Enterprises adopt GenAI in hybrid delivery models, reshaping application development and management, ISG Provider Lens® report says
The application development and maintenance (ADM) market in Europe is fundamentally evolving as generative AI (GenAI) becomes instrumental in emerging service delivery models, 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 2025 ISG Provider Lens® AI-Driven ADM Services report for Europe finds that over the past year, enterprises have begun integrating GenAI agents into their delivery lifecycles, changing how applications are developed, tested and managed. The use of GenAI has advanced from limited pilots in code generation and quality assurance into end-to-end delivery lifecycles. Organizations use GenAI for targeted code modernization rather than entirely replacing high-value legacy systems, as these systems remain central to enterprise technology stacks.
"Europe's ADM market is entering a phase of co-intelligence where human engineers and AI systems work together to achieve operational excellence," said Matthias Paletta, director at ISG. "Enterprises are realizing tangible performance improvements, while complying with regulations, by embedding AI into every stage of their software lifecycle."
Enterprises are expanding GenAI use beyond code generation to continuous code review, predictive observability and compliance mapping. AI agents are also collaboratively supporting engineering teams, becoming co-owners of service delivery. As AI becomes vital to software development and operations, European governments and enterprises are accelerating investments in sovereign AI infrastructure, the report says. These initiatives include Germany's planned GenAI gigafactories and European Union (EU) programs such as GenAI4EU and InvestAI, aimed at enabling secure, open innovation.
Enterprises in Europe are standardizing the adoption of GenAI through service engagements tied to business outcomes, ISG says. Rather than focusing solely on productivity gains to measure success, organizations are benchmarking AI-driven ADM services against business key performance indicators, including faster time to value and higher customer experience ratings. However, many still face challenges in meeting data governance and compliance requirements under the General Data Protection Regulation (GDPR) and the EU AI Act, which demand transparency, auditability and strict access controls, the report says.
Another key ADM trend in Europe is the convergence of AI ecosystems, ISG says. Enterprises are deepening partnerships with large language model (LLM) vendors, cloud providers and sovereign data platforms to build compliant, scalable and modular AI solutions aligned with European regulatory goals. This shift is driving enterprises to become more selective, prioritizing highly adaptable providers with strong governance frameworks.
"The ADM market is shifting from process maturity to intelligence integration and transparency," said Oliver Nickels, lead author of the study. "Enterprises increasingly expect full transparency and control over AI behavior, especially in regulated sectors such as finance, healthcare and energy."
The report also explores other European trends in AI-driven application services, including sustainable AI adoption and increased investments in AI and talent reskilling through public–private initiatives.
For more insights into the ADM-related challenges faced by enterprises in Europe, along with ISG's advice for addressing them, see the ISG Provider Lens® Focal Points briefing here.
The 2025 ISG Provider Lens® AI-Driven ADM Services report for Europe evaluates the capabilities of 33 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, IBM, T-Systems and TCS are named as Leaders in two quadrants each.
In addition, NTT DATA is named as a Rising Star — a company with a "promising portfolio" and "high future potential" by ISG's definition — in two quadrants each.
In the area of customer experience, LTIMindtree is named the global ISG CX Star Performer for 2025 among AI-driven ADM Services providers. LTIMindtree 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 2025 ISG Provider Lens® AI-Driven ADM Services report for Europe is available to subscribers or for one-time purchase on this webpage.
About ISG Provider Lens® Research
The ISG Provider Lens® Quadrant research series is the only service provider evaluation of its kind to combine empirical, data-driven research and market analysis with the real-world experience and observations of ISG's global advisory team. Enterprises will find a wealth of detailed data and market analysis to help guide their selection of appropriate sourcing partners, while ISG advisors use the reports to validate their own market knowledge and make recommendations to ISG's enterprise clients. The research currently covers providers offering their services globally, across Europe, as well as in the U.S., Canada, Mexico, Brazil, the U.K., France, Benelux, Germany, Switzerland, the Nordics, Australia and Singapore/Malaysia, with additional markets to be added in the future. For more information about ISG Provider Lens research, please visit 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, in-depth knowledge of provider ecosystems, and the expertise of its 1,600 professionals worldwide working together to help clients maximize the value of their technology investments.
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Laura Hupprich, ISG
+1 203 517 3100
laura.hupprich@isg-one.com
Philipp Jaensch, ISG
+49 151 730 365 76
philipp.jaensch@isg-one.com
