Hello. This is Stanton Jones and Steve Hall with a special preview of the ISG Index Webcast on Thursday, April 16 at 9:00 AM ET. Reserve your spot here.
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What You Need to Know
Growth in managed services ACV was modest in 2025, but total contract value told a stronger story as deal durations continued to increase. BPO showed signs of stabilization after a down year, and AI adoption increasingly moved from pilot to production. All of this happened against a backdrop of elevated business uncertainty, with geopolitical instability in the Middle East and new tariff pressures adding to an already cautious demand environment.
Questions we'll address on the call:
- Is the IT and business services market bifurcating? As we wrote about earlier this quarter, a dumbbell structure is forming. Sixty-one percent of enterprises are consolidating with large providers for cost optimization, while more than a third are simultaneously turning to smaller, specialized firms for AI and agility. Whether this is a structural shift or a moment in the cycle is something we'll dig into on the call.
- Is revenue growth finally decoupling from headcount? The fourth quarter of 2025 saw the largest divergence between revenue and headcount growth in over three years. Revenue is up 12% over three years while headcount is essentially flat. We'll talk about what it would take for this to become a real trend.
- What's keeping AI from scaling? Most AI pilots are not failing, they're stalling. Enterprises can generate AI outputs but have not yet built the capacity to validate, govern and operate them at volume. That said, AI is unlocking demand by making previously uneconomical modernization projects viable. We'll talk about what production-ready AI delivery looks like.
- Will BPO recover in 2026? BPO ACV was down 14% in 2025, but showed stabilization in Q4. And demand from enterprises is growing: more than 60% expect to increase BPO scope through 2027, even as roughly a third plan to do it with fewer people. We'll walk through where we see recovery and where we don't.
- What will H-1B wage floors mean for hiring? A new proposed rule would raise prevailing wages for H-1B visa holders across all four wage tiers. When this is combined with the $100,000 fee introduced last year for new petitions, it dramatically changes the economics of H-1B hiring. We'll discuss what this means for the sector over the near and medium term.
One more reason to join us next Thursday, we’ll unveil the new ISG AI Index, the industry’s first measure of AI's impact on the IT and business services sector.
Make sure to reserve your spot here.
About the authors
Stanton Jones
Stanton helps enterprise technology leaders, IT service providers and buy- and sell-side professionals make sense of the global IT services sector. Stanton's weekly briefing - the Index Insider - is read by thousands of industry stakeholders each week.
Steve Hall
Steve is Chief AI Officer providing strategic insight and advice to help ISG clients in the region solve their most critical business challenges and adopt and optimize the technology and operating models they need to compete successfully.
Steve was named Chief AI Officer in 2024. He leads the firm’s work to help clients create an AI strategy, establish a business case for investment and select the right business partners. His industry-leading expertise in navigating the complexities of adopting technology at scale is helping clients drive value into every aspect of their operations.
Steve joined ISG in 2005 and has led ISG Digital Advisory Services, Emerging Technology Services, Global Product Engineering and Application Development & Maintenance. He is trained as a software engineer and holds a bachelor’s degree in computer science from Regis University.
