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 Awards
While mega award annual contract value was down in 2024, total contract value was up due to longer deal durations.
Data Watch
Background
The number of mega awards – awards with an annual contract value of $100 million or more – has been on the rise over the past 24 months. This is a change from the trend prior to 2023 as you can see in this week’s Data Watch.
The Details
- There were 34 mega awards in 2024, compared to 35 in 2023.
- The average contract duration for mega awards in 2024 was up by 25%.
- More than half of the mega awards in 2024 were in the U.S., with the remainder in EMEA and Asia-Pacific.
What’s Next
As we discussed on the 4Q ISG Index call, enterprises continue to focus on making significant changes in their cost structures. At the same time, providers continue to improve their ability to shape large, transformational awards to help their clients meet this need. The combination of these two factors has created an environment that generated 69 mega awards over the past two years (see Data Watch).
What’s interesting here is that, while ACV for mega awards was down last year, TCV, or total contract value, was up double digits. This is because – on average – mega awards were longer in 2024.
We believe the market will continue to be conducive for mega awards in 2025. Interest rates remain elevated, and enterprises are still facing significant cost pressure, which means hurdle rates for internal projects remain high. This – plus the need to modernize systems and processes to improve customer experience and increase speed to market – means that demand for services aimed at solving these dual mandates are likely to remain strong in 2025.
And providers will keep getting better at shaping deals to solve these challenges. The slowish recovery of discretionary spending will make providers hungry for deal structures that support these large, transformational programs and capture long-term revenue streams.
About the authors
Stanton Jones
Stanton leads ISG's Index research, helping providers, investors and ISG clients make sense of the global IT services sector. Stanton’s weekly newsletter, the Index Insider, is read by thousands of market stakeholders each week. An ISG Digital Fellow, Stanton has been quoted in Fast Company, Forbes and CIO.com, and has appeared on national cable news.
