New deal ratio remains intact

Mumbai The proportion of new deal wins into revenues is intact, a senior official at largest IT services company TCS said, attributing the sluggish revenue growth to the adverse impact on discretionary demand because of economic headwinds.

Stating that discretionary demand can contribute as much as 30 per cent of incremental revenues in a quarter, the company’s chief operating officer N Ganapathy Subramniam told PTI that the September quarter results were impacted due to this aspect.

Clients are choosing to conserve cash given the economic climate and choosing to defer spends where they do not see immediate returns on investments, which has impacted the discretionary demand, he said. He, however, said that the proportion of revenue it bags from new deals has not been affected. The company has reported signings of over $10 billion for three consecutive quarters.

“TCV (total contract value) to revenue conversion rate is intact,” Subramaniam said, explaining that there are a slew of other factors which influence the revenue growth in a quarter. The overall revenue was supported by contribution from new deals and the discretionary spends by clients, while cost optimization and end of contracts prove to be a drag, he explained.

Discretionary demand is typically a short-term consulting engagement, which is fulfilled by allocating a few resources, outsourcing work to subcontractors or by lateral hiring, Subramniam said, adding that it contributes an ‘extra’ to provide a fillip to the overall revenue pie.