On 22 December, Mint reported that Tata Consultancy Services Ltd (TCS) recently won a $2.25 billion outsourcing contract, the largest ever bagged by an Indian information technology (IT) firm, from television ratings measurement company Nielsen.

The deal is a renewal of TCS’s earlier engagement with Nielsen, which first awarded a $1.2 billion, 10-year contract to the Mumbai-based company in 2007, and later expanded the contract in 2013. Nielsen’s outsourcing contract has now been extended for five years until 2025 and the rating firm has committed to spend more on buying services offered by TCS for the remaining years of the earlier contract.

Multi-billion-dollar deals are an anachronism in today’s times, and extraordinarily difficult to come by, so this announcement is akin to an extraordinary fireworks display on New Year’s Eve. According to Mint’s research, there has only been one transaction worth over $1 billion that has been awarded to IT service providers each year since 2014. This is consistent with my experience; the days of the mega-deal are long dead, and these sorts of deals are remarkable stand-outs in today’s world.

Meanwhile, in a blog post on Forbes.com, Peter Bendor-Samuel, CEO of the Everest Group, an outsourcing advisory consultancy, dwells on how these fireworks are likely to fizzle out even further over the next few years. It was heartening for me to see that there is at least one analyst out there who is candid enough in his views; it’s convenient of course, that his views are congruent with mine, and I found myself agreeing with almost everything he said in the blog. Bendor-Samuel says that while many industry analysts think that digital transformation will happen rapidly, he doesn’t believe that it will. His prediction is that this change will happen over 5 to 10 years. However, he expects that while digital adoption grows, there will be dramatic consolidation in the IT and business process services markets which are based on the current labour arbitrage factory model. He notes that many arbitrage-based service providers remain in the market and still appear to be holding on tenaciously. In the years to come, he maintains that we will see that some service providers will be able to transition to digital, but many won’t. Those that don’t manage to change will consolidate (read disappear, or be bought out).

As I have dwelled on in this column before, it was very difficult for the Western outsourcers who were focused on the old outsourcing model to shift to the labour arbitrage model as offshoring to India and other low-cost geographies became mainstream. The current shift for the arbitrage based providers trying to switch to the digital model may prove to be just as difficult.

Most companies, including some of the largest players in the early 2000s, such as Affiliated Computer Systems Inc., Computer Sciences Corp. Inc., and Electronic Data Systems Inc., failed to make the change, and allowed India-heritage providers to take centre-stage over the last few years. The only two incumbents that succeeded in making the change from the operational model to the labour arbitrage model were Accenture Plc. and International Business Machines Corp. (IBM). Both are now more Indian than American, at least in my opinion.

Bendor-Samuel maintains that Accenture and IBM were successful because the transformation in the early 2000s, much like digital transformation today, required a fundamental business model change, and that these were the only two that actually managed to have sufficient will to execute on the new model despite the ostensible “cannibalization" of their mainstream business. Other firms recognized what was needed to be done, but were unable to pull off the feat. This was inevitable; not every firm can be both legacy and new-age at the same time. Changing the business model requires that talent be organized in a different structure, with a different way of pricing services. For digital models, people and IT need to be priced per team, not priced per person per hour. And the teams needs to be located onshore and be persistent—the same team for many years, to preserve the team’s learnings—and not a different team every few months as in today’s arbitrage factory model.

According to Bendor-Samuel, service providers struggled for about 20 years to transition from the operational excellence model to the labour-arbitrage model. In my mind, this struggle was shorter: about 10 years. Nonetheless, the legacy operational excellence model didn’t dissolve overnight, but the growth and new client work went into the labour arbitrage space, which was then the new model. The result was industry consolidation among the legacy providers; those that failed to make the change ended up being consolidated and disappeared.

I think something similar will happen with the rotation to digital. No one can accurately predict how long it will take service providers to change to digital models, but those that cannot master the new digital model will end up being consolidated. Bear in mind that Accenture and IBM, which managed the shift the last time around, are now in the same boat as the large Indian players, since they will have to shift again.

In a repeat of what happened in the early 2000s, there will be two kinds of market consolidation happening, as Bendor-Samuel points out. One is where service providers are trying to buy out smaller players with established skills in the digital space. The second wave will be caused by the collapse of margins for the incumbent arbitrage-based providers. Though some of them have managed to preserve margins largely due to the rupee’s depreciation since 2013, I believe that a rational expectation of revenue growth levels should be in the single percentage digits and that earnings for a truly global service enterprise can only be managed in the mid-teens.

While TCS has ensured that the IT services industry has ended the year with a bang, there will unfortunately be some damp squibs in the years to come.

Siddharth Pai is a world-renowned technology consultant who has personally led over $20 billion in complex, first-of-a-kind outsourcing transactions.