Virtusa Corporation and Tech Mahindra went head to head in a competition for a contract from British Telecom. The company was hitherto a client of Tech Mahindra for over twenty five years. Virtusa Corporation winning the client over was a huge success for the company.
Tech Mahindra’s loss
The contract, now inked with Virtusa, is similar to the contract that British Telecom maintained with Tech Mahindra. Nearly 12% or approximately $250 million of Tech Mahindra’s revenue was generated by this agreement with the telecom giant. An executive with Mahindra confirmed that the Telecommunications Company’s contribution was all set to fall significantly in the company’s revenue books. All three parties involved in this new deal refused to comment on the proceedings.
Tech Mahindra had nearly 2,500 employees working on projects related to the British Telecommunications Company’s contract. A large portion of those employee numbers, if not all of them will be moved to various other projects within the company.
Post the July quarter earnings, the Deputy Chief Financial Officer of the company, Manoj Bhat, stated during the August call with analysts that some of the British Telecommunications Company’s contracts were coming up for renewal. He also revealed that the company might have to lose out on some of those contracts owing to the competition.
The CFO was quoted during the analyst call as saying, “As a percentage of revenue, it (BT) has actually dropped to a level where I think it might not have a significant impact on the overall prospects of the company.”
The relationship between British Telecommunications and Tech Mahindra
Mahindra British Telecom was born in the year 1986 as a joint venture between Mahindra and Mahindra and the British Telecommunications who chose the company to be their offshore contact center. Despite the loss of such a major relationship, Mahindra has plans for the future. With the acquisition of Satyam, despite the company being hit by fraud convictions, Tech Mahindra is looking at a total revenue projection of $5 billion by the end of the year 2017. Currently, the companies together have a total revenue of $2.6 billion or 16,000 crore rupees.
Virtusa Corporation was not the only choice for British Telecommunications Company in their search for a new partner. They were apparently in talks with companies like HCL BPO, Infosys BPO, Aegis, Wipro BPO and Sutherland Global Services before settling terms with Virtusa Corporation.
A senior analyst who chose to be unidentified said, “BT has been reducing the work given out to them (Tech Mahindra). Somewhere they (BT) was reaching incumbency fatigue and wanted to renegotiate their terms.”
Details of the deal inked
The actual details of the contract with either company was not revealed by the sources themselves. There are however several rumors floating around about the value of the contract. Apparently, it is rumored that the value of the project stands at a staggering $100 million and will create about 1,000 job opportunities for full time employees. These details as iterated were not confirmed by any of the three companies involved in the deal.