The total contract value (TCV) seems to be trending downwards. In 2015, the average contract duration was three-and-a-half years. Today, it’s around three years, according to Information Services Group (ISG). As a result, the average TCV of a deal has dropped to just under $50 million today as against $66 million in 2015 – recording a 33 percent decline in five years.
Yugal Joshi, Partner at research firm Everest Group, said that a shortening time period indicates clients’ unwillingness to get into longer duration engagements with their service providers given the pace of change in technology and their own priorities. For example, if a company is thinking of cloud migration, it will not want to get into a long-term data center management contract with a service provider as they will not know whether they will have data centers three years from now.