For two decades, the growth of IT services followed a simple approach: win work, add people, and increase revenue. However, that model is now under pressure. AI is reducing the effort behind many technological achievements, leading clients to pay for results rather than capacity. Buyers in IT services M&A are also becoming more selective.
Recent market signals illustrate these pressures. Gartner estimates that 40% of enterprise applications will incorporate AI agents by the end of 2026, while outcome-based contracts are projected to account for 30% of IT services contracts by 2029.
Our latest white paper, "The New IT Services Model: What Investors Should Underwrite for Growth," discusses what makes an IT services business harder to replicate as a new IT services business model takes shape, and how investors can test whether the evidence supports the claim.
In this white paper, readers can expect to learn more about:
Why labor arbitrage is no longer enough: How IT firms are responding to AI adoption and changing client demands
Six levers of differentiation to translate capabilities into stronger growth: IP, vertical depth, ecosystem strength, commercial model, talent, and management
What diligence needs to test: The evidence IT services due diligence should look for to separate real repositioning from relabeling
Proof points from the market: How Optimum Healthcare IT and HSO built differentiated positions
The same evidence can mean different things to different buyers—whether financial sponsors, such as private equity firms, or strategic acquirers, seeking to strengthen existing operations. The question is not only whether a business has a capability, but whether that capability creates value for a particular financial sponsor or strategic acquirer.
Download the full white paper to learn more about the six-lever framework and how your organization can build an IT services growth strategy around capabilities that are harder to replicate.
Author
Swagata Das Chowdhury
Swagata is a Partner based in the Bangalore office. He brings over 12 years of experience in Consulting and Technology, including a 9-year tenure at YCP India.
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