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IT majors earning more from fixed price contracts
By siliconindia
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Tuesday, 12 February 2008, 00:01 IST
Bangalore: Fixed price contracts were the major sources of revenue of some of the major Indian Information Technology service providers in the third quarter. Obviously, there has been a proportionate fall in time and material contract, reported Business Line.
Companies, who have recorded a rise in revenues from fixed price contracts as a percentage of total revenues, include Infosys, Tata Consultancy Services, HCL Technologies and Wipro.
Fixed price contracts help clients arrive at a fee they would pay the vendor for a project done within a deadline. For example, if the vendor meets the deadline using 100 people insted of 1000, it is to his advantage. If his team is inefficient, he loses out by using more people to meet the deadline. Contracts for which fees are based on time taken and manpower used are called time and material or T&M contracts.
Sumit Sarawgi, an analyst with Everest Group, said increase in revenue from fixed price contracts is actually an indication of a company's expertise in project management. He said a company would go for fixed contracts if it is confident of its project management skills. Increase of revenue from fixed price contracts is also a sign of the company moving up the ladder as far as pricing is concerned, he added.
