TCS likely to experience minimal consequences as $2 bn Transamerica deal ends

Tata Consultancy Services Ltd. and U.S. insurer Transamerica have agreed to terminate the 10-year, $2-billion outsourcing deal after five-and-a-half years, citing “current macro environment and respective business priorities”.

The two companies will end the “administration arrangement for Transamerica life insurance, annuities, and supplemental health insurance and other employee benefit products”, according to a joint statement. They will work together to ensure a smooth transition to a “new servicing model” in about “30 months”.

The low-margin 2017 deal, which required onboarding nearly 2,000 Transamerica employees at TCS, is expected to have a minimum impact on the revenues of the Indian IT major, according to a company executive aware of the transaction. The executive spoke on the condition of anonymity due to a non-disclosure agreement.

As part of a strategy shift after the new Chief Executive Officer Will Fuller joined in March 2021, Transamerica has opted to bring all IT services within the company instead of outsourcing, said the executive.

TCS has already recovered nearly 85% of the deal value in revenues over the last five-and-a-half years, the executive said, adding the rest is expected to be recovered in the transition period of 30 months.

The TCS division managing the Transamerica outsourcing employs close to 3,500 people and has scaled up operations. It bagged a $723-million deal from the Phoenix Group and a $250-million contract from Teachers Retirement Fund—both U.K.-based organisations.

The 2,000 Transamerica employees who switched to TCS will be re-deployed across operations, said the executive. Bloomberg