In an exclusive interview with BW Businessworld, Nagarro’s CEO and co-founder Manas Human outlines plans to reach USD 10 billion in revenue by 2030 and charts path to expand its India-based workforce. He expresses cautious optimism about the IT market and notes that while GCCs are growing, they won’t replace traditional IT services firms. Excerpts:
Given that you co-founded the company in 1996 and decided to list in 2020, why did you choose to list in Germany rather than in India?
We’ve always been a bootstrap, self-funded company, growing at about 30 per cent per year. It took us five years to reach USD 1 million in revenue, another five years to hit USD 5 million, and another five years to reach USD 20 million. I wasn’t involved in the entire journey as I was working on other startups, most of which failed. In 2008, during the financial crisis, we decided to bring in a stronger financial partner and sold the company to a German-listed firm. We later carved Nagarro out of the listed company. At the time of the carve-out, we were generating USD 400 million in revenue and chose to list on the German stock market. Nagarro has grown into a global company, having merged with firms from Turkey, Dubai, Norway, Austria, Germany, Romania, China, the Philippines, and the US. While our roots are in India, with the majority of our employees, 13,000 out of 18,000 are based here, our leadership and operations are global. Germany is simply where we are listed.
Geographically, can you describe the primary sources of your business? We understand there is a European slant?
Our business is evenly split between Europe and the US, with each contributing about 35 per cent. The remaining revenue comes from other regions we call Rest of World, including the Middle East, South Africa, and India. We have a stronger focus on Europe compared to many companies, due in part to our European history. For instance, we work with ASSA ABLOY, a leading Swedish company in hotel room lock systems, which collaborates with only us for R&D in Gurgaon. We also partner with an American company for lighting controls used in iconic locations like the White House and the Statue of Liberty. Additionally, our flight planning software is used globally, including for real-time flight updates. This European slant is reflected in some of our key projects and partners.
You compete with IT services companies based out of India as well, particularly in international markets, yet you have a unique European focus compared to many of these firms. At the same time, a majority portion of your workforce is based in India. How has this balance evolved over the past 30 years?
When we were acquired by the German-listed company in 2010, we were a small company with about 1,000 employees, most of them based in India, with a few in sales and onsite roles. It was largely a US, Europe, and India-based company. Over the years, we’ve merged with many companies in different regions, including 600 people in Turkey, 500-600 in the Philippines, several hundred in China, 1,000 in Romania, and 1,000 in Germany. These acquisitions helped us build local talent pools and better address regional markets. Since 2014, through about 20 acquisitions, we’ve evolved into a much more global company. But before that, we were primarily India-origin and India-focused.
Have the acquisitions also had an India background?
We’ve made some acquisitions that had an India component, such as India-based centres or India-origin founders, but that’s only about a third of our total acquisitions. Many of our acquisitions have had no connection to India at all. However, some did have India centres that we later merged with the parent company.
We know that your company aims to reach USD 10 billion in revenue by 2030, which is a big leap from your recent milestone of USD 1 billion (last year). Given this goal, what are your plans for growth in India, particularly in terms of investments and hiring over the next 10 years?
While it seems like a long way to go, we’ve done 10x growth over the last 10 years. We had a plan back then, aiming for USD 250 million by 2018-2019, and now we’ve hit USD 1 billion by 2024. We've seen others achieve this, and while we don’t follow the same path, we can learn from broader trends. Reaching 10x requires not just scaling but also a qualitative transformation. For us, the biggest change will be moving from being a top technology provider to steering clients’ businesses through ecosystem thinking, connecting industries like travel and tech.
Ironically, we started as a consulting company and now, as a software company, we’re going back a bit to consulting. In terms of numerical growth, we’ve seen costs per hour rise, and they’ll continue to increase. So, it won’t be a 10x increase in people, but more like 5x-7x growth in India, which means around 80,000-90,000 employees. That’s still significant, though smaller compared to some large players.
Can you give us an overview of your business in India? How do your Indian clients fit in, and across which verticals do you operate? Are you currently working on any government projects?
No, we don’t work with the government, except for some pro bono projects. Most of our work in India comes from consulting firms, especially the big ones advising clients on digital transformation. They need a partner who can move quickly to deliver on those projects. We work across various industries like life sciences, banking, construction, and retail, both online and traditional. Consulting-led projects are actually our biggest channel globally, with over 10 per cent of our annual business coming from clients referred by consulting companies.
Could you give us a breakdown of your clients across different verticals? Are there specific industries or segments where you’re seeing the most growth?
We are spread across many verticals, driven by three main factors. First, consumer expectations for experience are similar across all sectors, whether it’s a hospital site, ecommerce, or travel booking. Second, technologies are becoming more universal; specialised technologies for each vertical are becoming less common, with similar playbooks now used across different areas like data and AI. The most exciting development, in my view, is the intersection of verticals. For example, integrating locking systems with travel or automotive with banking, insurance, or ecommerce.
In terms of recent growth, automotive and industrial sectors have seen the most expansion globally. We work with major companies like Audi, Volkswagen, BMW, and Suzuki, and we’re seeing decent advancements in IoT and other technologies in manufacturing. While other sectors like banking are also growing, automotive and industrial remain our most dynamic areas of growth.
Most IT CEOs are currently indicating that demand is moderate, with some suggesting it might improve in the second half of the year. What is your perspective on the current market outlook?
I think predicting this market is very challenging, and I generally wouldn’t venture a guess. However, there may be a slight reduction in inflation worries, and the concern now is whether interest rates have been kept too high for too long, potentially leading to an economic downturn. Clients are also showing weariness and delaying some initiatives. Despite this, I’m hopeful. Every indicator, at least from our perspective, suggests that the underlying market structure remains sound. For instance, we have around 180 clients with contracts over USD 1 million, and we typically maintain these relationships long-term. Despite recent stresses, we’ve only lost one client recently due to their IPO and subsequent changes. Our retention rate is around 98-99 per cent, which indicates that the market structure is still solid, even if growth has moderated.
Do you think decision-making has slowed due to uncertainty about budgets and investments? Additionally, we’ve heard that there’s a growing emphasis on quick returns on investment (ROI) in current deals. Is that something you’re observing as well?
In early 2023, technology firms faced sudden pressure for profitability from venture capital investors, leading to significant cutbacks in project spending. This was particularly evident in the horizontal tech sector. We managed to stay afloat while some others cut back rapidly. Now, we’ve moved past that phase, and dramatic cutbacks are no longer a major issue. Growth is now coming from historically under-invested sectors like industrial and low-margin industries, where there is new interest in AI and data infrastructure.
Currently, decision-making isn’t so much delayed but rather cautious, with a focus on spending and trade-offs. Companies might choose to release a product later with a smaller team to save costs, rather than pushing for a quicker release with higher expenses. The current environment favours preserving cash over immediate competitive advantage. Overall, the situation is much more stable compared to early 2023, with fewer uncertainties about potential setbacks.
I’d like to get your perspective on the ongoing debate between IT services companies and GCCs (Global Capability Centres) in India. There’s a concern among IT services firms that GCCs, which are servicing other GCCs, might encroach on their market share. Some experts believe that GCCs will narrow this gap over time. What is your view on this issue and its potential impact on the broader IT services sector?
I’ve been around long enough to have seen at least three GCC waves come and go, each leaving its mark. Historically, there hasn’t been a fundamental shift in how GCCs impact the market compared to previous years. Currently, many companies with GCCs still need partners for specialised areas, ramping up, and maintaining competitiveness. This means that external teams are still necessary, and GCCs often work with external partners. While GCCs will continue to grow, I don’t see them posing an existential threat to IT services.
It’s worth noting that the rapid growth of GCCs driven by the remote working boom of 2020-2022 may have plateaued. Setting up a GCC was ideal during those peak times, but retaining talent has proven challenging. As the demand curve flattens, there might be a reconsideration of the minimum viable size for GCCs. GCCs will keep growing and may outpace the IT export industry’s growth when the industry itself is not expanding. However, the IT export industry still has significant strengths. Large firms like TCS offer extensive competencies and diverse capabilities, which will ensure their continued prominence.
