(source : ANI) ( Photo Credit : ani)
Artificial Intelligence (AI) is shaking up the global IT services industry, and it’s not all good news. A new report from Jefferies warns that AI could slash about 20% of revenues in this sector between 2025 and 2030. That’s a big challenge for IT companies worldwide, especially as AI boosts productivity in key areas like application services and business process outsourcing (BPO).
The report points out that AI will hit 20% of current IT services revenues by 2030. You’ll see the biggest productivity jumps—anywhere from 5% to 35%—in application services and BPOs, compared to consulting or infrastructure services. High-margin areas like application managed services and BPO will feel the pinch the most.
Why is this happening? Jefferies lists three main reasons. First, businesses might cut back on new IT spending because fast AI progress could make their investments outdated quickly. Second, AI’s productivity gains will shrink revenues from existing IT services by around one-fifth from 2025 to 2030. Third, companies haven’t even fully cashed in on the massive $280 billion they poured into tech each year from 2021 to 2024—that’s more than double the $130 billion average from 2016 to 2020.
This AI-led revenue deflation will hit first, dragging down growth as early as 2027. New AI-driven spending might pick up later, but short-term pressures on old-school revenues could hurt company valuations. Overall, the IT services sector’s growth will slow to a modest 1.5% to 3% compound annual growth rate (CAGR) from 2024 to 2029—far from the double-digit booms of the past.
Non-AI IT services should still grow 1% to 3% year-on-year, but that 20% deflation will lead to a similar drop each year. In the end, global IT services spending might only expand at 1.5% to 3% CAGR over the next few years.
Mid-sized IT firms face bigger risks from this AI revenue deflation than giants like the top players, but they could bounce back stronger. The report says these smaller companies are well-positioned to grab more market share and deliver better growth in the long run.
As AI transforms the IT services industry, companies need to adapt fast to stay ahead. This shift could redefine how businesses handle tech spending and operations in the coming years.
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