Software Services Vendors Log On To Larger, Multi-year Deals

New Delhi: | Updated: Nov 17 2003, 05:30am hrs
Overseas customers are increasingly favouring multi-year multi-million dollar software services contracts. The average deal size this calendar is up by almost 60 per cent to $4 million from $2.5 million last year, according to various estimates.

Also the number of multi-year contracts being bagged by Indian software services companies or Indian subsidiaries of the US companies is on the rise, pointing to long-term customer relationships.

Following the trend in the last ten months, National Association of Software and Service Companies (Nasscom) estimates this calendar is likely to see a total of 480 new multi-year contracts (3 to 5 years) as compared to 410 such contracts in 2002.

The environment has certainly improved for the Indian IT industry and the outlook for 2003-04 is better than 2002-03. This is clearly reflected in the increase in multi-year and multi-million contracts being bagged by the software companies in the country, Nasscom vice president Sunil Mehta told eFE.

HCL Technologies has recently bagged a multi-million and multi-year contract from AMD. A senior official of HCL Tech told eFE that this is a 5-year contract and might go up to $100 million. As part of this contract, AMD has outsourced its application and IT infrastructure requirements to HCL Tech, the company official said.

HCL Tech chairman and chief executive officer Shiv Nadar had earlier this month said that the number of mulit-year and multi-million contracts were defintely on the rise this year.

The countrys largest software and services company, Tata Consultancy Services (TCS) too backs this trend. In this calendar, the company bagged big contracts from GE, Swiss Air, Tata Honeywell and Adobe.

This year has definitely been better than the last year for the industry as well as for TCS. The first two quarters for TCS have been good as compared to the corresponding quarters last year, a TCS spokesperson said confirming that the company has received more of multi-year and multi-million contracts this year.

Hughes Software Systems (HSS) bagged a couple of contracts in the last calendar compared to more than half a dozen contracts this year.

This year, the company also bagged a 3-year contract of over $30 million from Lucent.

Say company sources, this contract is further being rev-iewed and might be extended to 5 years for over $50 million.

Till about 2 years ago, HSS did have too many multi-year and multi-million contracts but this year things are different. Such contracts are being increasingly preferred by our clients reflecting higher confidence in Indian vendors, HSS president Arun Kumar said.

Nasscom says that the entry of Accenture, EDS and IBM in India has attracted serious customers to India for even domestic vendors.

iGate Global Solutions, a software and services company that is undergoing a restructuring process, too has experienced the same trend. We have signed 4 contracts this year in the 3 to 5 years range (extensions of the earlier contracts). We have recently signed a new customer for 3 years running into tens of millions, iGate Global Solutions chairman Ashok Trivedi told eFE.