Worldwide services contracts touched $48 billion

There is a saying that every disruption brings new opportunities. We can keep a positive attitude and see problems as opportunities. Disruptive innovation is where you create a new market by focusing on a different set of values than that are currently applied in the existing market. This new market then ultimately takes over the existing market. If the demand cycle flips to a higher scale than what was seen during the Covid-19 pandemic, companies will be stretched too thin to manage their resources.

The U.S. economy contracted for a second straight quarter between April and June as per the government data, it is adding fuel to recession fears. Many blue-chip tech companies started hiring resources, to offer service contracts including managed services, third party outsourced jobs by setting up BPO and KPO, with this direct hiring by the large corporates to come down.

As per IDC, Worldwide Services Contracts Reached $48 Billion in the First Half of 2022 with Strong Growth in Average Deal Size. More than 720 managed services deals were signed worldwide in the first half of 2022 with $48 billion in contract value.

While the total number of deals declined compared to the same period in 2021, the average deal size increased by 20%. Moreover, the average deal size in terms of Total Contract Value has almost doubled when compared to the first half of 2021.

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 minimize disruptions while improving flexibility and enhancing productivity, says expert. The push to become a digital-first organization has created opportunities for managed service providers with the expertise and resources to facilitate these efforts.

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

On a geographic basis, nearly 58% of the deals were signed in the United States. Although federal deals seemed to drive growth, there were several large deals, such as the one between Oracle and AT&T valued at more than $700 million and another between DXC and DIRECTV valued at around $455 million, that contributed to the growth in the commercial sector. Western Europe accounted for 32% of the deals.

Accenture’s deal with Mount Sinai Health System worth around $450 million was a significant win this year in the healthcare industry. This, along with several large contracts, including the one between Microsoft and Government of New South Wales for cloud migration worth around $590 million, contributed to the increase in public sector contracts.

Dr. Deepak Kumar Sahu, President & CEO, VARINDIA