Bengaluru-headquartered Infosys Ltd wants an early extension of the eight-year contract signed in December 2020 with German automobile major Daimler, the people added, with a new revenue arm added that brings in artificial intelligence (AI) tools into the deal.
The Daimler project, dubbed ‘twice as fast program’ inside Infosys, has the company offering solutions in six areas—network, security, SAP basis, data centre, workplace, and operations—and assures it of average annual revenue of $400 million, according to the two people cited earlier.
The data centre business brings in $160 million revenue annually, while the remaining software and hardware components bring in the balance $240 million.
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Infosys is looking to renegotiate and bolster the hardware and software business part with a seventh revenue arm—that of AI—into a new deal with Daimler, and expand the business by at least a year, from 2028 to 2029, according to the two people cited earlier.
“We are told there will be an added AI component as part of the new RFP (request for proposal),” said one of the executives. “The overall revenue Infosys gets from Daimler in a year is expected to increase.”
The executive added that the discussions between Daimler and Infosys are at an early stage, and both companies remain hopeful of closing the contract by next year.
However, Mint could not ascertain the incremental business Infosys would get from the German automotive company after the renewal.
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An email sent to Infosys went unanswered, while Daimler Trucks and Mercedes-Benz declined to comment. Daimler had split into Mercedes-Benz Group and Daimler Trucks in December 2021.
However, Infosys still gets business from both companies that once formed Daimler, according to the executive mentioned above.
Infosys deal
According to a third executive, Daimler is one of Infosys’s three largest clients, after Apple Inc. and JPMorgan Chase & Co.
Two mega deals or contracts valued at more than $1 billion, with Daimler and Vanguard, the American money manager, were Infosys’s largest deals since incumbent chief executive officer Salil Parekh took over the reins in January 2018.
In July 2020, Infosys signed a 10-year deal valued at $1.89 billion with Vanguard.
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Infosys does not disclose business from carmakers; instead, it groups automotive clients under the manufacturing industry vertical.
For Infosys, the Daimler deal has helped business from manufacturing companies more than double in the past four years, from $1.3 billion revenue in the year ended March 2020 to $2.8 billion last year. During this time, Infosys grew 37% to end the fiscal year with $18.6 billion in revenue.
“The early renewal indicates that emphasis is going to be on making additional investments likely in AI,” said Peter Bendor-Samuel, founder of Dallas-based IT research firm Everest Group, adding that other IT services companies might also look to rework their mega deals to have an AI aspect.
An early renewal to the company’s largest deal comes when mega deals, valued at over $1 billion, are few in number for the country’s largest software services companies. Save TCS’s 15-year outsourcing deal worth at least $2.5 billion from British insurance group Aviva announced in January last year, there have not been any mega deals in at least the past two years.
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Still, more than two years after Infosys signed the deal with Daimler, ChatGPT was launched, which put generative AI or Gen AI in public discourse including company boardrooms.
At least one expert said Infosys might be looking to scale up its AI offerings with its largest clients.
