Winning large deals key for IT companies in 2018: V Balakrishnan

Winning large deals will be the key to success for India's IT services firms in 2018 as the legacy business would not give an incremental growth amid the challenges on pricing, says a senior industry figure.

Former Chief Financial Officer of Infosys Ltd, V Balakrishnan, said the current calendar year will be better for these companies, noting that their two biggest markets -- the US and Europe -- are doing well and giving growth opportunities.

"2018 should be better (than 2017) but again the key to success is to win large deals when they come up for renewal," Balakrishnan told PTI.

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"....when the (two) large economies are doing well, and some of the regulatory changes like tax reforms in the US, the general climate with companies (in the US and Europe) is very bullish, and they are spending more money. That means there are lot of opportunities for the Indian IT services companies," he said.

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On the legacy business, he said the challenge is on price points and it does not give one an incremental growth.

"So the need is to win a lot more large deals. The bigger companies are able to do that more efficiently. They will be winners," he said.

Balakrishnan does not think the global IT spending will recover big time this year, and said there will be a lot of shift on deals moving from global players because price points have become much more important.

A lot more deals are coming up for renewal and if Indian players get large deals from global players, that itself will give them growth, he said.

The spending on legacy systems is still big even today but the challenge is how to improve the market share by winning large deals which are coming up for renewal and accelerate the growth, he further said.

"If you have a good sales engine and focus on winning large deals, those players will grow faster. Any company with the ability to win large deals, incrementally new deals, I think they will be more successful," Balakrishnan said.

According to him, automation is a big risk for the IT services companies because customers want better price points and the companies also want to improve productivity.

He said automation is good but the challenge is how to retain the value because 70 per cent of the contract of Indian IT services companies are on time and material (T&M) pricing model.

"The more you automate, you lose out on billing and revenues," Balakrishnan said.

So, the challenge before the IT services companies is not only automation but also on the contract front and how to engage with clients and retain the value, he added.

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