AI contracts unlikely to follow traditional multiyear deal model, says LTM CEO

"With the cost of AI changing so rapidly, I don't think customer is in a hurry to go and lock in price for the next three to five years," Lambu said. The shift could change how IT-services companies approach large deal bookings, which have traditionally been an important indicator of revenue visibility. Unlike conventional outsourcing arrangements, where companies commit to multiyear contracts with predefined scopes and pricing, AI adoption is evolving rapidly, making it difficult for enterprises to predict costs and returns over extended periods.

Lambu said traditional enterprise resource planning (ERP) implementations allowed companies to sign contracts worth $100 million because the scope of work, implementation approach, costs and expected returns were relatively predictable. "My view is that we should not be looking at when will the long-term contracts come. I would say that we should look at what is our strategy to ensure that we have a long-term engagement with customers?" he said.

The duration of contracts is less important than maintaining relationships with customers throughout their AI adoption journey. "If that means in that five years I get 10 contracts, each of them for one year or 18 months, so be it," he said, adding enterprises are expected to spend significant amounts on AI. The changing nature of contracts comes as LTM,  formerly LTIMindtree, accelerates its shift towards AI-led business, with the company realigning sales incentives and training its delivery organisation to pursue opportunities emerging from enterprise AI adoption.

LTM has made a conscious decision to undertake a faster transition towards AI-led services rather than focus exclusively on traditional outsourcing opportunities, Lambu said. The company has trained its global sales teams, delivery organisation, and portfolio leaders, while introducing a new incentive structure to encourage sales employees to pursue Business AI deals. "We wanted the contracts which are, though it is a shorter in tenure, more like an ACV kind of deals, but it is going to be iterative because once you are on the right side of AI spend trajectory, the AI adoption is going to be a multi-year cycle," he said.

The strategy comes against the backdrop of a decline in LTM's order inflow in the September quarter. Its order bookings fell 25 percent to $1.26 billion from $1.68 billion in the preceding quarter. The shift towards shorter AI engagements was a conscious strategic decision and should be viewed as an indicator of the company's transformation rather than merely a change in contract values, Lambu said.

He acknowledged that traditional services could still generate large deals in individual quarters but said LTM's focus was on capturing new AI spending. LTM's Enterprise AI and Business AI revenues together grew 47 percent year-on-year, outpacing the its overall constant currency revenue growth of 5.1 percent in Q2.