IT majors slash travel expenses, focus on cost optimisation
As the IT sector pulls all stops to control costs and improve margins, travel expenses are being curtailed. Indian Information Technology (IT) giants have spent far less on travel in recent years compared to their business growth.
Travel expenses as a percentage of revenue for top-tier IT players in fiscal year 2024 ranged between 1.1 per cent and 1.7 per cent compared with 2.3-3 per cent in FY19. In absolute terms, travel expenses of the IT majors were 15-25 per cent lower in FY24 compared to FY19.
Travel expenses at IT services companies include onsite travel for sales meetings, including accommodation and visa costs, CXO meetings with clients, and in-city transportation of sta, among others.
At TCS, travel expenses for FY24 stood at ₹2,972 crore compared with ₹3,474 crore in FY19. This represents 1.2 per cent of revenue compared with 2.3 per cent in FY19.
A similar trend played out at Infosys. At ₹1,759 crore, travel expense was 1.15 per cent of revenue in FY24 (2.95 per cent).
Travel as a percentage of revenue at Wipro was 1.68 per cent in FY24 (3.03 per cent).
HCL Tech reduced travel costs from 3 per cent of revenue in FY19 to 1.20 per cent in FY24.
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Prashant Shuhkla, Vice-President
of research firm Everest Group, says, “A big component of travel expenses falls under the cost of sales, which is generally billed to the client as part of the contract, and this cost is being optimised by moving several activities oshore or virtual.”
Out of the ₹1,759 crore incurred by Infosys in travel expenses in FY24, ₹1,243 crore is grouped under the cost of sales, and at other IT firms, too, the majority of travel cost is project-related.
In the last year, IT firms have also focused on setting up smaller centres and hiring from tier-2 and -3 locations, optimising domestic travel. Additionally, increased awareness of the environmental impact of doing business contributes to curbing travel costs.
However, business travel is estimated to rise further in FY25. “With Gen AI, large deal negotiations, delayed renewals and changing technology landscape, CXO travel spends will rise in the coming year, though these will be for future capability and pipeline building,” Gaurav Vasu, Founder and CEO of UnearthInsight, said.