Amid project ramp downs and slow decision making by clients that has marred growth in the IT industry, Infosys on Saturday said an unnamed global company has terminated a $1.5-billion deal it had signed with the Indian IT major.
In September this year, Infosys entered into an MoU (memorandum of understanding) with the global company for a total contract value of $1.5 billion and focusing on artificial intelligence (AI) over a period of 15 years. This was subjected to parties entering into a master agreement.
Infosys said in filing with BSE, “This is in continuation to the disclosure made by Infosys vide letter dated September 14, 2023, titled ‘company update’ with respect to a Memorandum of Understanding with a global company which was subject to parties entering into a Master Agreement.”
It added, “The global company has now elected to terminate the Memorandum of Understanding and the parties will not be pursuing the Master Agreement.”
Slow decision making by clients have caused longer sale cycles for IT companies in this year of macro uncertainty. Considering the deal was on AI solutions, analysts are wondering whether technology and business environment are changing so rapidly that the assumption made in September are no longer valid now.
They are also of the opinion that the market has become so competitive that the particular client might have got better terms from some other IT vendor.
After a historic Q2 marked by numerous billion-dollar deals, IT companies are now completing a nearly dry Q3. The dearth of such mega deals in Q3 comes on the back of IT leaders echoing during Q2 earnings calls that new deals are getting neutralised as digital transformation projects are getting completed or coming to an end. The replacement of old deals by new deals are also at a slower pace.
K Krithivasan, CEO of TCS, noted during an earnings call, “The newly won deals are converting into revenue as expected, but these revenue inflows are getting neutralised by reduction in the existing revenue base as the transformation projects get completed, or RTB (run the business) projects get optimised, or in some cases, downsized.”
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