The International Data Cor. (IDC), a market intelligence company, reveals that despite a slight decline in the total number of deals compared to the previous year, managed services contracts surged past the $100 billion mark in 2023.
The IDC database reports approximately 1,800 deals worth more than $100 billion in contract value (TCV). However, the average deal size has remained steady, signaling robust growth in the sector.
IDC highlighted the increase in large deals, with a total contract value exceeding $100 million. This surge in larger contracts aligns with the predicted rise in IT spending by organizations, particularly in cloud and artificial intelligence (AI) services.
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According to IDC, with more organizations adopting or exploring AI-enabled services, the demand for managed services will continue to escalate in the coming years.
The United States accounted for over 45% of the global TCV, indicating a significant uptick in technology spending in the region. Several substantial contracts contributed to this figure, including the $14 billion agreement between AT&T and Ericsson, the Verizon Business and HCL Technologies contract valued at over $2 billion, and the $1 billion deal between CoreLogic and Cognizant.
AI-related deals
Western Europe also saw a substantial increase in TCV, capturing 42% of the global market share. Despite economic and geopolitical uncertainties, the region experienced robust growth, with several mega deals signed, such as the GBP 1.5 billion agreement between Liberty Global and Infosys.
IDC highlights a shift in AI-related deals, with the average deal size more than doubling in 2023 compared to the previous year. This increase reflects a growing demand for AI implementations across major sectors, particularly manufacturing and financial services.
IDC projects continued growth in technology spending across all regions. It anticipates an increase in the number of large managed services contracts in 2024, with a higher average deal size. Already in Q1 2024, several mega deals with TCV exceeding $500 million have been inked, indicating a promising outlook for the industry.
“With approximately 3,000 managed services deals worth over an estimated $150 billion expected to be up for renewal in 2024, service providers have ample opportunities for growth and expansion,” IDC said.