BackIT companies report spurt in Q1 deal wins amid pandemic
Midcap IT firms like Mindtree and L&T Infotech won large deals and renewals in areas dominated by tier-I IT firms
PremiumIndia’s IT companies reported above-average deal wins and renewals in the June quarter even as the coronavirus pandemic raged, led by cloud and cybersecurity businesses.
Most firms pulled off deals across their strongest offerings, despite client curbs on discretionary spending, experts said. Midcap IT firms like Mindtree Ltd and L&T Infotech Ltd won large deals and renewals in areas dominated by tier-I IT firms who have moved to larger digital transformation deals.
The Mindtree management said deal signings in the first quarter were maintained at the fourth quarter run rate of $391 million. However, deal signings in Q1 were largely skewed toward renewals (80%), unlike in Q4, when the firm reported a healthy mix of renewals (52%) and new deals (48%). On a year-on-year basis, deal signings still improved around 21%.
Infosys reported $1.7 billion worth of large deal wins in Q1—almost on par with its average quarterly wins since Q1FY20 figure of $2 billion. Five of its 15 big deals were in core banking, financial services and insurance. Infosys shares have gained 10% after it reported Q1 earnings.
“The distinction between renewals (same client, same project) and new or additional deals with the same clients is reported differently across companies. However, a shift towards increased work from home-related solutions is driving a lot of value added deals for IT firms at present. The tier-1 firms will be in a better position to take advantage of it because of long-standing relationships with these clients as well as the fact that they are better placed to negotiate pricing against volume of contract," said Pareekh Jain, IT outsourcing advisor and founder, Pareekh Jain Consulting.
On Friday, HCL Technologies reported 11 net new transformational deals led by key industry verticals including telecom, financial services, manufacturing, life sciences and healthcare. It also reported renewals of large deals and a strong demand and deal pipeline in the June quarter.
“We see demand driven by cost transformation and vendor consolidation. A lot of the customer digital initiatives are coming from hybrid cloud adoption, customer experience enhancement, application modernization and adaptive security," said C. Vijayakumar, president and chief executive officer, HCL Technologies, during the earnings call.
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