Index Insider: Before the Big One: What Comes Before a $100M+ Contract | ISG

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

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Mega Deals

Most enterprises that sign a mega deal – an IT or business services contract with an annual contract value of $100M or more – are likely to come to it with a strong history of prior outsourcing activity.

Data Watch

Background

As we discussed back in 2024, over $3 billion of mega deal annual contract value is up for renewal this year. So, while the current environment puts pressure on smaller, discretionary awards, it also supports large deals that help enterprises optimize costs through transformation.

But it’s important to note that these large deals – or mega deals as we call them – don’t just spontaneously appear in the market. Most of the time they are “shaped” by an incumbent over many months, or even years, as we wrote about here.

However, as this shaping is happening, technology outsourcing activity does not stop. Our data shows that, when you look at deal activity in the five years leading up to a mega deal signature, there is actually quite a bit happening.

The Details

• On average, enterprises sign eight deals within the five years prior to signing a mega deal.
• EMEA-based enterprises award nine deals on average prior to signing a mega deal while enterprises in the Americas sign an average of six.
• Company size also has an impact. Enterprises with $100 billion or more in revenue sign an average of 13 awards prior to awarding a mega deal, while companies with less than $10 billion in revenue sign an average of three.

What’s Next

As the data shows, enterprises are typically engaged to some degree with the IT and business services sector before they are comfortable signing a very large financial commitment that could last six, seven or more years. 

However, that may be changing. The number of awards being signed prior to a mega deal is declining. That could be an outlier for now. Or it could be a signal that the immediate need for near-term savings combined with providers’ improved deal-shaping capabilities is making enterprises more comfortable signing longer, larger deals without as much deal-making experience.

Either way, providers that are looking to proactively shape mega deals with existing clients or pursue mega deals with new clients would be wise to study what has happened before the big one.