Infosys Risks $150 Million Daimler Deal as German Automaker Looks for New IT Vendor

According to Mint, which cited sources familiar with the situation, Infosys Ltd. faces the possibility of losing almost one-third of its around $400 million yearly revenue from Daimler, one of its top three clients, as the German automaker searches for a replacement vendor after execution delays. At a time when client technology budgets are being tightened by economic uncertainty, tariff tensions, and automation, the possible loss might be approximately $150 million, or 0.7% of Infosys' FY25 sales.

The 'workplace solutions' portion of the contract, wherein Infosys acquired and provided devices, software subscriptions, and equipment for Daimler's back-end IT operations, is where the risk is focused, according to Mint. In December 2020, Infosys and Daimler inked an eight-year, $3.2 billion IT transformation agreement that will span six business units. The engagement's main focus was workplace solutions. In December 2021, Daimler separated into Mercedes-Benz Group and Daimler Truck, but Infosys was still used by both companies for IT support.

No Renewal and Acceptance of RFP

The workplace solutions contract was supposed to be renewed last year, according to Mint, but clarification is now only anticipated in June. According to those quoted in the paper, the client rejected an Infosys request for proposals. The partial renewal coincides with disagreements over billing delays and execution.

According to persons familiar with the situation, Daimler, which includes Mercedes and Daimler Trucks, owed Infosys around $47 million as of January 12. According to Mint, other areas, including SAP, network services, and call functions, have not been fully extended, even though cybersecurity and data centre services have been renewed till 2029.

Mint claims that one of the major IT services companies in India has already submitted a bid for a share of the Daimler deal; however, the competitor was not identified. It is unlikely that Infosys will receive significantly more revenue from Daimler in the near future, Phil Fersht, CEO of HFS Research, told Mint. He went on to say that any renewal-led expansion is usually countered by pricing pressure and scope rationalisation.

Why Daimler Contract is so Crucial for Infosys?

Under CEO Salil Parekh, who took over in January 2018 and propelled Infosys to the top of its peers in big deal wins, the Daimler contract was one of twelve huge deals totalling more than $1 billion. According to an executive who spoke to Mint, Daimler is one of Infosys' top three clients, after Apple Inc. and JPMorgan Chase & Co. Internally referred to as the "twice as fast programme", the project assisted Infosys in doubling its manufacturing revenue from $1.3 billion in FY20 to $3 billion in FY25.

According to JM Financial analysts, after two years of more than 40% growth, revenue from Infosys Automotive and Mobility GmbH, the subsidiary formed for the Daimler contract, decreased 8.5% year over year to $418 million in FY25. Additionally, the unit has not turned a profit for four years running. According to JM Financial, the drop indicates that Daimler account revenue has peaked and moved into a mature period.