Managed service deals touch $48 bn in H1: IDC

The number of managed services deals signed worldwide during the first half of 2022 has touched more than 720 with $48 billion in contract value, IDC report said.
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The number of managed services deals declined in H1 2022 as compared to the same period in 2021, said IDC. The average managed services deal size increased by 20 percent. The average managed services deal size in terms of Total Contract Value (TCV) has almost doubled when compared to 1H21, according to the report.

“The push to become digital-first organization has created opportunities for managed service providers with the expertise and resources to facilitate these efforts,” said Supriya Kamath, senior research manager, Global Services and Market Trends at IDC.

About 94 percent of the 1H22 deals were in the IT Outsourcing market, while the remaining 6 percent were Business Outsourcing deals. The IT Outsourcing contracts were largely focused on digital transformation, cloud migration, and technology modernization.

There was a 40 percent drop in business process outsourcing (BPO) deal signings with an almost 50 percent decline in total contract value compared to 1H21. This trend is due to increased adoption of automation and AI-enabled technologies that are replacing traditional BPO engagements. This has affected large BPO deal signing as well, with 1H22 recording just one deal above the $500 million threshold compared to two deals during this time the previous year.

Nearly 58 percent of the deals were signed in the United States driven by federal deals. Some of the large deals including the Oracle-AT&T deal for more than $700 million and the DXC-DIRECTV deal for around $455 million.

The number of managed services deals in Asia Pacific region (excluding Japan and China) increased slightly compared to 1H21 – driven by Australia and India.

Public sector deals contributed about 60 percent of the TCV for 1H22. This is nearly 10 percent higher than 1H21. Accenture’s deal with Mount Sinai Health System worth around $450 million was a significant win this year in the healthcare industry.

The deal between Microsoft and Government of New South Wales for cloud migration worth around $590 million was also significant in public sector contracts.

About 12 percent of the TCV was from the financial services sector. The deal size between Kyndryl and Deutsche Bank was more than $800 million, for the consolidation of core banking systems into one platform and the migration of certain applications to cloud.