TCS Wins New 15-Year Contract From UK-Based Insurer Aviva
Analysts say that the renewed TCS-Aviva deal can potentially add at least $100 million to TCS's top line every year. That makes this an at least $1.5-billion contract for India’s largest IT firm.
Tata Consultancy Services Ltd. has signed a new 15-year contract with Aviva Plc., expanding on their near two-decade alliance to service millions of customers of the U.K.’s biggest insurer.
The new contract will see India’s biggest IT firm deploy a TCS BaNCS-based platform to service 5.5 million Aviva customers for their insurance and pension needs, according to a statement on Tuesday. That is expected to improve service quality as well as enhance the claims experience for policyholders and advisers alike.
Diligenta, TCS’ UK-based subsidiary, will manage the contract until 2039.
TCS refused to disclose the financial details of the contract, but analysts told NDTV Profit that the renewal could potentially add at least $100 million to the company’s top line every year.
While an exact amount is difficult to arrive at, as the structure of the deal is unknown, one can take cues from the $2 billion TCS-Transamerica deal that was scrapped in June last year. That contract entailed servicing 10 million customers of the US-based insurer for 10 years. Extrapolating those details to the new TCS-Aviva deal, it’s safe to assume that the transaction could very well be in excess of $1 billion over 15 years, an analyst told NDTV Profit on the condition of anonymity.
It’s also worth mentioning here that soon after the Transamerica deal was scrapped, TCS won a $1.9-billion contract from UK’s National Employment Savings Trust (NEST) to service 12 million pensioners over 18 years.
The Mint newspaper, meanwhile, reported that the renewed TCS-Aviva deal could be the Indian outsourcer’s biggest ever at $2.5 billion, eclipsing the $2.25 billion deal TCS struck with Nielsen in December 2017.
To be sure, TCS and Aviva have been partners for almost 20 years now, and this new contract simply expands on that alliance.
The deal renews TCS’ current engagement, under which Friends Life initially awarded a $2.2-billion, fifteen-year contract in 2012 to service 3.2 billion policies, Mint reported. Aviva acquired Friends Life in 2014.
“Extending this strategic partnership will improve how we serve our customers, simplify our operations and support our growth ambitions,” Doug Brown, chief executive officer of Aviva’s insurance, wealth and retirement business, said in the statement. “It’ll allow us to rationalise our systems and improve efficiency, bringing significant benefits for our customers and the business.”
Deal Dynamics
The TCS-Aviva deal is the third large contract that the Tata Group firm has won under Krithi Krithivasan, who took over as the chief executive officer after the abrupt exit of Rajesh Gopinathan in March 2023.
In June 2023, TCS won the $1.9 billion contract from UK’s NEST over 18 years.
In September 2023, TCS won a $1-billion contract from JLR over five years.
These large deals are crucial, especially when India’s $250-billion IT services industry is in the throes of a slowdown. Granted they pan out over the long-term, guaranteed accruals are more than welcome when discretionary spending is still largely absent.
TCS ended Fiscal 2023 with revenues of $27.92 billion. In the nine months ended Dec. 31, 2023, the company has grown its top line by 4.7% to $21.71 billion.
The UK Factor
The Aviva deal also underscores the UK’s importance in TCS’s scheme of things, even as the US business faces sustained macro headwinds. In the October-December quarter, TCS’s UK business grew 8.1% year-on-year.
The Tata Group firm has been operational in the UK for more than 45 years now. It works with 200 of the nation’s best-known businesses, including British Airlines, Virgin Atlantic, Marks & Spencer’s and Asda. TCS is also one of the biggest IT employers in the UK and Ireland with more than 23,000 employees currently on its British roster.
“Our long-standing relationship with Aviva...is a testament of our joint efforts to consistently and continuously transform customer experience,” R. Vivekanand, president of TCS’ BFSI products and platforms vertical, said in the statement. “(With this deal), we continue to improve end-to-end customer experience benchmarks in the UK life and pensions industry.”
On Tuesday, TCS shares fell 0.06% to Rs 3,799.10 apiece on the BSE even as the benchmark Sensex ended the day 1.11% lower at 71,139.90 points.
