CGI chief sees a revival of large outsourcing deals

Canadian IT consulting and services firm CGI, with revenues of CA $10.8 billion ($8.2 billion) says it is seeing a revival of large outsourcing deals as clients look to implement digital services across the enterprise and moving from individual business services.

“The budgets are going up. In an interview of over 1,400 customers, 54% of the clients said they are increasing their IT spend. That is significant. If you keep the budgets the same, you are increasing the amount you are spending because we know the hardware costs and storage costs is going down due to the cloud. It means you have more money to spend on services,” George Schindler, President and CEO of CGI told ET “The clients who were ready to spend over $200 million (in three years) was 14% a year ago, now it is 25%”.

IT services firms are witnessing growth returning as clients, who were making digital investments in building applications for smartphones are expanding these investments to stitch legacy applications built for desktops to be accessed on a mobile. In the process, they are also asking vendors to migrate their legacy code to newer applications.

“I actually see the deals are becoming bigger and the time frames are getting a little bit longer,” he said.

Last month, Accenture raised its full-year revenue forecast to 9.5-10% from 7-9%, reaping benefits from its consulting-led investments in digital and cloud services. On Wednesday, Tata Consultancy Services said that the double-digit growth is definitely sustainable as it is broad-based across verticals and geographies.

As clients expand their digital journey, the chief information officer - who was relegated and business leaders took to technology spends in the last two years due to shifts towards digital and cloud, has returned to make IT investment decisions with chief executives in many organisations.

“We are seeing the CIOs saying - wait a minute, I got to bake in cybersecurity if I am going digital, I need to make sure that I have a handle on the data, actually I can analyse it and if there is too much data then I need to modernise the systems. This is driving bigger and longer projects,” said Schindler.

The firm, which has over 14,000 people in India, is expanding its workforce faster in the country, as it makes its operations innovation hub for business verticals.

“The last decade, it has been frankly chasing cost savings. How do I keep the lights on. Now the world has changed, all the economies we are in growing. Digitisation is at the centre of how do we serve clients,” he said