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 Award Renewals
More than $3 billion of mega award ACV is coming up for renewal this year. These renewals are happening in an environment that supports the creation of net new large deals as well. These two things together suggest that large deal activity will remain strong in 2025.
Data Watch
Background
As we discussed last week, 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 because enterprises continue to be focused on reducing costs, and providers are focused on shaping large deals. This week, we look ahead to the mega awards that are coming up for renewal in the next two years.
The Details
- 39 mega awards are coming up for renewal between now and 2026.
- This equates to nearly $6.5 billion in annual contract value (ACV).
What’s Next
Renewal data is one of many indicators that help us forecast what IT services contracting activity will look like in the quarters ahead. The combination of this strong mega deal renewal profile, along with the current macro environment that supports the creation of new mega awards, suggests that large deal activity will remain strong in 2025.
That said, the awards coming up for renewal this year and next will likely look different than those signed five to seven years ago. That’s because of the changes generative AI are driving in the IT services sector. For example, we’ve discussed previously the potential for GenAI to reduce manual effort by 45% – 55% in areas like coding and testing.
Enterprises want accelerated cost savings and technology modernization. AI – including but not limited to GenAI – has the potential to deliver both, and we expect this to influence what happens to mega awards over the next two years.
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.
