The Hindu Business Line : TCS bags $100-m contract from NXP Semiconductors of Europe

Pune, May 26 Tata Consultancy Services, India’s top IT services company today announced that it has bagged a $100-million, five-year contract to deliver global IT application services to NXP Semiconductors.

Founded by Philips, NXP creates semiconductors, system solutions and software for better sensory experiences in mobile phones, TVs, set-top boxes and other such electronic gadgets.

Addressing the press over a tele-conference, Mr N. Chandrasekaran, Chief Operating Officer and Executive Director, TCS, said the contract is valued at $100 million and would provide high-end consulting services as well as application management, development and support services across NXP’s supply chain operations.

Asked when revenues from this contract would begin to accrue, he said that the contract would begin in mid-June and that the revenues would begin to accrue in the second quarter of the current fiscal.

Discretionary spend

He added that TCS had the opportunity to pursue revenues from NXP’s discretionary spend, in addition to the $100 million already awarded.

Asked if outcome-based pricing was included, given the cyclical nature of the semiconductor business, Mr Chandrasekaran replied in the negative and added, “One portion of the contract is based on fixed price and the other is priced based on time and material, to which NXP has committed.”

He did not reveal further pricing details. Details on manpower to be used were also not available. He said, “A few hundred would work on this project. As we get more projects from the discretionary portion of the contract, more people would be used.”

Multiple centres

Mr Chandrasekaran said the work would be delivered from multiple centres, predominantly in India, but also from Asia and the US which are part of TCS’ Global Network Delivery Model. These centres would be supported by a High Tech Centre of Excellence based in Eindhoven.

TCS would also support NXP’s entire technology infrastructure globally covering ERP and CRM applications in addition to the company’s portal-based applications.

Asked if the impending slowdown is forcing companies such as NXP to look at offshore opportunities, Mr Chandrasekaran said, “We have a broad range of skillsets, a strong relationship with NXP and a good track record. NXP has not yet benefited from the global delivery model. Using such a model, cost savings would certainly accrue to them.”

Slowdown impact

Responding to a specific question on the slowdown, Mr Chandrasekaran reiterated, “So far, in the financial services vertical, we have seen that projects requiring discretionary spending are approved on a case-by-case basis. We do not see this in any other vertical.”

So far, TCS’ revenues from the semiconductor space had been aggregated under the ‘manufacturing’ head while reporting quarterly numbers. Mr Chandrasekharan said, “Internally, we have been tracking semiconductor revenues for the past one year. Soon, we will observe the break-up for this segment for the sake of our investors, too.” NXP, headquartered in Europe has 37,000 employees, posted sales of $6.3 billion in 2007.

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