Business-as-usual may erase 30% of revenue for tech services firms: Report

Report says tech services firms risk major revenue and margin erosion if they continue with business-as-usual strategies. AI, demographic shifts and energy transition are reshaping sector's outlook

The global technology services industry faces major disruption, if it continues to operate with a business-as-usual approach. This could erode their revenue by 30 per cent or more, said a new report by Bain & Company. 

 

The report, New Growth Equation for Tech Services, further noted that across the sector, margins have fallen by more than 200 basis points, and valuations have returned to pre-pandemic levels. 

 

“Technology services firms stand at a defining moment,” said Kushal Raja, partner at Bain & Company. “AI and other structural shifts are redrawing the industry’s growth map. The next wave of winners will be those that reimagine strategy using a micro-battle approach, leverage AI to transform processes and move to platform-based, value-driven delivery. They are the ones that lead the way in revamping their talent and

 

culture models to fully capture the value of this change.” 

 

AI is the biggest disrupter in tech services, but it is not the only one. Economic nationalism, aging population and the energy transition are also forcing change across the industry. Together, these factors are reshaping how tech services providers operate, deliver value and compete. 

 

Analysis by Bain shows that these factors also create new opportunities. The rise of an AI-driven economy is fuelling growth in areas such as data operations, systems modernisation and chip design, while the modernisation of legacy platforms is unlocking new opportunities for core transformation. 

 

As technology becomes central to every enterprise, AI-first models are redefining how organisations manage processes and operations, creating a new wave of demand for tech-enabled transformation. 

 

Bain’s research suggests that continuing to operate with a business-as-usual approach could erode revenue by 30 per cent or more. Firms stand to lose 5 to 7 points of earnings before interest and taxes (EBIT) margin from deal discounting to win more work, which could contribute to an enterprise value loss of 45 to 50 per cent over the next five years. To this, leading providers that reshape their offerings, delivery models, talent and are able to move to value-based pricing are positioned to grow by 8% to 10%, sustain or expand margins, and increase revenue multiples by 3 to 3.5 times. 

 

To stay competitive, Bain recommends that technology services need to shift strategy to focus on targeted ‘micro-battles’ at the intersection of industries, geographies and spending themes. Build multi-service solutions that transform processes by integrating service design, technology, data and operations to address high-priority client challenges.

 

Adopt platform-based delivery and value-based pricing to scale outcomes efficiently, improve speed and transparency, and tie pricing to business results. 

 

Technology services providers need to take decisive action now. Firms will need to deploy AI not only in client solutions but also across their own operations. By taking a zero-based approach -- rebuilding internal processes with AI at the core -- tech services providers can unlock 200 to 300 basis points of margin improvement. This efficiency gain can then fund further investments in innovation, delivery and talent.