European Enterprises Adopt AI-Native Application Services

Companies rethink how software is built, maintained and assured as AI becomes embedded in application lifecycles, ISG Provider Lens® report says

LONDON--(BUSINESS WIRE)-- Enterprises in Europe are extending generative AI beyond coding assistance and embedding it throughout software engineering to accelerate application modernization, according to a new research report published today by Information Services Group (ISG) (Nasdaq: III), a global AI-centered technology research and advisory firm.

The 2026 ISG Provider Lens® AI-driven ADM Services report for Europe finds that enterprises continue to prioritize application modernization despite subdued economic growth, elevated energy costs and geopolitical uncertainty. Organizations increasingly expect these investments to produce measurable business results that include improving productivity, reducing operational complexity and strengthening resilience.

“European enterprises are now taking a more practical approach to older applications,” said Matthias Paletta, director at ISG. “Instead of replacing them entirely, companies are retaining important business knowledge while updating the technology that supports them.”

European enterprises increasingly favor continuous application modernization, using AI-assisted documentation, business-rule extraction, code transformation and automated testing to update older systems. Development teams are also taking greater responsibility for operations, while quality engineering is being incorporated earlier in software development. As the lines between them blur, application development, managed services and quality assurance are beginning to form a single engineering lifecycle.

Engineering platforms are becoming more important as companies seek a unified way to manage application work from requirements through deployment and operations, ISG says. European buyers also want to avoid dependence on a single foundation model, hyperscaler or AI platform. They increasingly expect to use environments that include different language models and integrate their own AI agents. As a result, providers are focusing less on proprietary models and more on how they coordinate AI while giving clients flexibility as technologies change.

Quality assurance is a growing priority as more software is generated by AI, the report says. European enterprises now expect testing to take place throughout development rather than after applications are completed. Quality teams are expanding their focus beyond conventional software to encompass AI-generated code, autonomous agents and models. Providers are responding by supporting ongoing validation, helping organizations maintain reliability as automation increases and making quality central to AI-based development.

“Software engineering is becoming less about supplying development capacity and more about applying specialized knowledge where it matters,” said Oliver Nickels, lead author of the report. “Enterprises need providers that can combine technical expertise with local understanding and disciplined oversight as AI assumes a larger role in application work.”

The report also explores other application trends affecting European enterprises, including changing workforce requirements amid increasing automation and growing demand for regional expertise in regulated industries.

For more insights into the AI-driven ADM challenges faced by enterprises in Europe, plus ISG’s advice for overcoming them, see the ISG Provider Lens Focal Points briefing here.

The report evaluates the capabilities of 35 providers across three quadrants: Application Development Outsourcing, Application Managed Services and Application Quality Assurance.

The report names Accenture, Capgemini, Cognizant, DXC Technology, HCLTech, Infosys and Wipro as Leaders in all three quadrants. Atos, Deloitte, NTT DATA and T-Systems are named as Leaders in two quadrants each. IBM, Stefanini and TCS are named as Leaders in one quadrant each.

In addition, LTM is named as a Rising Star — a company with a “promising portfolio” and “high future potential” by ISG’s definition — in two quadrants. Hitachi Digital Services, Inetum, Stefanini and T-Systems are named as Rising Stars in one quadrant each.

In the area of customer experience, Altimetrik is named the global ISG CX Star Performer for 2026 among AI-driven ADM service providers. Altimetrik earned the highest customer satisfaction scores in ISG's Voice of the Customer survey, part of the ISG Star of Excellence™ program, the premier quality recognition for the technology and business services industry.

Customized versions of the report are available from Capgemini and T-Systems.

The 2026 ISG Provider Lens AI-driven ADM Services report for Europe is available to subscribers or for one-time purchase on this webpage.

About ISG

ISG (Nasdaq: III) is a global AI-centered technology research and advisory firm. A trusted partner to more than 900 clients, including 75 of the world’s top 100 enterprises, ISG is a long-time leader in technology and business services that is now at the forefront of leveraging AI to help organizations achieve operational excellence and faster growth. The firm, founded in 2006, is known for its proprietary market data and research, in-depth knowledge and governance of provider ecosystems, and the expertise of its 1,500 professionals worldwide working together to help clients maximize the value of their technology investments.

View source version on businesswire.com: https://www.businesswire.com/news/home/20260924525014/en/

Press Contacts:
Laura Hupprich, ISG
+1 203-517-3132
[email protected]

Philipp Jaensch, ISG
+49 151 730 365 76
[email protected]

Source: Information Services Group, Inc.

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