Recent coverage of India's technology sector has often highlighted the dominance of Bengaluru and Hyderabad, alongside the large IT services firms. However, a powerful trend emerging from Pune is reshaping the narrative, demonstrating that focused expertise in product and digital engineering can yield extraordinary financial results.
The Pune Advantage: A Hub for Product Engineering
Pune's established ecosystem, blending automotive, defence, and manufacturing prowess, has cultivated a unique product-thinking culture. This environment has attracted numerous Global Capability Centres (GCCs) specializing in product engineering, utilizing cutting-edge tools like artificial intelligence (AI), simulation, and cloud computing. This foundational strength is now propelling homegrown companies to remarkable heights.
The evidence is stark in the stock market performance of Pune-based technology services firms. Over the past five years, Persistent Systems and KPIT have seen their share prices skyrocket by approximately 700%. In sharp contrast, the shares of nearly all the largest traditional IT services companies have risen by less than 30%. Another Pune firm, Zensar, has also followed this impressive trajectory.
This divergence stems from a fundamental shift in business models. While traditional IT services help businesses operate their technical tools for daily tasks, product engineering involves the end-to-end application of engineering principles to design, develop, and maintain a product through its entire lifecycle. The rise of advanced technologies like AI, the Internet of Things (IoT), automation, and digital twins has made product development faster but also more complex, creating a significant demand for outsourced expertise—a demand Pune companies were perfectly positioned to meet.
Strategic Pivots: From IT Services to Engineering Leadership
KPIT's Bold Bet on Automotive
In 2019, KPIT made a courageous decision to divest its entire IT services business to Birlasoft. The company chose to focus solely on automotive engineering, which at the time contributed only about a third of its revenue. Co-founder and Managing Director Kishor Patil explains that observing the innovations by Tesla and Chinese automakers convinced them to dedicate themselves entirely to this transformative space.
"Five years back, we redefined everything, including our vision statement – we redefined as if we were a startup, with a clear goal of building global leadership," Patil states. Recognizing the industry's shift towards electrification, digital cockpits, and autonomous driving, KPIT invested heavily in developing skills in these areas. The bet paid off handsomely.
Today, KPIT performs core platform work for many of the world's leading automotive brands. Its revenue surged from $275 million in 2020-21 to $691 million in 2024-25, representing a compound annual growth rate (CAGR) exceeding 20%. "Our employees tell us how they are treated differently from others when they go to a client, because that's the respect KPIT has built," Patil adds.
Persistent's Fierce Digital Engineering Focus
Similarly, Persistent Systems underwent a strategic transformation under CEO Sandeep Kalra, who joined in 2020. The company pivoted to what analyst Pareekh Jain terms "a fierce digital engineering focus." Beyond strengthening its technical capabilities, Persistent built a robust partner ecosystem with giants like Salesforce, AWS, IBM, and Google, as well as private equity firms, moving beyond reliance on direct sales.
This shift has been recognized by the market. Phil Fersht, CEO of HfS Research, notes that the massive share price appreciation for Persistent and KPIT reflects their evolution into engineering-led businesses with "software-like economics," a departure from the traditional services model focused on optimizing employee utilization.
The Uncomfortable Lesson for Indian IT
The success stories of Persistent and KPIT deliver a powerful message to the broader Indian IT services industry. Fersht summarizes it clearly: "The old model is finished. Persistent and KPIT show what happens when firms have the courage to burn the legacy playbook and rebuild around engineering depth and IP ownership."
The broader lesson is indeed uncomfortable but clear. The future belongs not to generalized IT services but to firms that develop deep, intellectual property-driven expertise in specific engineering domains. Pune's rise, powered by its historic strengths in complex manufacturing and product design, offers a compelling blueprint for this new era, proving that strategic focus and courage to specialize can catapult companies into entirely new orbits of growth and valuation.
