TCS changes tack, looks at $50-100m deals
The Economic Times — February 26, 2007

India's largest software company Tata Consultancy Services is negotiating about 5-10 IT services deals of $50-100 million each. "We are looking at 5-10 deals worth $50-100 million each, across various verticals. We think customers feel a lot more comfortable with such deal sizes," TCS CEO S Ramadorai said. Ramadorai said the $50-100 million deals offered flexibility of outcomes as values delivered to the customer could be measured in shorter timeframes ranging between 1-3 years.

"Large corporations do not want to sign the $1-2-or 10 billion outsourcing deals for sure because they are also worried on the aspect of value delivery on sustained basis. In addition, they also want to retain the flexibility…they do not want go from one (player) to another. The key point emerging from the current trends in the industry is that $50-100 million deals are the sweet spot," Ramadorai said. TCS, earlier this year, bagged a multi-million dollar contract to implement an international trading system for China Foreign Exchange Trade System (CFETS), which is a sub-institution of the People's Bank of China.

It also signed a multi-year agreement to provide IT infrastructure support to Kimberly-Clark's operations in the US, Europe, South America and the Asia Pacific region. These wins come at a time when not only the India-based IT service providers are eyeing a $60-billion export target by 2010, but are also vying for a share of large global contracts. The action in the outsourcing space can well be gauged from the fact that when it comes to number of industry-wide contracts with value of over $50 million, the Indian players grew their share from 8 per cent in 2005 to 11 per cent in 2006 while the share of the Big Six - IBM, Accenture, ACS, CSC, EDS and HP, traditionally known for their stranglehold in the IT contracts - dropped from 44 per cent to 37 per cent, according to outsourcing advisory firm TPI.

Measured on the basis of the total contract value, the India-based service providers commanded 7 per cent market share in 2006 against 4 per cent share in 2005 and a mere 1 per cent share during the three preceding years. The global Big Six outsourcing firms held 46 per cent of the market share in 2006, which although marginally higher than 45 per cent market share in 2004 and 2005, is way lower than 71 per cent control enjoyed by these IT giants back in 2002 and 2003.