IT services deal size gets bigger

Moreover, with research and advisory firm Gartner's prediction of IT services market growing at a compound annual growth rate (CAGR) of 20.4 per cent for the next five years, the scenario will only get more lucrative for these firms.

IT services deals now range between Rs 40 crore and Rs 80 crore on an average from less than Rs 10 crore earlier. BPO deals too, which earlier averaged at Rs 60 lakh and Rs 80 lakh, now range between Rs 6 crore and Rs 8 crore on an average, according to Gartner.

Arup Roy, senior research analyst, Gartner, says while telecom, government, manufacturing and BFSI sectors have traditionally been the big-spenders, verticals like retail and utility are also catching up.

Industry players say $25-50 million (around Rs 100- 200 crore) deals are becoming the norm. S Venkatramani, head, India operations, Tata Consultancy Services (TCS), says, "We are beginning to see deals getting larger on a regular basis and in some cases comparable to the West as well."

TCS won a $40 million ( Rs 100 crore) transformational deal with New India Assurance and the company reportedly has bagged the e-passport project by the Union government worth over Rs 1,000 crore.

Wipro Infotech is another case in point. Wipro bagged a deal from Pantaloon Retail worth around Rs 200 crore. It also signed a Rs 2,400 crore outsourcing deal with Aircel.

Says Anand Sankaran, chief executive, Wipro Infotech, "Three years ago, a $500-million deal in the domestic market would have been difficult, but now with the growth in business, firms are ready to go in for end-to-end outsourcing."

The margins in the domestic market are also getting bigger. A few years ago, margins in the domestic market would be in the range of 8-10 per cent. Currently, the margins vary between 15 and 20 per cent, says Roy. For TCS, it has been a 100 per cent growth in the margins and are at par with the APAC level.

It's the same story at Wipro. The domestic market is also maturing in terms of the work being outsourced. Says Venkatramani, "Majority of the work that TCS has been doing in the domestic market is transformational in nature. One of the reason is that domestic firms have no legacy systems. That means the work we do start right from the consulting stage to process re-engineering and then solution identification."

Despite being a multinational, IT giant, IBM, scored on the home turf with cumulative IT outsourcing deals of nearly $2.5 billion