Indian IT companies riding on cost takeout deals
Global enterprises keen on outsourcing projects to save future costs in the wake of rising inflationary pressure
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Cashing In On Cost Drive
- TCS has signed a 6-yr contract with UK-based Rail Delivery Group
- Large deal wins for large IT firms cushioning global slowdown impact
- Infosys and HCL Tech raised guidance for FY23
- Mega deals are the mainstays of revenue growth
Bengaluru: In a sign of things to come, Indian IT services players have started winning multi-year large deals as organisations and enterprises speed up outsourcing for saving cost amid inflationary environment.
Tata Consultancy Services (TCS), India's largest IT services firm, recently announced that it has signed a six-year contract, with an extension term opportunity, with the UK-based Rail Delivery Group to build and run the UK government's Rail Data Marketplace (RDM).
"We are delighted to lead on this strategic programme with the Rail Delivery Group. Built on TCS Dexam, the Rail Data Marketplace can not only provide data relating to the rail industry but could also present adjacent data sources important to passengers and operators and help deliver an improved experience for users," said Amit Kapur, Country Head, TCS, UK and Ireland of TCS.
UK is an important market for TCS as it is the only large IT firm to provide UK's revenue share separately. The Mumbai-headquartered firm has been one of the biggest beneficiaries of cost takeout initiatives taken up by global enterprises with win of record number of outsourcing deals.
Similarly, in a recent interaction with Kotak Institutional Equities, Infosys management has said that the Bengaluru-headquartered firm is witnessing uptick in cost takeout deals.
"We expect significant large cost take-out deals to fructify in H2 FY23 and FY24. Such deals can cushion the impact of slowdown in global IT spending in FY24," Kotak said.
Large deal wins for large IT firms have been muted in the first half of current financial year. In mega deal term, HCL Tech has performed better during this period as compared to its peers. HCL Tech won a mega deal worth $625 million during this period of FY23.
Infosys and HCL Tech are the two companies which have raised their revenue guidance for FY23 on the back of better revenue visibility in the second half of this financial year.
"As we are entering into a planned recession period, organization will likely prepare for cost optimization aggressively which will put more emphasis on outsourcing/cost take out program. Product development, revenue maximisation services & large digital transformation deals will likely be on backburner," ICICI Securities wrote in a note.
Mega and large deals are the mainstays of revenue growth for large Indian IT services firms, which are gaining market share globally.
As we are entering into a planned recession period, organization will prepare for cost optimization aggressively which will put more emphasis on outsourcing/cost take out program. Product development, revenue maximisation services & large digital transformation deals will be on backburner, observes ICICI Securities in a note
