Community Short Facts - May 2022

Runtime Decreases Significantly

The duration of mega-deals in the IT services industry has declined by 40 percent over the past twenty years. As recently as 2000, mega-deals were structured to last an average of nearly eight years. Today, the average duration is less than five years. In general, the industry has seen a trend over the past twenty years toward not only shorter but also smaller contracts—in an overall growing market. The annual contract value (ACV) for mega-deals also follows this pattern. Three years ago, mega-deals still accounted for 20 percent of the ACV of the entire IT services market. Today, that figure stands at only about 12 percent.

This decline is not solely due to a decrease in the ACV of mega-deals. It is also because the overall ACV pie has grown. For example, the ACV for managed services rose by 16 percent in 2021 compared to the previous year. A large portion of this growth comes from contracts with an ACV of less than $20 million. These smaller deals now form the backbone of the IT services industry, underscoring the broader paradigm shift taking place in the sector. This is reported by the Information Services Group (ISG) based on its own market data.