Three trends that drove global managed services spend to $48bn
IDC has outlined three driving factors currently bolstering global IT services spending
More than 720 managed services deals were inked globally in the first half of 2022 with $48bn in contract value.
While the total number of deals dropped compared to the same period in 2021, the average deal size increased by 20 per cent, according to the IDC Services Contracts Database.
Moreover, the average deal size in terms of 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 IDC senior research manager for global services and market trends, Supriya Kamath.
"The push to become a digital-first organisation has created opportunities for managed service providers with the expertise and resources to facilitate these efforts."
Here are three trends highlighted by market research firm IDC that are driving managed services spend.
The IT outsourcing market
The researcher's data shows that around 94 per cent of H122 deals were in the IT outsourcing market, while the remaining six per cent were business outsourcing deals.
IDC said these contracts were largely focused on digital transformation, cloud migration, and technology modernization.
Meanwhile, H122 saw a 40 per cent slump in business process outsourcing (BPO) deal signings with an almost 50 per cent decline in TCV compared to H121.
The analyst firm claims 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 signings as well, with H122 recording just one deal above the $500m threshold compared to two deals during this time the previous year.
[Click through to find out where in the globe more than 50 per cent of deals were signed...]
Three trends that drove global managed services spend to $48bn
IDC has outlined three driving factors currently bolstering global IT services spending
Federal US deals
On a geographic basis, nearly 58 per cent of the deals were signed in the US, according to IDC's findings.
Although federal deals seemed to drive growth, there were several large deals, such as the agreement between Oracle and AT&T valued at more than $700m and another between DXC and DIRECTV valued at around $455m, that contributed to the growth in the commercial sector.
Western Europe accounted for 32 per cent of the deals, while the Asia/Pacific region (excluding Japan and China) has seen deal signings increase slightly compared to H121 with Australia and India mainly driving growth.
Public sector deals
IDC said that from an industry perspective, public sector deals contributed about 60 per cent of the TCV for H122, nearly ten per cent higher than the same period last year.
Accenture's deal with Mount Sinai Health System worth around $450m was a significant win this year in the healthcare industry.
This along with several large contracts, including the deal between Microsoft and Government of New South Wales for cloud migration worth around$590m, contributed to the increase in public sector contracts.
Around 12 per cent of the TCV was from the financial services sector, which includes the banking, financial services, and insurance industries.
The largest deal recorded in this sector was between Kyndryl and Deutsche Bank, valued at more than$800m, for the consolidation of core banking systems into one platform and the migration of certain applications to cloud.