A top Infosys official said on Friday that clients are increasingly evaluating their outsourcing contracts on a monthly basis.
Mr Ashok Vemuri, Senior Vice-President and Global Head, Banking and Capital Markets and Strategic Global Sourcing for Infosys, told Business Line that uncertain economic conditions are causing ‘significant nervousness' among Infosys' clients about IT spending though budgets have been allocated for this year.
“While the world has predicted the demise of large deals going ahead, we have been signing large deals, but even with them, evaluation is on a monthly basis- such is the zero-base budget,” Mr Vemuri said. (A zero-base budget is one where the client funds the service provider on a monthly basis irrespective of the duration for which the deal has been signed.)
Infosys signed five deals in excess of $100 million in the fourth quarter.
Also, the company is seeing a ramp down where an existing project is not funded for subsequent years. Typically, an IT contract is undertaken for 3-5 years but at the end of every year, the client evaluates the contract.
“Programs that were in flight were not renewed or extended,” Mr Vemuri said. “This is primarily due to change in leadership in client companies, and we hope that these are just deferments as some of these are strategic,” he added.
Yet, the company plans to stick to its existing clients, rather than look for new projects. “This quarter we opened eight Fortune 500 clients, but you can't replace old clients with new ones. Some of the clients that have deferred are our oldest clients who have been with us for about 20 years in the financial services business,” he said.