How does IT companies make so much profit? On what services do they earn the highest premium?
IT Companies make “so much profit” only if they sell to a country with higher cost of living and deliver from a country with a lower cost of living i.e. adopt dual-shore business model.
If an IT company sells in USA and also delivers from USA, it’s unlikely to make much more profits than companies from other industries in USA.
Ditto for India. There are several IT companies in India that get no business from abroad and they’re not all that profitable.
ByTW, high profitability is an inherent trait of the dual-shore business model. Just that IT is one of the rare industries where many of the deliverables can be “shipped over the wire”. As a result, IT is one of the few industries that can use the dual-shore business model effectively and benefit from the high profitability intrinsic to that model.