AI is increasing demand for some IT services while putting pressure on labor-heavy, repeatable work. Companies need help building and integrating AI applications, preparing data, updating infrastructure and managing risks and costs. But AI spending is not the same as consulting revenue: automation can also reduce the hours—and sometimes the contract value—needed to deliver existing services.
Where demand is growing—and what the numbers measure
Recent market indicators point to expansion in AI-related technology spending, especially infrastructure and cloud services. They do not all measure the same thing: spending forecasts, outsourcing contract values, survey intentions and provider revenue forecasts describe different parts of the market.
| Indicator | Reported figure | What it measures |
|---|---|---|
| Worldwide AI spending forecast | $2.7 trillion in 2026, up 49.5% year over year | Gartner’s forecast of AI spending across categories, including infrastructure, software and services. |
| Gartner AI spending categories | AI infrastructure: $1.484 trillion; AI services: $576.481 billion; AI software: $461.637 billion in 2026 | Gartner-defined spending categories. AI services is not the whole IT consulting market. |
| Global technology-services contract ACV | $42.4 billion in Q2 2026, up 43% year over year | ISG Index commercial outsourcing contracts with annual contract value (ACV) of at least $5 million; it combines managed services and cloud-based XaaS. |
| Cloud-based XaaS contract ACV | $31.5 billion in Q2 2026, up 65% year over year | ISG Index cloud-based services contracts. Within this, IaaS was $25.8 billion, up 78%; SaaS was $5.7 billion, up 25%. |
| Managed-services contract ACV | $10.9 billion in Q2 2026, up 2.7% year over year | ISG Index managed-services contracts, not all consulting or IT-provider revenue. |
The categories show why “AI demand” is not a single market. Spending can reach a provider through cloud consumption, infrastructure, AI features added to existing software, or a custom implementation—not only through a stand-alone consulting project. Gartner also revised its forecast for AI application development platforms to 39% growth in 2026.
What companies are hiring IT providers to do
Move from experiments to production
Organizations need more than a working demonstration. They need to choose a business use case, define what success means, connect the system to company data and applications, and operate it safely at scale. ISG described enterprise conversations in Q2 2026 as shifting toward execution, return on investment and business outcomes. Its chief AI officer and ISG Index leader, Steve Hall, put it this way: “Management teams are spending less time talking about AI opportunity and much more time talking about execution, return on investment and business outcomes.”
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Build, integrate and prepare the underlying systems
Growing areas of work include custom application and agent development, integration with existing enterprise systems, data engineering and operations, and preparing the context that AI systems need to produce useful results. Companies may also need infrastructure modernization, security, governance and help controlling cloud and model usage costs. Gartner has reported demand for custom AI applications and projects that use AI features in incumbent software. For Indian IT services firms, ICRA also identifies GenAI transformation, modernization, data engineering, cloud and cybersecurity as potential opportunity areas.
These are plausible areas of demand, not a guarantee that every provider—or the consulting sector as a whole—will grow. A project can create new work while also reducing effort elsewhere.
Where AI puts pressure on service work and contracts
AI tools can perform parts of work that follow repeatable patterns and require limited human judgment. ISG says large language models are increasingly displacing traditional labor-intensive managed-services tasks. Boston Consulting Group (BCG) identifies level 1 and level 2 incident management, some customer-experience work and parts of application and infrastructure managed services as exposed to automation.
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That does not mean these service lines are disappearing. It means the mix of tasks can change: fewer hours may be needed for routine work, while more effort may go to exception handling, oversight, integration and redesign. In contracts priced mainly around staffing or hours, delivering the same scope with fewer people can squeeze revenue unless the provider and buyer agree on how productivity gains are shared.
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ISG also reports pricing deflation and more provider-funded AI transformation embedded in contracts. Hall said: “Providers are facing more competition and changing economics, include pricing deflation and more provider-funded, AI-powered transformation embedded within contracts.” This creates a commercial tension: a provider may have to fund the automation that makes its own delivery more efficient, while buyers may expect lower prices or a larger scope.
The effect varies by service line. ISG’s first-half 2026 data show ITO contract ACV of $15.5 billion, down 5.6% year over year, and ER&D services ACV of $1.8 billion, down 2.8%. BPO ACV, by contrast, was $4.8 billion, up 47%. In Q2, ISG reported ER&D ACV down 6% year over year despite deal volume rising 34%, citing a strong comparison quarter and effects in software and embedded engineering. These figures cover qualifying contracts, not all projects or provider sales, but they caution against treating outsourcing as one uniform trend.
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What this could mean for jobs and skills
Both task displacement and new demand are visible in the evidence, but the overall employment effect is not settled. Deloitte’s 2026 survey found that nearly 70% of surveyed technology leaders planned to grow teams in direct response to generative AI. That is a reported intention, not a count of jobs created. In the same report, 64% of surveyed organizations planned to increase AI investment over the next two years, and the average share of technology budgets allocated to AI was expected to rise from 8% to 13% over that period.
As providers and buyers change how they deliver work, demand may shift toward AI architecture, data, integration, governance and domain expertise, while routine operational or engineering tasks face pressure. The survey does not establish realized hiring, and the reviewed market figures do not establish whether new AI-related work will outweigh reduced labor needs across the global sector.
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How to assess an AI implementation partner
For a company choosing an IT services or software consulting provider, a polished pilot is not enough to show that a partner can deliver production value. Ask how the provider will handle:
- Use case and acceptance criteria: What business problem is being addressed, and how will the buyer verify that the result works?
- Integration: How will the solution connect to the organization’s ERP, CRM, data, cloud and other existing systems?
- Data and safeguards: Who is responsible for data quality, context preparation, security, governance and data-sovereignty requirements?
- Operating costs: How will cloud and model usage be tracked, forecast and controlled once the solution is in production?
- Outcomes: Will performance be measured through business results, service quality, cycle time or customer outcomes—not just hours saved or pilots completed?
- Contract economics: Who pays for implementation, who benefits from productivity gains, how will scope changes be handled, and what measures determine success?
These are practical evaluation questions, not a standardized provider ranking. The contract matters alongside technical capability: it should make clear how the parties will manage cost, risk, changing scope and measurable results.
What market forecasts can—and cannot—tell you
Gartner’s 2026 figures are spending forecasts, not realized consulting revenue. ISG’s Index tracks qualifying outsourcing contracts of at least $5 million in ACV, so it excludes smaller engagements and does not represent every provider’s sales or project labor. Deloitte reports survey plans and expectations rather than observed spending or hiring. BCG estimates that AI could add up to $200 billion to the technology-services total addressable market over five years, equivalent in its analysis to 6%–8% CAGR through 2030; this is a modeled estimate, not measured growth. ICRA forecasts USD revenue growth of 3%–5% in FY2027 for its sample of Indian IT services companies, an outlook for that sample and geography rather than the worldwide sector.
These indicators are best read together as evidence of a changing market, not as interchangeable measures or a guarantee of growth. The opportunity depends on whether companies move from experimentation to useful deployments—and whether providers can capture value while adapting to automation-driven price and staffing pressure.
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