In this quarterly report, Avasant provides key information on IT and apps managed services provider trends. The report covers key information on the IT services industry and the provider ecosystem. It covers the service provider facts and figures (including revenue and resource trends), macro trends, and executive sentiment from the service provider community. The report covers trends across a gamut of IT services, including but not limited to IT infrastructure, application, and end-user services. The geographic coverage for the report is global. It builds on insights gathered through ongoing market research, data collection, and proprietary databases. It includes market data from providers accessed through multiple sources such as public disclosures, market interactions, and deals data.

This report also highlights the key trends in the market and Avasant’s viewpoint on the industry’s future direction.

Key buyer market trends shaping the market:

• • IT operational budgets continue to increase.
  • Outsourcing budgets for European companies are higher compared to North American companies.
  • Cloud continues to be the IT spending priority for North American companies.
  • Data centers remain the lowest priority budget category for North American companies.

Key deal commercial trends:

• • COLA clause continues to be relevant in T&M contracts but not in managed services.
  • Volume discounts continue to appear in some T&M contracts.
  • The pace of increase in FTE rate cards has declined, while managed services RUs continue to decrease.
  • Hiring has been slow, with an increasing focus on utilization and productivity enhancement.

Key service provider trends:

• • QOQ revenue for providers sees an increase while new bookings decline.
  • Service providers have announced major investments in AI to enhance their operations.
  • Generative AI is being deployed to improve CX and enhance productivity.
  • Operating margins continue to decline, and service providers are focusing on margin improvements.

Big Four firms are changing deal dynamics through a greater push on revenue growth as well as margin expansion:

• • The Big Four firms continue to grow at a rapid pace
  • Broad based tech service offerings competing head-on with traditional providers.
  • Leading the AI investments to expand their capabilities
  • Incredible focus on hiring in India to push for skills and better cost leverage.