Recent report by market research company IDC highlights three main factors contributing to growth in Managed Services. According to their database, 720 deals were signed in the first half of 2022. That’s a drop in numbers from comparable period in 2021 but the average deal size increased by 20 per cent. What’s more, the Total Contract Value (TCV) has almost doubled when compared to H121.
“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 minimise disruptions while improving flexibility and enhancing productivity,” said Supriya Kamath, IDC senior research manager for global services and market trends.
“The push to become a digital-first organisation has created opportunities for managed service providers with the expertise and resources to facilitate these efforts.”
The IT Outsourcing
The data shows that around 94% of deals were in the IT outsourcing market, while the remainder were business outsourcing deals. These contracts were largely focused on digital transformation, cloud migration, and technology modernization. Business process outsourcing (BPO) deal signings dropped by 40% with an almost 50 per cent decline in TCV compared to H121. Increased adoption of automation and AI-enabled technologies is what appears to be driving this trend.
US Federal Deals
While Western Europe accounted for 32 per cent of the deals, nearly 58 per cent of the deals were signed in the US, according to IDC’s findings. Although federal deals seemed to drive growth, the commercial sector saw several large deals, such as the agreement between Oracle and AT&T at more than $700m and another between DXC and DIRECTV at around $455m.
Deals in the Public Sector
From an industry perspective, public sector Managed Services deals contributed about 60% of the TCV for H122, nearly 10% higher than the same period last year. Around 12% of the TCV was from the financial services sector. The largest deal in that space was between Kyndryl and Deutsche Bank, coming in at more than$800m, for the consolidation of core banking systems into one platform and the migration of certain applications to the cloud.