IT deals becoming smaller amid rising digital projects, says new report

The terms of a smaller deal can be chosen according to their own personal advantage by the parties in a smaller contract

The deals between IT services companies and their clients are increasingly becoming shorter and smaller. According to a report in the Financial Express (FE), the number of such deals, on the other hand, has gone up. 

"Some customers want to introduce a big digital programme, so they break it into smaller programmes and then take it step by step. So, we see a higher percentage of smaller deals in the overall pipeline," C Vijayakumar, chief executive officer and managing director, HCLTech, told FE.

"Unlike monolithic deals of the past, we are seeing more specialised, outcome-based approaches delivered through more ecosystem-based approaches. In addition, the duration is also shorter and typically for three years because the visibility of technology is limited, and clients don’t want to get themselves locked into long term contract when there are many unknowns," DD Mishra, senior director analyst at Gartner, told FE. 

The smaller deals are saving more for the clients and saving more value. According to experts, shorter durations work well for clients as well as the provider amid the high uncertainty in the markets. The terms of the deal can be chosen according to their own personal advantage by the parties in a smaller contract. 

"These are smaller, complex projects where margins as a percentage of revenue are higher. Digital projects, like consulting projects, are also the gateway to downstream work, which presents larger and longer maintenance opportunities. Digital projects need to be viewed as the tip of the spear in IT, much like consulting projects, said Abhisek Mukherjee, co-founder and director, of Auctus Advisors, as reported by FE. 

While no IT services company in India bagged a deal worth $1 billion or more, their digital revenue has seen constant growth.