A $100-million contract was a walk in the park for most top tier IT firms till a few quarters ago. But with the slowdown reaching most of its catchment areas, the industry is now struggling to cross even the $25-million mark. Clients increasingly choose short term, low-value deals with poorer mid-term visibility, clouding long-term decision making.
Companies like Infosys and Wipro have already informed analysts about the disappointing trend.
Infosys board member and banking services head BG Srinivas recently said the company was not seeing many large deals in the US or Europe. The pipeline of large deals has shrunk from what it was six months back, he noted. At an analyst call, Wipro CEO, IT business & executive director TK Kurien remarked that the biggest worry was the time for closing deals which was now stretching up to 45 days. ?I only wish clients took decisions faster,? he said.
Everest Group India country head Amneet Singh told FE the trend reflects the global economic environment. ?Customers feel by giving smaller contracts, they are able to generate higher efficiency and extract better value,? he said.
A senior executive with an IT leader said there was still business around ? especially many sub-$50 million deals ? but the trick was in knowing how to tap them.
Big BFSI deals, which were a given during IT?s heydays, have turned elusive with the slowdown in American banking.
At one time, $250-300 million BFSI deals were common. Other slowing verticals like manufacturing have not helped either.
BPO advisory firm Avasant?s president and managing partner Pradeep Mukherji said $5-25 million deals in the application and BPO space are helping the industry get by. ?Majority of deals are contract renewals, with small extensions. Fresh contracts are very few and happen only when new products or services are launched,? Mukherji said.
Customers are giving contracts essential to business, said Offshore Insights CEO Sudin Apte. ?IT companies should prepare for a different business model with flexible pricing and differentiated services.?
There is little industry hope of an immediate return of $100-million-plus deals. However, Ray Wang, principal analyst at Constellation Research predicts a turn around. ?A big shift could happen in 6-12 months when contracts worth $75 billion could come up for renewal globally,? he said.