BackWipro wins $1 billion IT deal from Alight Solutions
Starting next year, Wipro is assured of at least $140 million in revenue, a shot in the arm for Abidali Neemuchwala, who since taking over as chief executive officer in February 2016 has been trying to put the Bengaluru-based company back on the growth path
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Bengaluru: Wipro Ltd has won a $1 billion contract, the biggest such order in four years, from Alight Solutions, the former benefits administration and human-resources outsourcing business of Aon Plc, according to two people familiar with the development.
As part of the deal, Wipro is expected to get at least $70 million in additional revenue in the current financial year.
Starting next year, Wipro is assured of at least $140 million in revenue, a shot in the arm for Abidali Neemuchwala, who since taking over as chief executive officer in February 2016 has been trying to put the Bengaluru-based company back on the growth path.
For now, Wipro and Alight are in final stages of closing this partnership, and the duration of the contract could be extended beyond seven years, depending on the final negotiations currently underway between the two firms, an industry expert, one of the two people cited above, said on condition of anonymity.
A seven-year partnership with $140 million in annual revenue will translate into $980 million over the duration of the contract, a shade less than the $1.1 billion order Wipro won from Canadian logistics firm ATCO in June 2014.
Wipro has not included the new business from this deal in its at-best 2.3% constant currency sequential growth forecast for the three months ending 30 September.
“It is a very strategic deal... there are very few companies which offer this full suite of services, under which company’s IT infrastructure is offered, and offerings through BPS and application services is given. Cloud enablement, company’s consulting practice and deployment of Holmes platform will be also seen," said the second person, on condition of anonymity.
Wipro declined to comment but according to the industry expert cited above, the company may disclose this contract in September.
“We are still finalizing the strategic partnership with Alight and we have no further comments," said a spokesman for Wipro.
Typically, IT firms take 15-18 months to close outsourcing contracts valued at more than $1 billion, and work on this entire IT outsourcing deal was completed under Neemuchwala’s watch.
Since December last year, Wipro’s larger rival, and Neemuchwala’s former employer, Tata Consultancy Services Ltd (TCS) has won three such multi-year mega-deals, which together bring in over $5.6 billion in revenue. This has made the TCS management confident of clocking a double-digit growth in the current financial year.
“Assuming Wipro passes on productivity gains, the net annual revenue accretion would be in the ballpark of $140 million per annum. Wipro will pay $117 million for this deal. This deal is not part of the revenue growth guidance for the September 2018 quarter," Kotak Institutional Equities analysts Kawaljeet Saluja and Jaykumar Doshi wrote in a 20 July note.
Although Wipro does not give a full-year growth outlook, this mega order win assures it of a better performance than last year, when it added $355.7 million in incremental revenue to end with 4.6% dollar revenue growth.
Wipro’s deal win is also significant because most outsourcing deals are shrinking both in value and duration, as firms ranging from banks to retailers cut their budgets to maintain back-end technology and plough the savings into work that can help them improve business operations.
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