Managed services contracts numbers down, but average deal size up in 2022, IDC finds
Over 1,700 deals were signed last year worth more than $125bn in contract value
The total number of managed services contact deals in 2022 were down compared to 2021, but the average deal size grew by 22 per cent, according to IDC.
There were more than 1,700 managed services deals signed last year worth more than $125bn in contract value.
The research firm reports that despite indications of a global economic slowdown, IT spending across organisations seems to be steadily increasing.
There was an increase in larger deal signings (total contract value (TCV) above $100m) in 2022 compared to 2021.
IDC said that as technology is increasingly becoming the backbone of organisational growth strategies, they are seeing more and more organisations upgrading their IT infrastructure leveraging cloud, artificial intelligence, and security.
The pandemic also forced organisations to move towards a digital-first approach.
The after effect of this paradigm shift is evident in the increased IT spending trend observed in 2022.
Data found that more than 60 per cent of the total TCV was signed in the US, which is almost eight per cent higher than 2021.
This growth was mainly driven by many large deals awarded to hyperscalers involving higher level cloud implementation.
Some notable deals include the one between Snap and Google estimated to be more than $700m, and one between Boeing and AWS estimated to be around $400m.
Western Europe accounted for 28 per cent of the TCV in 2022, which is almost six per cent less than 2021.
Due to high inflation, skill shortages, and disruption in the supply chain due to geo-political reasons, IDC said that this slowdown is expected to continue over a few quarters.
Notable deals in the region include the one between the London Stock Exchange and Microsoft worth $2.8bn and between UBS and Microsoft estimated to be around $750m.
Contrasting views on the future
IDC found that many "credible" sources have provided a pessimistic outlook for 2023 due to the economic slowdown.
Overall spending by organisations is expected to decline due to the economic headwinds.
Resellers that still derive much of their revenue from on-premises infrastructure and PCs 'will face difficult market conditions this year' says IDC VP Stephen Minton.
However, IT spending is not expected to be affected as much. The Services Contracts Database lists more than 2,300 managed services deals, worth more than an estimated US$122bn, coming up for renewal in 2023.
This includes about 130 deals above TCV of $100m.
IDC expects many more large cloud transformation contracts to be signed in 2023 which will be instrumental in driving growth and sustainability.
Tech leaders also remain confident in revenue growth in 2023 despite economic uncertainties, according to a Gartner survey conducted earlier this year.