In this edition: Mega-deals are still significant– but not as significant as they used to be. U.S. chemicals company signs full ITO deal. McDonald’s is selling its conversational AI unit to IBM.
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MARKET ACTIVITY
Mega-deals are still significant to our market – but not as significant as they used to be. On a YTD basis, there have been 14 deals with ACV over $100 million. At this point last year, we had 15 mega-deals, and in 2019, there were 21 in the first three quarters.
That reduction in mega-deal activity may sound like a soft result – but we believe it’s actually a sign of a healthy market. Take a look at the Data Watch section below. You’ll see that mega-deals account for a significant portion of the total ACV awarded each year, but that portion is diminishing.
In 2015 and 2017, mega-deals made up 20% of the total ACV awarded. In two of the three years since then, mega-deals made up less than 15% of the total ACV. And that trend is continuing into 2021. Mega-deal ACV is just 11% of the total ACV awarded so far this year.
As we discussed last week, the market is growing. Both award counts and ACV are up from 2019. So, while mega-deals are still significant, they don’t move our market as much as they did in the past.
DATA WATCH
DEAL ACTIVITY
- Cabot Corporation and Cognizant. U.S. chemicals company signs full ITO deal with ADM and infrastructure operations in scope (link).
- Posten Norge and Infosys. Norwegian postal service modernizing IT service management (link).
- Washington Health Care Authority and Conduent. State agency signs eight-year pharmacy benefit management contract (link).
- Weis Markets and Collaborative Solutions (a Cognizant company). U.S. food retailer deploying Workday HCM (link).
M&A, ALLIANCES
- IBM acquiring McD Tech Labs from McDonald’s (link).
- Tech Mahindra acquires U.S.-based digital engineering firm Infostar and U.K.-based Shopify specialist We Make Websites (link).
- Microsoft acquires Oracle and SAP integration platform Clear Software (link).
- Equinix and PGIM Real Estate enter into $575 million joint venture for two data centers in Australia (link).
About the author
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.
