HCL Technologies has won one of the biggest deals the IT sector has seen for sometime. It has signed what it calls a ‘strategic engagement’ with the pharmaceutical firm, MSD (Merck & Co). The five-year contract is worth $500 million.

Among its other big deals in past were a six-year agreement with Xerox for an estimated $100 million and a seven-year, $350 million- plus partnership with Readers Digest Association.

The deal marks an extension of the Noida-based company’s relationship with MSD, forged in 2004. It will cover a multitude of services, including software-led IT solutions, remote infrastructure management, engineering, and business & knowledge processes.

Calling it a landmark, Shami Khorana, president of HCL Americas, said, “We are proud that our growing leadership in pharmaceutical and healthcare, coupled with our previous delivery for MSD, has positioned HCL as its strategic partner.”

Added Richard G Branton, MSD’s vice-president of application services: “We have chosen HCL as our strategic partner for its depth of technology and pharmaceutical domain experience, coupled with its flexibility to engage and a commitment to deliver.”

MSD will leverage HCL’s near-shore delivery network in the US comprising its operations centre in Raleigh, North Carolina, and its global data centre delivery ecosystem. As a result of this engagement, HCL will expand its US team in North Carolina, relying on local hires to staff projects, thus creating jobs for Americans.

“There are 500 people in North Carolina, but as of now we cannot share figures on how many more we will hire in the future,” HCL Technologies’ senior corporate officer and president of financial services and healthcare, Premkumar Seshadri, said on the phone. HCL will deliver services out of 20 worldwide locations, including the US, Poland, China and Brazil.

The latest HCL contract continues the trend of large deals reported by the Big 3 – TCS, Infosys and Wipro – in the last couple of quarters. TCS signed a $900 million contract in March with Britain’s Personal Accounts Delivery Authority and a $230 million business from the Cardiff council in November. Infosys won two contracts worth $150 million each in the fourth quarter. Wipro got four $100 million contracts last year.

Deals of $100 million and above are considered a benchmark in the Indian IT industry. Deals worth $1 billion plus, though common in multinational relationships, are few and far between in the Indian IT industry. In 2007, a Nielsen-TCS contract was worth $1.2 billion and the 2006 deal between BT and Tech Mahindra was for $1 billion.

Infosys chief financial officer V Balakrishnan, commenting on the HCL-MSD contract, said, “Anything moving offshore is good for the industry’’. He said some big deals were on their way, though the environment was still volatile and clients were cautious. He cited the recent $100 million plus Microsoft contract to Infosys.

“The ones coming to our table are sized between $150 million and $200 million for a three- to four-year periods,’’ he said. Clients saw Indian vendors as flexible and were tilting towards them in renegotiations, he added.

Industry analysts agree. Avinash Vashistha, chief executive officer of Tholons, said that as companies came out of the slump, they had a perception that Indian suppliers were more flexible and cost-effective than traditional multinationals. Hence, contracts were coming the Indian companies’ way.

“It’s going to be a good phase for the Indian biggies at least for the next one year in terms of deals of an average size of $200 million,” he said. He described HCL’s $500 million contract with MSD as an exception in terms of size.

The HCL win was further proof that Indian vendors were back in the mainstream, said Sid Pai, managing director of TPI. “The market is picking up not just in discussions but actual closure of deals. The pipeline looks very healthy,” he said.