TCS, Infosys see spurt in medium-sized deals
Both IT services firms are focusing on healthy distribution of deals by size, industry, and geographic markets.
Rajesh Gopinathan, CEO of Tata Consultancy Services (TCS), is bullish about the company's double-digit growth in fiscal year (FY) 2022. "The key growth drivers continue to be around core transformation," he said, in the earnings call for the quarter ended June 2021.
“One of the big reasons is the strong deal pipeline that we have seen," Gopinathan said. TCS' order-book crossed $8 billion in total contract value in the quarter.
Gopinathan said it is "well distributed" across all markets and deal sizes. “That is also a healthy sign because growth is not dependent on one single type of deal or a few large ones," he added.
One measure of TCS' hunger is its activity in the small and mid-sized deals over the previous year. In the June 2021 quarter, it added 29 clients in the $1 million to $10 million bracket, and 18 clients in the $10 million to $50 million bracket.
This could prove crucial in a very competitive market, where Infosys is emerging as the industry bellwether. The Bengaluru-headquartered company grew 6.1 percent in FY2021 over the previous year. It reported revenue of $13.6 billion. TCS' grew 1 percent on a larger revenue base, finishing FY2021 at $22 billion.
During its June quarter results, Infosys highlighted its large deals. It won 22 large deals in the quarter totalling $2.6 billion, well distributed across industries and geographic markets. "Large deals are deals over $50 million in value," Salil Parekh, CEO of Infosys, said.
But the real action for Infosys was in the small and mid-sized deals. Infosys added 48 clients in the $1 million to $10 million bracket since June 2020, and 29 clients in the $10 million to $50 million bracket over the same period.
Infosys has increased its revenue guidance to 14 percent to 16 percent (from 12 percent to 14 percent) previously, “driven by deal signings, backed by robust deal pipeline,” said Nilanjan Roy, Infosys’s Chief Financial Officer.
In its recent report, global technology advisory Information Services Group (ISG) said mid-sized deals dominated the market composition in the June-ended quarter, with 17 percent of awards valued with an annual contract value between $20 million and $40million.
The diversity in deal size and geography helps companies to minimise risks related to COVID-19 waves, which are likely to happen in different parts of the world at varied times.
The one worry for Infosys will be its attrition rate (13.9 percent), as against TCS' 8.6 percent. But on the deals front, it has built momentum in the past year.
Edited by Kunal Talgeri