Tata Consultancy Services is close to signing another mega "take or pay" deal with GE Medical Systems (GEMS), its single largest business partner. Other GE group companies are also likely to enter into such business deals with TCS, a GE executive said.
TCS, which had signed a record $120 million, 5-year deal with GEMS in April 2002, will complete the deal almost two years ahead of schedule, by March 2004.
Mitchell Habib, chief information officer, GE Medical Systems said, "We are looking at an extension of business with TCS, and are targeting 30 days in which to take a decision. The scope of business will be undefined during the period. We expect that this time also (the deal with TCS) will be on a take or pay basis."
Habib added that other GE companies might also enter into such deals with TCS.
TCS and GE Medical Systems are the only known companies which currently have a "take or pay" agreement in India. Under a "take or pay" agreement, the awardee gets the promised amount, regardless of the amount of work done.
TCS, which has already assigned around 1,000 software professionals to work on various GEMS' projects, will retain most of them to work on the new assignments as well.
However, the tenure of work and, more importantly, the size of the deal, are likely to be larger this time.
General Electric is already TCS' biggest business partner, and GEMS is already the biggest client for TCS from the General Electric fold. However, S Ramadorai, CEO, TCS, does not see the company becoming dependent on GE for growth.
"We see GE as multiple businesses, where each of them is independent. If tomorrow, the business of one of the businesses suffers our business with them will also decline. But we do not want to refuse to do business with them on these grounds. We would rather increase the size of the business pie," Ramadorai said.
Habib said TCS is currently GEMS' largest vendor for IT services "by far", while Mascot is its second largest vendor. He added that GEMS currently outsources 70 per cent of its global software solutions work.
