Co closes big transformational deals

BANGALORE: IT Major Infosys recently closed three big transformational deals ranging between $50 million and $200 million and extending over a period of 4-5 years.

Infosys CFO V Balakrishnan said that the deals are with companies in the manufacturing, retail, and banking, financial services and insurance (BFSI) space. The customers are based in the US and Europe. Balakrishnan did not give further details citing client confidentiality.

The company expects the tally of transformational deals to touch around 15 by the end of this fiscal. Transformational deals are those that help clients in simplifying internal processes, harmonizing business processes across the enterprise, and contributes towards making organizations smarter and leaner.

Infosys, like many of its top-tier peers, is now putting a larger focus on end-to-end transformational deals owing to the structural shift in spending away from application development to system integration and consulting around enterprise application software. "Deals of this nature offer IT companies opportunities to win large multimillion dollar sized contracts, leverage on non-linearity (higher revenue per employee) and win sticky long-term contracts," added Balakrishnan.

Rather than working with IT vendors for developing customized applications, many clients now seek to implement packaged solutions such as enterprise resource planning (ERP), supply chain management and customer relationship management (CRM) suites. These packaged solutions are typically offered by software application giants such as Oracle and SAP. IT services companies offer consulting and package implementation services to integrate these solutions as per client specific requirements.

Such transformational deals have typically been the forte of international technology giants such as IBM and Accenture who have broad based technological and consulting capabilities. Indian top-tier IT companies Infosys, Wipro, TCS and HCL Technologies are increasingly vying for such deals having built their consulting capabilities over the years.

Abhishek Shindadkar, IT analyst at ICICI Securities, said that apart from the ability to manage complex transformational projects, transformational deals require consulting skills and strong domain knowledge.

Balakrishnan said that the company is focusing on more such deals by developing its consulting capability. "We have a 600 member consulting team which we are looking to strengthen further. Acquisitions is one route that we are seeking," he added.

Analysts see Infosys's failed bid to acquire British consulting firm Axon Group in 2008 as a huge missed opportunity. HCL Technology which eventually went on to buy the company today has a strong consulting practice. HCLT, thanks to Axon, is said to have the most number of solutions accredited by SAP.

According to a recent report by brokerage firm Motilal Oswal, the new license sales at SAP and Oracle have been growing at a steady rate in recent times. This is expected to drive the package implementation revenues for Indian IT companies with a lag of a couple of quarters.

The consulting & package implementation service contributed around 26% of the overall revenues of Infosys in the previous quarter, registering a 38% annual growth. At the same time, the application development & management business, which contributed 38% of the company's revenues, grew by just 11% last quarter.