According to the IDC Services Contracts Database, more than 720 managed services deals were signed worldwide in the first half of 2022 (1H22) with $48-billion in contract value.
While the total number of deals declined compared to the same period in 2021, the average deal size increased by 20%. Moreover, the average deal size in terms of total contract value (TCV) has almost doubled when compared to 1H21.
“The impact of Covid-19 has accelerated the adoption of digital technologies, specifically focused on providing a digital workplace, to ensure the continuation of business and minimize disruptions while improving flexibility and enhancing productivity,” says Supriya Kamath, senior research manager: global services and market trends at IDC.
“The push to become a digital-first organization has created opportunities for managed service providers with the expertise and resources to facilitate these efforts.”
About 94% of the 1H22 deals were in the IT Outsourcing market, while the remaining 6% were Business Outsourcing deals. The IT Outsourcing contracts were largely focused on digital transformation, cloud migration, and technology modernisation.
1H22 saw a 40% decline in business process outsourcing (BPO) deal signings with an almost 50% decline in total contract value compared to 1H21.
This trend is due to increased adoption of automation and AI-enabled technologies that are fast replacing traditional BPO engagements. This has affected large BPO deal signing as well, with 1H22 recording just one deal above the US$500 million threshold compared to two deals during this time the previous year.
“With the imminent economic slowdown that is expected in various sectors and regions, the overall number of deal signings in 2022 could be affected, although not severely as IT spending, especially towards digital services, has become an integral part of most companies’ growth and stability plans,” says Kamath.