Business-as-Usual Mindset May Wipe Out 30 Pc of Revenue for Tech Services Firms, Warns Bain & Co

A business-as-usual approach could erode revenue by 30 per cent or more for tech services firms, Bain & Co has said citing major disruptions like AI facing global technology services industry.

In its new report 'The new growth equation for tech services' Bain & Company noted that AI is the biggest disrupter in tech services, but "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.

The global technology services industry faces major disruption, and continuing to operate with a business-as-usual approach could erode revenue by 30 per cent or more, according to the report. "Across the sector, margins have fallen by more than 200 basis points, and valuations have returned to pre-pandemic levels," it observed. Analysis by Bain shows that these factors, however, also create fresh opportunities.

The rise of an AI-driven economy is fuelling growth in areas such as data operations, systems modernisation and chip design, while makeover 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," it said. "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 EBIT margin from deal discounting to win more work, which could contribute to an enterprise value loss of 45 per cent to 50 per cent over the next five years," it cautioned. Leading providers that reshape their offerings, delivery models, talent and are able to move to value-based pricing are positioned to grow by 8 per cent to 10 per cent, sustain or expand margins, and increase revenue multiples by 3-3.5 times, according to it.

Exhorting technology services providers to take decisive action, it said 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 200-300 basis points of margin improvement," the report said, adding that this efficiency gain can then fund further investments in innovation, delivery and talent.