningfully in that space.

 

The second focus was using our deep domain knowledge and combining it with engineering to build next-generation, domain-driven solutions for the AI enterprise. That’s what we launched through our Helios suite of productised solutions. This too has gained strong traction. The third focus was expanding into new verticals and new geographies — both organically and inorganically. We have already started scaling into these areas.

 

As you invest in AI to improve efficiency and productivity for clients, how do you ensure you maintain the desired margin levels?

 

The kind of deal flow that is there today, the gross margin will continue to be challenged because there is a lot of consolidation. Every customer wants to get the entire saving from AI back to them because they want to have control of their AI journey. Where we are seeing high-margin plays is in areas where processes are being reimagined. If one is getting into the reimagination part early, the provider will usually get a downstream business which is more outcome-driven. We are also helping organisations set up their own AI centre of excellence (CoE). Anybody can set up a GCC, but how do you do an AI-first GCC where you have a human-plus-agentic approach model? The third piece is the fin ops. Every time we change a prompt, billions of data points must come together, which needs to be optimised. So the fin ops piece that we are taking to market is gaining a lot of traction and has a high profit in it.

 

With the adoption of AI, have you seen revenue per employee go up over the last two years?

 

Our AI revenue is about 17 per cent of the topline. The rest 80 per cent is still regular digital engineering. But that AI revenue is made by experts who have already added very high productivity. How much productivity can that give you from a per-person perspective? A lot of these projects are still in their initial stages. These are not scaled AI deployments and people are still working on a lot of proof-of-concepts (PoCs) and foundational work. I don’t think that it will immediately swing the needle just now. What we should track is if we are growing by hiring fewer people. And we will get that answer in the next 12 to 18 months.

 

How much do you estimate your AI revenue can go up in the next 12 months?

 

In March, we were at 11 per cent and 17 per cent in the September quarter. I would say it will go up in the next seven months to about 30–35 per cent. That is the speed at which we are growing and our productised solutions are getting traction in the market. Our aspiration is to be an AI-for-services company which hits $5 billion by 2030. I think we are very well on track for that.

 

Which are some of the new geographies and verticals that you are looking to expand into?

 

In service offerings, Virtusa is very strong in cloud and application engineering. We excel in cloud engineering, app engineering and related areas. But we now want to expand into network and chip — essentially covering the full stack from chip to network to cloud to app. Because in digital engineering, product/platform engineering and AI, you need end-to-end coverage and AI won’t remain limited to software; it will move into OT (operational tech) as well. We are also expanding organically and inorganically into embedded software, chip design and pre-silicon design, while continuing to scale cloud and app.

 

On geographies: We are expanding into Japan, where we currently don’t have a presence. Besides this, also in the Nordics, Saudi Arabia and Canada.

 

We are strong in banking, financial services and insurance (BFSI), healthcare, life sciences, communications and tech. We now want to expand into manufacturing and CPG. A lot of next-generation transformation will happen there, both in digital and AI.

 

How do you plan to expand into manufacturing at a time the sector is under pressure due to tariffs?

 

Manufacturing is a very large vertical, with automotive, discrete, aero and high-tech sub-segments. We are already present in some sub-sectors — especially discrete and high-tech manufacturing. Automotive, however, is going through turbulence. The software-defined vehicle ecosystem is plateauing, car demand is under pressure and Chinese exports are rising. So we are not planning a big automotive expansion.

 

Most of our focus will be on discrete manufacturers — compressors, agricultural equipment, etc. A lot of digital transformation is happening here: digital twins, predictive maintenance, asset management — all aligned with our digital engineering heritage and AI strategy. This is where we want to expand.

 

In geographies like Japan and Saudi Arabia, which verticals offer the highest expansion potential?

 

It is mostly financial services and manufacturing, followed by healthcare. Japanese BFS is undergoing massive transformation, and manufacturing is also evolving quickly. From a digital engineering and AI perspective, these are perfect fits for us.

 

Most Japanese banks still run on mainframes and legacy systems. They still need to undergo complete cloud and digital transformation. They have large deployable capital and need to modernise to support their expansion, especially across Asia and then the US, as their digital experiences lag behind the western markets.