Top Indian IT services companies are witnessing an uptick in large and mega deals in specific sectors like banking, financial services and insurance (BFSI) as they turn to technology to optimise costs in the current uncertain economic environment.
Last week, Tata Consultancy Services (TCS), the country’s largest IT services firm, announced an over £600-million (about $723-million) contract with Phoenix Group, UK’s largest long-term savings and retirements provider, to digitally transform the latter’s ReAssure business using the TCS BaNCS-based platform. The deal is an expansion of TCS’s long-standing partnership with the Phoenix Group.
Typically, top-tier IT companies consider deals worth $100 million or more as large deals and those more than $500 million are referred to as mega deals. For TCS, such mega deals are returning almost after four years.
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In 2018, TCS signed a contract worth more than $2 billion in revenues with Transamerica, a leading provider of life insurance, retirement and investment solutions, to enable the transformation of administration of its US insurance and annuity business lines. In the same year, TCS expanded a deal with UK-based insurer M&G Prudential taking the deal value to over $1.2 billion in 10 years.
“There will be some large deal initiatives as the current macroeconomic situation develops and clients want to optimise costs as well as provider consolidation strategies mature, similar to the pandemic where we saw a one-time increase in large deals. This is likely to be triggered by account or industry-specific issues and not a change in deal trends for the long term…We see BFSI firms often taking significant measures in a recession or financial downturn to optimise costs,” said Nitish Mittal, partner, Europe Technology Practice, Everest Group.
Infosys signed 32 large deals worth a total contract value (TCV) of $3.3 billion in Q3, the highest in the last eight quarters with 36% net new. Of the total number of deals, seven large deals were in retail, six each in financial services and communications, five each in energy, utilities, resources & services (EURS) and manufacturing, two in life sciences, and one in hi-tech.
“We see good traction of large deals, and we have seen more and more relevance, connect with our clients on the cost efficiency and automation plays,” Salil Parekh, CEO and MD, Infosys, said during the Q3 earnings.
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Wipro signed 11 large deals with a TCV of over $1 billion during Q3. “Our pipeline of large deals is both strong, and diversified…Our large deals include new and existing clients seeking a transformation partner, or going through vendor consolidation,” Thierry Delaporte, CEO and MD, Wipro said in a post earnings call.
“Indian IT players stand to gain market share amid this macro slowdown due to clients’ high focus on cost optimisation and efficiency improvement (visible in the pick-up in contract activity during Q3 FY23), over more discretionary spend on digital transformation,” analysts at ICICI Securities said.