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MEGA AWARDS
The impact of mega awards is at its lowest point in the history of the sector.
Background: Historically, the value of mega awards (> $100 million ACV) has made up more than 20% of total managed services ACV in the IT and business services sector. However, through the third quarter of 2022, that percentage is down to 10% (see Data Watch).
The Details:
- In 3Q22, there were a total of three mega awards, with a combined ACV of $705 million. That’s the fewest mega awards the sector has seen since 2017.
- However, YTD, there have been 18 mega awards with a combined ACV of $2.7 billion. This compares with 13 awards with a total ACV of $2.5 billion over the same period last year.
What’s Happening:
Managed services ACV has seen unprecedented levels of growth over the past five quarters. However, during this period, the number and value of mega awards have stayed relatively consistent. This means that the sector is growing, but that growth is coming from smaller awards, while mega awards are staying relatively flat. In fact, it’s the awards between $5 – $19 million ACV that have seen the biggest growth year-to-date. And this is diminishing the overall impact of mega awards.
As we discussed last year, enterprises are favoring smaller, shorter engagements. There are a lot of reasons for this: companies need to realize the results of outsourcing faster, and they need to reduce transformation risk. Companies also are increasingly carving out and rebidding less successful components of larger transactions. And, given the explosive growth of cloud, there are fewer technology assets – like servers and software licenses – included in awards than in the past.
We’ll have an update on mega awards signed this quarter on the 4Q22 Index call in January. Register here to join us.
DATA WATCH
About the author
Stanton Jones
Stanton leads ISG's Index research, helping providers, investors and ISG clients make sense of the global IT services sector. Stanton’s weekly newsletter, the Index Insider, is read by thousands of market stakeholders each week. An ISG Digital Fellow, Stanton has been quoted in Fast Company, Forbes and CIO.com, and has appeared on national cable news.
