IT services and SaaS: utilisation, attrition, TCV and the metrics nobody defines the same way

An IT services firm generates thousands of crores of revenue, earns a fat margin, and converts nearly all its profit to cash — and its balance sheet is almost empty. There is little inventory, negligible plant, a pile of cash and some receivables, and that is about it. The asset that actually earns the money — tens of thousands of skilled people — appears nowhere on the balance sheet, because you cannot own employees. So the financial statements, so central to reading most businesses, tell you remarkably little about an IT firm, and the numbers that matter are operating metrics about people and deals that sit outside the accounts entirely. illustrative

That would be manageable if those operating metrics were clean. They are not. The headline revenue growth is reported in rupees but earned in dollars, euros and pounds, so a favourable currency move flatters it — the underlying growth is the constant-currency figure, which is lower. The deal-win metric, total contract value, sounds precise but is defined differently by every company: one counts only new deals, another folds in renewals, a third includes pass-through costs, so the same reported TCV growth can mean quite different things. The people metrics — utilisation and attrition — are the most honest and the most leading, moving before the financials show anything. Reading an IT firm well means largely ignoring the empty balance sheet and reading these operating numbers with a clear eye for which are trustworthy and which are dressed up.

So this module reads an IT services firm and its SaaS-product cousins (SaaS — software sold as an ongoing subscription rather than a one-off licence) through the numbers that matter: utilisation, how fully the people are deployed; attrition, how fast they are leaving; and total contract value, the deal pipeline — while treating the headline growth with the currency in mind and the TCV with its definition in mind. The financial statements are almost beside the point; the operating metrics, read carefully, are the business.

The format module noted that an IT firm files the ordinary Division II statement but that its balance sheet is nearly irrelevant. This module does the operating metrics in full, because for a business whose asset is its people, the financials lag and the people-and-deal metrics lead — and because two of the headline metrics are systematically distorted in ways a careful reader must correct for. It exists so that a reader does not mistake a currency-flattered growth number for a strong business, or compare two firms' incomparable TCV figures as if they meant the same thing.

Three ideas carry it. Utilisation is the share of the billable workforce actually deployed on client work — the factory-utilisation of a people business, where idle, benched employees are a cost with no revenue. Attrition is the rate at which employees leave, a leading indicator of cost and delivery pressure: high attrition forces expensive rehiring and disrupts projects, squeezing margins in the quarters ahead before the revenue line shows anything. And total contract value (TCV) is the value of deals signed — the forward pipeline — but a metric no two companies define identically, so it must be read against each company's own definition rather than compared naively.

Without this module, a reader makes three errors. They read the reported revenue growth as the business, missing the currency tailwind that the constant-currency figure removes. They compare two firms' TCV as though it were a standard measure, when one includes renewals and the other does not. And they read the pristine, cash-rich balance sheet as evidence of a low-risk, high-quality business, missing that the real risks — attrition, client concentration, deal quality — are operating risks the balance sheet does not show. The point is to read the leading people-and-deal metrics carefully, correct the headline growth for currency, and never compare a metric across firms without checking they defined it the same way.

Two distortions to correct, and the leading metrics to read.

Read constant-currency growth, not reported. An IT services firm bills clients in foreign currencies and reports in rupees, so when the rupee weakens, the same dollar revenue translates to more rupees and the reported growth is flattered — and when the rupee strengthens, reported growth is understated. Neither has anything to do with the business winning or losing work. Constant-currency growth restacks the numbers at fixed exchange rates to show the underlying rate, and it is the figure to read. A firm reporting 11% growth with 9.5% constant-currency growth grew its business by 9.5%; the rest was the exchange rate, and crediting it to the company overstates the performance.

Utilisation — the factory-utilisation of a people business. An IT firm's capacity is its billable people, and utilisation is the share of them actually deployed on client work rather than sitting on the bench between projects. Benched people are paid but earn nothing, so utilisation is a direct margin lever — a few points higher fills the factory and lifts the margin, a few points lower means idle capacity dragging it down. Rising utilisation with growing revenue is efficient growth; revenue growing only because the firm added headcount while utilisation fell is growth bought with idle cost.

Attrition — the leading indicator that moves first. Attrition is the rate at which employees leave, and it is one of the most forward-looking numbers in the sector. High attrition forces the firm to hire replacements — often at higher salaries in a tight market — and to absorb the disruption of losing experienced people mid-project, both of which pressure margins and delivery in the coming quarters, before the revenue or margin line shows the strain. A spike in attrition is an early warning of cost and delivery pressure ahead; falling attrition on a growing base is a sign of a firm whose people and margins are secure. It leads the financials, which is exactly why it is worth reading.

Total contract value — the metric nobody defines the same way. TCV is the total value of deals signed in a period — the forward book of work, a genuine leading indicator of revenue. But it is not standardised: one company counts only net-new deals, another includes renewals of existing contracts (which are real but not new business), a third folds in pass-through costs that carry no margin. So the same reported TCV growth can mean very different things, and comparing two firms' TCV directly is a category error. The number is useful read against a single company's own consistent definition over time; it is meaningless compared across companies without knowing what each one counts. The same caution applies to SaaS metrics — ARR (annual recurring revenue, the run-rate of subscription revenue), net revenue retention, bookings — which every company defines to its own advantage.

A business whose asset is off the balance sheet, read on operating metrics rather than financials, is unusual, and it reads quite differently from a capital-heavy peer.

The inversion is that for an IT firm, the balance sheet — which for a bank is the entire business and for a manufacturer holds the productive assets — is almost empty and nearly uninformative, because the asset that earns the money is people who cannot be owned or capitalised. A reader who studies an IT firm's balance sheet learns that it has cash and receivables and little else, which is true and beside the point; the business lives in the utilisation, attrition, deal wins and revenue per employee that sit entirely outside the accounts. This is the mirror image of the bank, whose balance sheet is everything and whose operating story is in it. The reader must invert the instinct to read the statements first: for an IT firm, the statements are a footnote, and the operating metrics — read with the currency and the definitions in mind — are the text.

Read the composite IT services firm. On the financials it looks excellent and almost featureless: revenue of ₹4,780 crore in the final year, a 17% EBIT margin (EBIT — earnings before interest and tax, the operating profit), near one-to-one conversion of profit to cash, and a balance sheet of little more than ₹1,980 crore of net cash and ₹1,000 crore of receivables. The return on equity looks high — but that is largely because the equity base is tiny, since the business needs almost no capital. The financials confirm it is asset-light and cash-generative and tell you almost nothing else. The business is in the operating metrics. illustrative

Start by correcting the growth. Reported revenue growth in the final year was 11.2%, but constant-currency growth was 9.5% — so about 1.7 points of the headline was a currency tailwind, not the business winning more work. The honest growth rate is 9.5%. Then read the people. Utilisation held around 82% — the billable factory is reasonably full, supporting the margin. Attrition, though, tells a story the revenue line does not: it spiked to 24% in the third year, a sign of intense wage and delivery pressure, before the firm brought it back to 14% by the fifth. That third-year spike would have pressured margins and costs in the quarters that followed, an early warning visible in the people-metric well before it reached the P&L (the profit-and-loss statement, where revenue and costs finally show up).

Then the deal pipeline and the quality signals. Large-deal TCV grew from ₹1,200 crore to ₹2,100 crore, with a jump in the final year — a healthy forward book, though you would read it against the firm's own definition, not compare it with a rival's. Revenue per employee rose from ₹76 lakh to ₹92 lakh, a genuine sign of moving up the value chain into higher-margin work. And the top-five client concentration fell from 34% to 29%, a reduction in the risk that one large client leaving could dent the business. Together these operating numbers — corrected growth, utilisation, attrition, TCV, revenue per employee, client concentration — describe a solid, improving firm, and none of them is in the financial statements.

The habit to build: for an IT firm or SaaS company, read past the empty balance sheet to the operating metrics. Correct the headline growth for currency and read the constant-currency rate. Read utilisation for how fully the people are deployed and attrition as the leading indicator of cost and delivery pressure. Read TCV and any SaaS metric against the company's own consistent definition, never compared naively across firms. And read revenue per employee and client concentration for whether the business is moving up the value chain and spreading its risk. The financials confirm the firm is asset-light and cash-rich; the operating metrics tell you whether it is actually winning.

The operating metrics read the near-term health of the business, but they cannot tell you whether the firm's skills will still be in demand. IT services is exposed to shifts in technology — a move to cloud, to automation, to artificial intelligence — that can make a large part of a firm's work obsolete or far cheaper to deliver, and none of that shows in utilisation, attrition or TCV until the demand for the old work fades. A firm with strong current metrics can be sitting on a skill base the market is about to stop paying for, and whether it is reskilling fast enough is a judgement about technology and strategy that the operating numbers do not capture.

Nor does TCV, however carefully read, tell you the margin or the certainty of the work behind it. A large deal book can be won by pricing aggressively — taking work at thin margins to keep people utilised — so a growing TCV can mask deteriorating deal economics, and the value signed is not the value that will be realised if clients defer, descope, or cancel. Even within one company's consistent definition, TCV measures the size of the forward book, not its profitability or its certainty, and those depend on the pricing discipline and the client relationships that sit behind the number rather than in it.

And the metrics cannot fully reveal the client-concentration and delivery risks that can unravel a firm quickly. A single large client cutting its spending, a failed project that damages a reference relationship, a visa or regulatory change that raises the cost of the delivery model, or a key account team defecting to a competitor can each hurt a firm whose current utilisation and attrition look fine. The people-and-deal metrics measure the aggregate; the specific dependencies — on a few large clients, on a delivery model, on particular skills — sit in the client-concentration disclosure and the management commentary, and they are where a firm with healthy headline metrics can still be fragile.

How it comes up. When an IT firm reports strong growth, a sharp analyst separates the business from the currency and probes the deal quality. The question sounds like this: "Reported growth was 11%, but what was constant-currency, how much of TCV is net-new versus renewals, and what's your utilisation and attrition trajectory into next year?" The analyst is stripping out the currency, testing the TCV definition, and reading the leading people-metrics.

A good answer, verbatim-style.

"Constant-currency growth was 9.5% — the rest was the rupee. On TCV, the ₹2,100 crore is net-new plus new-scope on existing accounts; we exclude pure renewals, and I can tell you renewals separately were about ₹900 crore. Utilisation is 82% and we have room to take it toward 84% before we need to hire ahead, which supports margins. Attrition has come down to 14% from the 24% peak, so wage pressure is easing. Net-new deal momentum is the number I'd point you to, and it's genuinely improving."

It gives constant-currency growth, defines TCV precisely and separates renewals, and reads utilisation and attrition forward. It lets you judge the real growth and the deal quality.

An evasive answer, verbatim-style.

"We're delighted with our strong double-digit growth, robust deal bookings and healthy demand environment. Our people are our greatest asset and we continue to invest in them. We remain confident in our growth outlook and our ability to deliver value to all stakeholders. Momentum across verticals remains strong."

Cites "double-digit growth" without the constant-currency figure, "robust deal bookings" without defining TCV or splitting renewals, and "our people are our greatest asset" in place of the utilisation and attrition numbers. It is fluent and says nothing the question asked for, and a firm whose reported growth was mostly currency and whose TCV was mostly renewals would answer exactly this way.

The follow-up nobody asks. "What is TCV excluding renewals, and how does your definition compare with how you reported it two years ago?" That forces the deal metric into a consistent, comparable form. Watch what happens when it is not asked. If "strong bookings, robust demand" is allowed to stand, an investor credits a renewal-inflated, possibly redefined TCV as new-business momentum. The silence is the tell — either the net-new deal flow is weak beneath the headline, or the TCV definition has quietly been broadened to flatter it.

The first trap is reading the reported revenue growth as the business. An IT firm earns in foreign currency and reports in rupees, so a favourable exchange move flatters the headline growth with nothing behind it — the underlying rate is the constant-currency figure, which is lower. A reader who takes the reported number credits the exchange rate to the company, and in a year when the rupee moves the other way, the same reader will unfairly mark the firm down for a currency headwind. Constant-currency is the honest measure, and reading the reported figure without it misjudges the business in both directions.

The second trap is comparing TCV — or any SaaS metric — across companies as if it were standardised. It is not: one firm's TCV counts only net-new deals, another includes renewals, a third folds in pass-through costs, and the same is true of SaaS bookings, ARR and retention metrics, each defined to the company's own advantage. So identical reported TCV growth at two firms can mean genuinely different things, and ranking them on the number is a category error. The metric is useful only against a single company's own consistent definition over time, and a reader comparing across firms without reading the definitions is comparing figures that were never the same measure.

The third trap is reading the pristine, cash-rich balance sheet as a low-risk business. An IT firm's balance sheet is nearly empty because its asset is people, and its cash pile and lack of debt make it look safe — but the real risks are operating and strategic: attrition, client concentration, aggressive deal pricing, and above all the technology shifts that can make its skills obsolete. None of those shows on the balance sheet, so a reader lulled by the clean financials into thinking the business is low-risk has mistaken the absence of financial leverage for the absence of risk. The balance sheet confirms the firm is asset-light; whether it is winning, and whether its work will still be wanted, lives entirely in the operating metrics and the strategy behind them.