IDC: Worldwide Services Contracts Reached $48 Billion in 1H 2022 with Strong Growth in Average Deal Size

Published On: September 10, 2022Categories: Buzz, Uncategorized

More than 720 managed services deals were signed worldwide in the first half of 2022 (1H22) with $48 billion in contract value, according to the IDC Services Contract Database. 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,” said 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 modernization. 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. Nearly 58% of the deals were signed in the United States. From an industry perspective, public sector deals contributed about 60% of the TCV for 1H22. This is nearly 10% higher than 1H21.

“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,” added Kamath.

The IDC Services Contracts Database is updated in real time with the most recently available services contract signings for nine regions and 53 countries. Contract details include size and run rate in US dollars, the buyers’ industry, geography, and size, the solution and technology, and the primary, secondary, and foundation market and submarket, according to IDC’s taxonomy.

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