IT & ITES News

it companies: In large IT deals, MNC clients now monetising internal assets


Infosys Ltd’s recent $1.6 billion deal with Liberty Global Plc includes licensing the European telecom company’s connectivity platform Horizon to other telecom firms.

Similarly, hardware equipment maker Lexmark plans to commercialise its internet of things (IoT) platform Optra through Tata Consultancy Services Ltd (TCS), which will then offer it to manufacturing and retail clients of Tata Group companies worldwide.

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These two partnerships underscore how multinational companies are seeking to monetise platforms and solutions developed inhouse and partner IT services firms to sell these solutions to a wider audience.

Experts say such monetisation moves may not move the needle much in terms of wider revenue streams for clients such as Lexmark and Liberty Global but they signal an emerging broader trend in terms of large deal composition. Tier I IT firms have an advantage here as they can easily cross-sell such internal solutions due to their vast client base.

IT deals

Indian IT firms have been winning large deals over the past few weeks as companies are focussing on large scale cost-cutting programmes and monetisation of non-core assets.

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“Today, the technology is such that you can build a reusable core platform and can build services or applications around it. I predict 40-50% of revenues for IT firms will come from platform usage across clients rather than custom-built applications (from scratch) in the future,” said Ganesh Natarajan, former CEO of Zensar.

The best example of an internal asset being monetised commercially is Amazon’s cloud services AWS, which has become almost an $80 billion money spinner for the e-commerce giant.

“Companies are monetising these internal projects that just incurred costs previously. They are taking the skeleton of the project or platform to other customers using the help of IT service providers,” said Pareekh Jain, founder and CEO of Pareekh Jain Consulting. This is “increasingly” becoming a part of big deals in an uncertain macro environment as it will be cheaper compared to other licensing fees paid for other existing products in the market and they both can co-innovate to add more use-cases and features to the platform, Jain added.

What will IT firms do here?

The best example of an internal asset being monetised commercially is Amazon’s cloud services AWS which has become a major source of revenue for the e-commerce giant.

In terms of monetisation, for example, in the Infosys-Liberty Group deal, the telecom giant accrues licensing revenues from other buyers, the IT major will benefit from implementation and support fees.

But delivering solutions or assets is not a one-time activity. IT companies will help in repackaging the software external use, add third-party documentation and features. They will also provide after-sales support as the MNCs will not be willing to spend time and resources here.

It starts off as an accelerator, then it will be componentized for particular client solutions as the world eventually will be platforms connected to each other through application programme interface (APIs). “Slowly companies (clients) will move away from ownership to value. Any client who is not fussy about owning everything and owning end-to-end intellectual properties (IPs), will take this route,” Natarajan, who is currently chairman of consulting services firm 5F World added.

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