Wipro’s IT buy comes with $1 billion outsourcing deal

Wipro LtdBSE 1.83 % has won a $1.2-billion outsourcing contract from a Canadian utility, its biggest single deal to date, providing its chief executive officer TK Kurien a muchneeded shot in the arm in his quest to make the Bangalore-based firm pip crosstown rival InfosysBSE 0.31 % to the second spot in the Indian IT rankings.

Bangalore-based Wipro on Friday said that it had bagged the nearly Rs 7,200 crore, 10-year deal to manage information technology outsourcing of energy and utilities firm ATCO. Under the deal, Wipro will also buy ATCO I-Tek, the IT subsidiary of ATCO for $195 million (Rs 1,175 crore), and take on board 550 employees.

This deal is especially significant because it comes at a time such deal wins have been few and far. Experts said big ticket contracts are getting cut in size and duration because clients seek “value proposition” from IT vendors. The last billion dollar deal was bagged by Tata Consultancy ServicesBSE 2.58 % when it won a 10-year $1 billion dollar contract from US-based consumer research firm Nielsen in October 2007.
As part of the deal, Wipro will also absorb about 500 IT employees of Alberta, Canada-based ATCO, which is one of the country’s largest logistics and utilities firms. ATCO I-Tek, ATCO’s IT services business, currently has about 700 employees. “(This deal) gives us access to geographies where it important for us to have significant local capability and presence to provide services,” said Anand Padmanabhan, head of Wipro’s energy and utilities business, during a conference call with reporters. “Most of these (ATCO) employees come with significant domain knowledge and presence in those markets, which will enable us to provide a lot of services to utilities firms in (North America and Australia),” he added. The energy and natural resources vertical has been Wipro’s fastest growing division over the past few years. In 2013-14, energy, natural resources and utilities accounted for 16 per cent of the company’s revenues as against 15 per cent in the previous fiscal.

ATCO’s subsidiary, ATCO I-Tek, will become a part of Wipro after the closure of the deal, which is expected to be completed in this quarter. On the sale of its IT services arm, ATCO said: “The decision to outsource ATCO’s IT services was due in part to increasing regulatory challenges faced by ATCO’s utility companies when applying to the Alberta Utilities Commission to include IT costs, provided by ATCO I-Tek, for recovery in customer rates.”