PAC's Top 10 Software & IT Market Predictions for 2025

Before looking at our predictions for 2025, let’s review the overall IT services market’s situation and trend. As usual, we examine the seven key growth drivers regarding market dynamics, which are also reflected in our SITSI “clusters.”

Starting with the 3 process areas:

·      Digital customer engagement (€ 95 bio. IT Services market in 2024) was the first segment to slow down in 2023, following massive Covid-initiated investments. This market started to recover in the first semester of 2024 in North America; in Europe, the recovery will start 6-12 months later. AI and in particular, GenAI usage is boosting this market to better process all available data and personalize the customer approach; the positive trend is illustrated by the market upturn around key technology suppliers like Adobe and Salesforce.

·      Industrial IT or OT (€ 150 bio. IT Services market in 2024), including both intelligent products (smart vehicles, connected vehicles, ADAS and more generally software-defined products) and smart intelligent processes (SCADA, shopfloor, smart factory, smart networks…) remains a very promising market in the long term, boosted by several change factors, in particular by the breakthrough of “traditional” IT technologies (cloud, analytics, AI, security…) in the OT world. However, currently, this market suffers in Europe from the tough situation in manufacturing and, in particular, in the automotive industry.

·      ERP and back-office (€ 300 bio. IT Services market in 2024), building the core of the information systems, also generates substantial long-term modernization and transformation opportunities. The massive slowdown of investments in selected industries (banking, telecoms, retail) is coming to an end, while the public sector has remained a resilient segment. Moreover, the ERP segment enjoys the exceptional situation of the SAP market – linked with the S/4 transformation wave.

Then, looking at the 2 key enablers:

·      Cloud (€ 150 bio. IT Services market in 2024) has been the main change factor over the last 15 years. However, costs have exploded over the past two or three years. Given the difficult economic climate, this has prompted most companies to be much more cautious in their approach to the cloud, postponing cloud migrations and focusing on cloud optimization (FinOps) in 2023 and 2024. Yet cloud usage will soon accelerate again – it already started in H2/2024 in North America – as there is still no alternative to hyperscalers to accelerate transformation and drive innovation.

·      Analytics & AI (€ 100 bio. IT Services market in 2024), with GenAI being currently the most important “game changer.” However, unlike “traditional AI,” GenAI mainly generates high cloud resource consumption, moderately-sized consulting assignments, and generally small-scale SI projects. Yet GenAI also has a massive impact on IT services delivery, e.g., for coding or testing. And, of course, AI and GenAI require “clean”, validated data and powerful underlying analytics infrastructure.

Then, looking at the 2 “boosters”:

·      Cybersecurity (€ 100 bio. IT Services market in 2024), is on the one hand taking advantage of new regulations (in particular NIS2 and CRA); on the other, customers aim at consolidating the security systems landscape for efficiency reasons. to better control security costs.

·      Sustainability (€ 20 bio. IT Services market in 2024): We originally expected new regulations, notably the Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS), to accelerate investment in this area. However, given the difficult economic climate, both companies and authorities are slowing down somewhat. Nonetheless, this remains a fast-growing market, even if the volume is low.

Finally, we took a look at the services markets by geography.

Europe was a resilient market in 2023 (+4.6%), yet slowing down massively in 2024 (+2.6%). Looking at the three main countries, the UK was the first market to lose momentum, but it was also the first to recover. France was the worst market throughout 2024, and the outlook for 2025 is gloomy.

Germany proved fairly resilient until mid-2024, but the situation has deteriorated considerably since then, particularly in the dominant automotive industry. By comparison, smaller markets like Belgium, the Netherlands, Austria, or Switzerland have remained quite resilient, while Spain, Italy, and Norway have been growing over average. Overall growth is expected to reach 3.4% in 2025, well below the global average (+4.8%).

Out of Europe, growth in the Middle East has remained very strong (close to 10%), driven by Saudi Arabia and UAE. Growth in APAC has remained substantial, boosted by Japan (over 5%) and India (growing two-digits), while China and Australia suffered. Finally, while the USA have been the first market to slow down (stagnation in 2023 if we exclude the public sector), it is also the first market to recover, and the outlook for 2025 is good (+5%; despite the already huge size: over € 400 bio. in 2024, compared with € 265 bio. for Europe as a whole).

Let’s now move on to our predictions for 2025.

What are the most promising topics for the year ahead?

1. Unleashing Generative AI: The dawn of organisation-wide impact
2. The Data Revolution: Unleashing AI to master data preparation and management
3. Shadow AI will be the next shadow IT (unless prevented)
4. 2025 will see big changes in the data centre space
5. From Discovery to Loyalty: How AI will fully automate customer journeys
6. RISE with SAP will drive user organisations towards cloudification and reshape the SAP services partner ecosystem
7. Sustainability moves beyond regulatory drivers
8. Cyber Asset Attack Surface Management (CAASM) – breakthrough by 2027
9. Cyber resilience will be the top issue for companies worldwide in 2025
10. 2025 will be the year when industrial companies overcome IT/OT data silos and prepare for the AI age

1. Unleashing Generative AI: The dawn of organisation-wide impact
 

By the end of 2025, PAC predicts that generative AI (GenAI) will move beyond the hype and become a foundational tool for organisations, driving tangible business outcomes. While the initial wave of GenAI captured attention with its ability to generate creative content like text, images, and code, its actual value will emerge in enterprise applications that transform operations, enhance customer experiences, and enable new forms of innovation.

For CxOs, the adoption of GenAI will go from experimental pilots to widespread deployment across core business functions. A 2024 PAC survey on how organisations are scaling the use of AI saw 27% of respondents indicate this is occurring across multiple use cases, with 34% indicating that they will increase their AI budget by 26-50% over the next two years.

GenAI will personalise content at scale in marketing and customer engagement, creating tailored product recommendations, hyper-relevant messaging, and adaptive customer interactions. Organisations will leverage GenAI to automate and optimise content creation across websites, e-mails, and social media, allowing businesses to deliver more meaningful experiences with far less manual effort. The emergence of enterprise-grade GenAI will lead to significant efficiency gains in operations.

AI-driven automation of document processing, report generation, and data analysis will reduce time spent on routine tasks and allow employees to focus on more strategic initiatives. By the end of 2025, PAC predicts that widespread adoption of GenAI will occur to streamline all elements of an organisation’s software delivery life cycle (SDLC), as AI for generating code, performing testing, and securely managing releases, and ongoing updates will become a mainstream tool for accelerating the build-and-deploy cycle, reducing time to market for digital products.

To this end, 39% of those surveyed by PAC regarding the adoption of GenAI over the next year said it was a high priority with executive leadership support. Moreover, GenAI will increasingly be used for decision support, enabling organisations to simulate complex scenarios, forecast market trends, and derive insights from unstructured data at a scale previously unattainable.

GenAI will help overcome data scarcity issues by creating synthetic data, enhancing AI model training, and improving predictive capabilities. CxOs will view GenAI as a critical driver of competitive advantage, with organisations investing heavily in the infrastructure, talent, and governance needed to integrate these models securely and ethically. By the end of 2025, organisations across private and public sectors that embrace GenAI will lead in innovation, delivering personalised customer experiences and operational efficiencies that set them apart in increasingly competitive and demanding markets.

2. The Data Revolution: Unleashing AI to master data preparation and management

By the end of 2025, AI-powered data preparation and management will be a game-changer for enterprise organisations adopting business workflow-focused machine learning (ML) and deep learning (DL) solutions. PAC regularly hears from CxOs that one of the most time-consuming and resource-intensive challenges in deploying AI at scale is data preparation—cleaning, labelling, and enriching the data needed to train models. However, advances in AI, particularly in generative and agentic models, will significantly streamline these processes, enabling faster and more efficient data management.

For CxOs, the rise of AI-powered data management platforms will mean organisations can automate much of the heavy lifting associated with data preparation. Generative AI will generate synthetic data to fill real-world data gaps, making it easier for organisations to train robust models even when they lack large quantities of labelled data. This capability is particularly valuable in industries like healthcare, finance, and manufacturing, where data is often incomplete or sensitive, and acquiring labelled data can be costly and time-consuming.

Agentic AI will further enhance these platforms by continuously cleaning and enriching data in real time, maintaining high data quality throughout the ML and DL model life cycle. These AI agents will automatically detect anomalies, correct inconsistencies, and augment data sets with additional information, ensuring that models are trained on the most accurate and relevant data possible.

For CxOs, this evolution will drastically reduce the time and cost required to implement AI initiatives and allow for more agile and scalable AI deployment across the enterprise. With less dependency on massive, labelled data sets and fewer manual data-handling tasks, PAC predicts that organisations will be able to move from data collection to actionable AI insights faster than ever before. By the end of 2025, organisations that leverage AI-powered data management will lead the way in ML/DL adoption, driving innovation and competitive advantage through superior data utilisation.

Speak to our analyst – Spencer Izard

3. Shadow AI will be the next shadow IT (unless prevented)

2024 was characterised by cloud optimisation and FinOps strategies to limit previously uncontrolled and excessive cloud consumption and cost. In the coming years, it will be crucial to avoid a similar trend in the AI space. However, excessive consumption and related costs are not the only issues to be considered. Since the emergence of cloud computing, shadow IT has challenged CIOs.

Business users in organisations quickly discovered Internet-based tools that were easily available and easy to use. In the early days of cloud computing, before IT departments became their best friends, cloud hyperscalers and SaaS providers explicitly targeted non-IT users with a “bypass your legacy IT” value proposition. This so-called “shadow IT” led to the loss of transparency and governance, increased complexity, lack of integration, and, above all, security challenges.

Shadow AI, i.e., the non-transparent and uncontrolled use of external AI solutions by employees, must be prevented, as does the unrestrained use of AI-related resources, which can result in high costs and security challenges.

AI usage in a professional context must not only meet the demand for high-quality underlying data, but it also must not compromise the security and privacy of organisations’ sensitive or regulated data. This is true for dedicated AI and GenAI solutions, and it will also be relevant for the use of more general software solutions, which are increasingly cloud-based and infused with AI.

Organisations will have to thoroughly qualify and clearly define AI platforms, models, and solutions suitable for broad usage or specific use cases. Technological measures such as establishing landing zones with approved AI tools for defined use cases and roles can help channel usage.

The organisation-wide training of employees will be crucial regarding two aspects: first, in an attempt to “leave no one behind”, companies want to make sure that their employees keep up to date with the rapid technological and cultural change that AI is expected to bring. Second, the uncontrolled use of AI by untrained and uncontrolled employees can result in shadow AI, which involves the known risks of complexity, high cost, and security threats.

Speak to our analyst – Eric Beaudet

4. 2025 will see big changes in the data centre space

The public cloud-first trend will remain omnipresent, but we expect to see a more diverse picture than in recent years. Obviously, most organisations have always followed hybrid cloud approaches. After years of sometimes uncontrolled public cloud migration, many organisations have recently begun focusing on the optimisation of cloud consumption and cost. Some organisations have even decided to re-insource their IT after public cloud costs exceeded those of on-premises architectures.

Private cloud approaches are considered as one way to keep control of sovereignty and cost. However, we observe a shift here, too. The changes in VMware’s licensing models have prompted customers and service providers to look for alternatives such as open-source solutions or on-prem cloud offerings.

While growth rates in the traditional public cloud business have declined – although still in the high double-digit range – the success of the cloud hyperscalers is fuelled by the emergence of GenAI.

Consequently, the hyperscalers have announced data centre investments worth billions of Euros. These giant data centres must be electrified and cooled without compromising carbon emission targets; after all, the hyperscalers’ emissions have already increased dramatically in recent years. Therefore, all big vendors have recently proclaimed nuclear energy to be another major investment target in addition to renewables.

At the same time, companies and governments have become aware of the risk associated with the hyperscalers’ dominance in cloud and AI. Multiple sovereign cloud and sovereign AI approaches have been launched, and regulators will keep setting guidelines for sovereign cloud specifications, which will potentially lead to more billion-euro investments in sovereign cloud offers, including from local and regional vendors.

We, therefore, expect greater rather than smaller variety and complexity going forward, including all the known challenges related to the management of hybrid and multi-cloud landscapes, which now even extend to multi-AI platforms.

Speak to our analyst – Karsten Leclerque

5. From Discovery to Loyalty: How AI will fully automate customer journeys

By 2027, end-to-end AI customer journey automation will revolutionise how enterprises engage with customers across their entire life cycle, from discovery to conversion and retention. Software and services companies will offer sophisticated agentic, AI-driven platforms that enable businesses to design, execute, and optimise personalised customer engagement strategies with minimal human intervention.

Leveraging advanced deep learning models, these platforms will continuously learn from customer behaviour and interactions, adapting digital in-store or online customer journeys in real-time to deliver highly tailored experiences at each touchpoint.

For an organisation leadership team, this means a fundamental shift in how customer engagement is managed. Rather than relying on manual processes or isolated automation tools, agentic AI capabilities will orchestrate the entire customer journey, analysing data from every interaction to make informed decisions about what content, offers, or communications resonate most with individual customers.

Generative AI will play a key role by creating dynamic, personalised content— such as product recommendations, marketing messages, and customer service responses—ensuring each customer interaction feels uniquely relevant.

Organisations will benefit from improved customer satisfaction, higher conversion rates, and greater loyalty as these AI systems guide customers through optimised, frictionless journeys. For instance, agentic AI-driven workflows automatically trigger personalised follow-up e-mails after a product demo or adapt website content based on real-time behavioural data to better match the visitor’s preferences.

CxOs will find that these AI-powered platforms reduce operational costs by automating previously manual tasks while simultaneously enhancing the customer experience. Agentic AI’s continuous learning capabilities will allow businesses to stay ahead of evolving customer expectations, rapidly adjusting strategies to meet new market demands. By 2027, enterprises that adopt end-to-end AI customer journey automation will be better positioned to finally deliver hyper-personalised experiences at scale, fostering deeper customer engagement and driving sustainable growth in ever-competitive market segments.

Speak to our analyst – Spencer Izard

6. RISE with SAP will drive user organisations towards cloudification and reshape the SAP services partner ecosystem

In 2025 and the following years, the already tense situation in the SAP S/4HANA market will become even tighter. The period until the end of standard maintenance for legacy ERP systems in 2027 will be characterised by time pressure and a shortage of resources. At the same time, user organisations must drive the cloudification of their application architectures and the transformation of their business processes.

At the heart of these changes is RISE with SAP, which addresses existing customers. SAP strongly incentivises RISE on the sales side and massively pushes it through its innovation strategy. Also, RISE usually requires public IaaS-based deployment models for SAP S/4HANA. Even though many SAP customers are still reluctant to introduce RISE, PAC believes that there will be no way around RISE in the coming years and the shift in application architecture towards public cloud deployment is inevitable.

Due to the RISE-induced shift of the SAP landscape to the public cloud, user organisations are faced with the question of what the future of non-SAP applications will look like, given that these two landscapes are usually closely linked.

RISE will also change established customer-partner relationships and the SAP services partner ecosystem, as SAP will take over public cloud hosting and technical application management under RISE contracts. This means that this kind of SAP-related services will no longer be addressable for the partner ecosystem in the future (or they will, at best, be subcontractors).

This will, first of all, affect service partners with a strong SAP hosting business, who will subsequently expand their service portfolios within or outside the SAP ecosystem, which is bound to create new competitive situations. On the other hand, it is already evident that providers focused on consulting and integration are responding to RISE by creating their own extensions and special services.

In any case, S/4HANA and RISE will transform user organisations’ application landscapes and the competitive landscape in the service partner ecosystem in the coming years.

Speak to our analyst – Joachim Hackmann

7. Sustainability moves beyond regulatory drivers

Regulation has been the primary driver for the recent wave of sustainability initiatives. However, in 2025, PAC expects that factors such as changing customer and employee preferences and pressure from investors and wider ecosystems will reshape sustainability strategies to integrate and embed ESG into day-to-day operations.

This requires an approach that seeks to embed sustainability into core business activities rather than treating it as a series of siloed initiatives. This shift requires breaking down organisational barriers and embedding digital sustainability principles and tools across all functions.

For example, supply chain management and procurement teams will increasingly utilise tools to assess suppliers against sustainability criteria when choosing their business partners. Data exchange platforms will enhance collaboration and equip procurement teams with accurate ESG data from their partners instead of relying on estimates. R&D and production teams will employ simulation software to refine product carbon footprints and evaluate alternative production methods.

While some organisations have made progress in embedding sustainability into various business functions, many are still too focused on regulatory compliance. The tendency to concentrate on tracking ESG metrics rather than using those metrics to drive operational improvements limits the potential of ESG strategies.

There is still a long way for many organisations to travel in order to fully tackle the compliance challenge. PAC’s research has found that there remains a long tail of companies that are in the process of implementing the necessary tools and processes to meet the European Union’s Corporate Sustainability Reporting Directive (CSRD).

Those lagging behind often face challenges related to data management or a lack of understanding of regulatory requirements, largely due to skill gaps. Moreover, with over 3,700 data points required under the CSRD and EU Taxonomy, many companies still struggle with poor data quality, unavailable data, or the complexity of consolidating information from disparate sources.

However, the most impactful sustainability strategies will be those that set their sights beyond compliance and aim for a more transformative approach. True ESG integration can help businesses not only reduce emissions but also improve supply chain logistics or resource optimisation, all of which contribute to better efficiency and competitiveness. The organisations that succeed will be those that recognise the potential of sustainability as both a compliance requirement and a competitive advantage.

Speak to our analyst – Aida Oganesov

8. Cyber Asset Attack Surface Management (CAASM) – breakthrough by 2027

Cyber Asset Attack Surface Management (CAASM) is a method for effectively managing and securing the attack surface of a company’s IT resources. This attack surface encompasses all potential vulnerabilities and access points that could expose a company to cyber threats. CAASM systems facilitate comprehensive recording, evaluation, and monitoring of an organisation’s digital assets, including servers, end devices, applications, and cloud resources. The objective is to gain a comprehensive and dynamic understanding of the IT infrastructure to identify and promptly address security vulnerabilities.

The importance of CAASM is growing in line with the increasing complexity of IT environments used by organisations. As digitalisation and networking advance, the number and complexity of managed IT assets are surging. This makes it more challenging to identify vulnerabilities. Traditional security solutions often only cover individual areas of the infrastructure, which results in information gaps and a lack of transparency.

CAASM addresses these issues by integrating all assets and providing a central view. This allows security managers to take targeted protective measures and reduce overall risk. A CAASM approach not only reduces potential attack surfaces but also ensures that security measures are continuously adapted to changes in the infrastructure.

CAASM will experience a significant advancement by 2027 due to the integration of cutting-edge technologies such as advanced automation based on deep-learning/machine-learning artificial intelligence capabilities. Deep-learning and machine-learning artificial intelligence will enable more accurate threat prediction and faster detection of vulnerabilities.

This will allow CAASM systems to respond in real-time to changing attack vectors and provide recommendations for risk mitigation. Furthermore, regulatory pressure is expected to increase, forcing organisations to implement comprehensive and transparent security concepts such as CAASM. Growing security and compliance requirements and the need for efficient, scalable security solutions will make CAASM an essential component of future cybersecurity strategies.

9. Cyber resilience will be the top issue for companies worldwide in 2025

Cyber resilience is the ability of a company to keep its business processes going and recover quickly from incidents despite cyber-attacks and threats. It goes beyond traditional cybersecurity, which primarily involves protecting IT systems. Cyber resilience focuses on rapid response and recovery measures to minimise the impact of attacks on business operations. This includes threat prevention and detection, effective incident response, and fast business recovery.

The importance of cyber resilience is increasing as companies become more digitally connected and cyber-attacks become more frequent and sophisticated. A resilient company can minimise downtime and financial loss and protect its reputation by reacting promptly. A lack of cyber resilience can lead to business disruption, loss of customers, and financial loss. The growing threat landscape shows that it is crucial for companies to not only ward off threats but also prepare for dealing with successful attacks.

Cyber resilience is expected to become significantly more critical and experience a breakthrough by 2025. The increased use of machine learning (ML) and deep learning (DL) artificial intelligence allows for faster threat detection and response, which plays a pivotal role. These technologies help identify system anomalies early on and initiate automated countermeasures.

Furthermore, new legal requirements such as NIS2, CRA, and DORA are forcing companies to develop robust resilience strategies to better protect their systems. The interplay between these technological and regulatory advances will make cyber resilience a priority for companies and establish it as a standard requirement in the digital world. Therefore, cyber resilience is not merely a defensive strategy but rather an investment in the long-term security of businesses.

Speak to our analyst – Wolfgang Schwab

10. 2025 will be the year when industrial companies overcome IT/OT data silos and prepare for the AI age

In 2025, many manufacturing companies will focus on unifying their data management to overcome data silos across IT and OT. This will especially involve establishing company-wide data catalogues combined with a governance framework to provide structured access to these data sources. In PAC’s view, the push in 2025 will be triggered by four factors: first, pressure to prepare for the upcoming AI age.

Thanks to ChatGPT, everybody now understands how important it is to have company-wide access to data, not only to analyse it for different purposes but also to train new AI models. This is especially relevant because the next step in the evolution is becoming evident – the rise of AI agents. These rational agents are goal-driven software bots that can perform more complex tasks and collaborate in multi-agent systems. To be successful in this space, in-house AI agents must also be able to access different data sources.

Second, there is competitive pressure, as leading industrial companies like Siemens and ABB have already moved in this direction and established internal data clouds. This will force other companies to follow fast.

Third, a growing number of offerings provide more choices to customers today. While platforms like Snowflake, Cognite, and Databricks have existed for some time, we observe that prominent vendors have also started offering solutions in this space. Examples are Microsoft Fabric and SAP Datasphere.

Fourth, a growing number of partnerships between prominent OT data platform vendors like Rockwell Automation and AVEVA and vendors like Cognite and Databricks are established to unlock the big existing OT data silos (data historian). All this will drive the market for industrial data platforms in 2025 and beyond. That is why in 2024, PAC started to evaluate the vendor landscape for industrial data fabrics.

Speak to our analyst – Arnold Vogt