Index Insider: How Often Incumbent Providers Win—and Lose—Mega Deals

Hello. This is Stanton Jones and Sunder Sarangan with what’s important in the IT and business services industry this week.

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Mega Deals

Providers that control a significant portion of the total contract value awarded at a client have a higher likelihood of winning mega deals awarded by that client. But this also means they risk losing some – or all – the scope they manage if a different controlling provider wins a mega deal.

Data Watch

Background

We’ve written a lot about mega deals over the past few weeks. Namely, what usually happens before a mega deal is awarded, and a couple of weeks ago, how the client’s size matters along with what to look for in pre-mega deal buying patterns.

In this week’s Insider, we’re going to focus on what happens when the deal is awarded – specifically, who usually wins? Not surprisingly, it’s often an incumbent.

But not just any incumbent for a specific scope of work. We’re talking about “client incumbency” here, meaning a single provider – or a small group of up to three providers – controls 50% or more of the TCV awarded at that client over the past several years.

Whether it’s made up of one or three providers, we call this group the “controlling” group. And what we analyze here is how often (or not) a provider in this controlling group wins a mega deal.

The Details

• 72% of the time, when a mega deal is awarded, a provider from the controlling group wins it.
• Not surprisingly, the controlling group overwhelmingly wins when the award is a renegotiation or a renewal.
• A provider outside the controlling group wins 40% of the time when it’s a new scope award (which can include a significant expansion or change to a previously awarded scope).

What’s Next

It’s not a surprise that incumbents have a significant advantage when it comes to mega deals. They know the client and the client’s processes and systems. They also (likely) have key relationships with decision makers or with people with access to decision makers, which gives them the knowledge and time they need to shape the client’s needs into a mega deal.

We expect this pattern to continue in 2025 as the market conditions remain conducive for mega deals – from both the enterprise and provider side of things.

Business uncertainty remains very high. This is putting pressure on topline growth at many enterprises, which means they are continuing to stay laser-focused on cost optimization.

Enterprises also continue to show a strong preference in 2025 to consolidate work with their largest providers. This means more opportunity for controlling providers to add further streams of work where they have not had scope. As they get access to these new areas of scope, these providers are in a better position to shape all of it into a larger, longer deal.

But, of course, when someone wins big, someone else loses. And the other providers in the controlling group as well as smaller providers with incumbency are likely to lose some or all the scope they managed when a mega deal takes shape.