More BFSI IT deals up for renewal this year

BENGALURU: Eight IT contracts in banking, financial services & insurance (BFSI) came up for renewal in 2019, compared to six last year.
Among the largest of these were Norwegian financial services major DNB’s $725 million contract with IT firm Evry, and ING’s $330 million contract with Cognizant. UK insurance firm Resolution Life Insurance renewed its $1.1 billion deal with the Capita Group.

BFSI, which comprises over 30% of overall revenues for many Indian IT firms, is increasingly seeing components of digitisation being built into larger contracts. Jimit Arora, who leads Everest Group’s IT services research practice, said that structurally, the concept of renewals is evolving as clients look to construct deals which are shorter in nature and create more flexibility. “Consequently, we had a period over the last three years where deal sizes became smaller and deal durations became larger. Now you have a situation with modernisation coming in where clients are getting comfortable signing larger transactions,” he said. Depending on the incumbent relationship, Arora said they expect changes in scope. “If the client is ready for modernisation, then the deal will be larger,” he said.

Public disclosures on larger contracts has reduced substantially given the political environment in the US.

Arora said there is still around 30% churn in deals, that is, the deal does not go to the incumbent. Everest Group said there was only one renewal each in the manufacturing and healthcare sectors this year, compared to four last year. Centres for Medicare & Medicaid Services’s $563 million deal with Accenture is one of the larger renewal deals.

An analysis showed Europe is seeing a slight increase in renewal activity compared to the US and Canada. Among very large deals (TCV of over $1 billion each), three came up for renewal in 2019 as compared to seven last year. The share of IT and BPO renewal activity remained similar in the two years.