Indian IT Companies Corner 50% of the Top Global Deals
Recent research indicates that India's top three IT companies have snapped projects worth more than nine billion US dollars in recent times
While doomsday predictions about a recession in the United States and Europe slowing down India’s IT services growth keeps hitting the headlines, here’s something that should warm the cockles of the executives at these companies. A report suggests that Indian IT companies have been the biggest beneficiaries of a global consolidation over the past two years.
In fact, the report by HfS Research suggests that close to half of the biggest global IT deals came to Indian hands. While Infosys is sitting pretty with a $3.2 billion deal from Dailmer and another $1.5 billion deal from Vanguard, TCS received a $1.5 billion deal from Walgreens Boots Alliance and a $2.3 billion deal from Nielsen.
Consolidation deals are usually contract renewals wherein services get bunched under a smaller number of providers, says Phil Fersht, CEO of HfS Research while pointing out that customers were now moving from a long tail of service providers to sharper offerings that could potentially enhance accountability and trust with IT partners.
Though most mega deals end up providing low margins, Indian companies have perfected standard operating procedures to a level where they are able to tweak operational levels once the project is set up. This, then provides them with enough scope to enhance margins over the long term with every large sized deal.
Of course, one could nitpick about some of the numbers. In its quarterly earnings statement, Infosys conceded that its large deal wins during the April-June period stood at $1.7 billion compared to $2.3 billion during the previous quarter. However, the fact remains that Infosys is investing in rapid talent expansion all along, which shows their intent.
The same holds good for TCS, which further consolidated its business with MetLife and also got a larger pie of the cake compared to competitors such as Cognizant. Company CEO Rajesh Gopinathan said it won two $400 million of deals during the April-June with both boasting a strong transformation and optimization component.
As for Wipro, its revenues from the said quarter rose 17.9% year-on-year to Rs.21,528 crore with operating margins in IT services declining by 200 basis points on a quarterly basis. In currency terms, the IT services segment revenue increased by 2.1% over last quarter and 17.2% on an annual basis to Rs.2.735.5 million.
Company CEO and MD Thierry Delaporte said their order bookings grew 32 per cent year on year in total contract value terms, powered by large transformational deals, and the pipeline today is at an all-time high. Delaporte’s largest yet deal came from Metro Cash and Carry, which analysts predict has the potential to go up to $1 billion over five years.
All in all, the going seems good for now though it is for time to tell whether this is the calm before the storm or just the green shoots of a transformation exercise that is certain to follow an economic slowdown, as Wipro’s boss Rishad Premji had recently said.