The time of innocent experiments with generative artificial intelligence is over. The latest reports from consultancy Bain & Company send a clear message to technology service providers: customers no longer want to talk about technological curiosities, but demand hard, measurable business results. While global IT budgets are stabilising at last year’s levels, the spending structure is undergoing a tectonic shift. For integrators, software houses and managed service providers (MSPs), this means that operational models need to be redefined immediately. The technology sector faced a dichotomy: either become the architect of an outcomes-based transformation or risk losing half of its market value.
The new anatomy of IT budgets: AI consolidates market impacts
Market observations indicate that the purchasing dynamics of chief technology officers (CIOs) have changed profoundly. While overall IT budgets are maintaining a flat trajectory, showing a correlation with levels quoted in 2025, there is a dramatic reallocation of resources within them. The technology services segment is seeing increases directly driven by two factors: the need for advanced cyber security and the need to operationalise artificial intelligence.
From Bain & Company’s survey of 280 business leaders from North America and Europe, an accurate picture of the new spending structure is emerging:
75% of companies say they will allocate up to 10% of their total technology budgets directly to artificial intelligence (AI) and machine learning (ML) initiatives.
In sectors with higher competitive pressures – such as retail, institutional banking and the oil & gas industry – this allocation exceeds 20% of the budget.
These figures confirm a paradigm shift. The mining industry or retail operate on low unit margins or high transaction volumes, where the automation of decision-making processes brings immediate operational savings. Artificial intelligence has therefore ceased to be treated as a research and development (R&D) project conducted at the margins of the organisation. It has become central to the agenda of boards of directors, and investments are being scaled to support broader business priorities and create value across the enterprise.
The end of fragmentation. Buyers demand holism and economy of results
The traditional model of the relationship between client and IT service provider was based on distributed procurement and time-and-materials billing. From the point of view of modern business, this model is becoming an anachronism. Corporate customers are seeking to minimise implementation risk and consolidate their supplier portfolios. They expect partners capable of delivering large, results-oriented transformation programmes.
For IT services companies, this means a deep talent transformation is required. A provider that cannot demonstrate that its developers are working more efficiently through the use of AI-assisted tools (e.g. LLM for code generation) will lose purchasing processes to entities that can document this efficiency and translate it into a lower valuation of the end result.
Landscape under pressure. Why the status quo means financial regression
The technology services sector has been operating under increasing macroeconomic pressure for some time. Analysis in the report ‘The New Growth Equation for Tech Services’ indicates that the industry’s average growth rate has slowed to 2-3%, compared to a stable 4-5% in the pre-pandemic period. Average operating margins have shrunk by more than 200 basis points and stock and trading valuations of IT companies have returned to historical levels.
This stagnation is compounded by three independent disruptive forces: the rapid development of artificial intelligence, growing economic nationalism (affecting supply chains and labour markets) and an ageing population in the developed world.
In these realities, trying to maintain the business model as usual (*business as usual*) is a loss-making strategy. Trying to compete on price alone and using discounts to save sales volume leads to immediate capital destruction – and can cost companies 5 to 7 percentage points in EBIT margin. Over the horizon of the next five years, the consequences of inaction will be dire.
New profitability vectors. Where to look for growth?
Although the traditional IT outsourcing market is showing signs of saturation, the transformation brought about by artificial intelligence is creating new high-margin market niches. Technology service providers that redefine their strategy should allocate resources to the following growth areas:
Core Modernization and data architecture: Implementing AI algorithms in enterprises is impossible without structured, secure and integrated data sets. Cloud migration services combined with the construction of modern data warehouses (Data Lakes) provide a technological foundation for which demand will grow by leaps and bounds.
Edge AI (Artificial intelligence at the edge of the network): Moving computing power closer to the point of data generation (e.g. in the manufacturing industry, autonomous transport or logistics) requires specific hardware and software integration competences.
Data centre infrastructure and specialised integrated circuits (ASICs): Enterprise system architectures need to be optimised for the power consumption and computing power required to train and infer models. Consulting and engineering for dedicated application chips is becoming a key engineering competence.
Capturing these opportunities, however, requires a complete abandonment of old recruitment and operational patterns. Instead of building teams based on the number of developers available, IT companies need to invest in solution architects, data engineers (Data Engineers) and cyber security specialists for autonomous systems.
The window of opportunity is closing irrevocably
The IT services sector is at a turning point, where the gap between the digital leaders and the lagging rest of the pack will begin to widen exponentially. The time window for making radical strategic decisions is limited. Buyers no longer have the time or budgets to fund pilot projects that do not deliver a return on investment (ROI).
The market is ruthlessly vetting suppliers: budgets will be consolidated around those able to prove that their technology platforms and transformed workforces generate real efficiencies. Service companies that demonstrate determination and operational flexibility will position themselves as leaders in the new technological era, securing high margins and multiple valuation increases. For those who choose a wait-and-see strategy, the shrinking market for traditional IT services will leave no room. The time for analysis has given way to the need for immediate execution.
