A market reshaped by AI-driven disruption
The defining theme across tech and tech services over the past year has been the pace and scale of disruption being driven by AI. Almost every conversation in the sector now comes back to the same questions: what is genuinely changing, what is hype, and which business models are most exposed?
That has created a more complex market, but also a more active one. Investors, management teams and founders are all reassessing how software and services businesses will evolve, where the risks sit, and which assets are best placed to benefit from the next phase of adoption.
The result is a market being reshaped in real time. Some software categories are under pressure, particularly where offerings are easier to replace or switch off. At the same time, there remains a clear and lasting need for businesses that help clients centralise data, connect systems, manage complexity and deploy technology effectively.
“AI is the backdrop to every conversation we’re having at the moment. It’s creating uncertainty, but it’s also creating opportunity for the businesses that are positioned in the right parts of the market.”
Wesley Fell-Smith, Partner and Head of Tech & Tech Services
Adoption cycles creating new opportunities
The current cycle is following a familiar pattern. New tools are attracting significant investment, creating strong demand for support around implementation, integration and ongoing management.
This is already being reflected in spending patterns. In some areas, budgets are shifting away from ongoing managed services and towards professional services that support adoption and transformation. At the same time, providers are evolving their propositions to help clients deploy and manage new technology more effectively. While demand is changing, the need for deep technical understanding, specialist implementation capability and informed strategic advice remains strong across both software and services.
Software and services facing a new wave of change
Disruption is no longer being viewed as a software-only issue. While much of the early debate has focused on SaaS and the extent to which AI may replace existing tools, the services side of the market is equally exposed to change.
Across technology-enabled services, IT services and broader business services, AI is beginning to reshape how work is delivered, how teams are structured and where value sits. In some cases, it is acting as a co-pilot alongside existing teams. In others, the long-term direction points towards more autonomous delivery models.
At the same time, real-world deployment remains complex. AI tools depend on strong data foundations, reliable governance and effective implementation. The businesses and investors navigating this environment most successfully are those distinguishing between short-term noise and long-term value creation.
Adoption cycles creating new opportunities
The current cycle is following a familiar pattern. New tools are attracting significant investment, creating strong demand for support around implementation, integration and ongoing management.
This is already being reflected in spending patterns. In some areas, budgets are shifting away from ongoing managed services and towards professional services that support adoption and transformation. At the same time, providers are evolving their propositions to help clients deploy and manage new technology more effectively. While demand is changing, the need for deep technical understanding, specialist implementation capability and informed strategic advice remains strong across both software and services.
“We’ve always focused on areas where technology is more complex, more embedded, and more difficult to replace. That discipline has served us well in a market where not all software, and not all services, are equal.”
Uncertainty affecting sentiment, but not stopping activity
Macroeconomic pressures have continued to influence the market, particularly in people-led tech services businesses, where inflation feeds directly into cost bases and margins. Higher costs of capital have also shaped investment appetite and valuation discussions.
“We’ve always focused on areas where technology is more complex, more embedded, and more difficult to replace. That discipline has served us well in a market where not all software, and not all services, are equal.”
Wesley Fell-Smith, Partner and Head of Tech & Tech Services
However, while uncertainty has affected sentiment and pricing, it has not stopped deal activity. Periods of disruption often create opportunities for M&A, prompting founders to exit, investors to rebalance portfolios and buyers to act where they see a clear path to future growth.
The key has been careful positioning: clearly articulating how a business fits into a changing market without overplaying trends or relying on superficial narratives.
Focus on the right segments has paid off
A major factor behind continued momentum has been a focus on areas of the market that require deep expertise and are harder to commoditise. Rather than chasing every high-growth software trend, the emphasis has remained on segments where implementation, know-how and strategic positioning matter most.
That approach has proved valuable in the current environment. While some parts of the market have faced greater disruption, businesses with more complex use cases, stronger technical depth or more embedded customer relationships have remained attractive.
“We’ve always focused on areas where technology is more complex, more embedded, and more difficult to replace. That discipline has served us well in a market where not all software, and not all services, are equal.”
Wesley Fell-Smith, Partner and Head of Tech & Tech Services
We completed 49 tech transactions with a total value of €1.8bn in FY25/26
Collaboration driving a stronger international platform
The past year has also seen strong collaboration across the wider Clearwater platform. Cross-border knowledge sharing and market insight have strengthened the ability to understand changing trends and position clients effectively.
In a market defined by rapid change, this collaborative model continues to be a key advantage.
“Our ability to share insight across markets is a real strength. The more we collaborate across geographies and sectors, the better positioned we are to understand where demand is building and how to help clients navigate it.”
Wesley Fell-Smith, Partner and Head of Tech & Tech Services
Looking ahead: complexity will create opportunity
The pace of change across AI, data, software and services is unlikely to slow. This will continue to create both opportunity and pressure across the sector, with clear winners and losers emerging over time.
For the strongest businesses, however, the environment remains rich with opportunity. Those that help customers navigate complexity, implement technology effectively and build durable capabilities will continue to be in demand.
For investors, the challenge remains separating hype from substance and backing businesses with real strategic relevance in the next phase of adoption.
“Our ability to share insight across markets is a real strength. The more we collaborate across geographies and sectors, the better positioned we are to understand where demand is building and how to help clients navigate it.”
Wesley Fell-Smith, Partner and Head of Tech & Tech Services
Tech & Tech Services Lead
Wesley Fell-Smith
Managing Director
I’ve been in M&A for more than 20 years. Slightly biased, but I believe I’m lucky enough to lead the best global tech team in the market. I grew up in Zimbabwe, which may help explain my pulsating collection of loud shirts and ‘original’ dance moves.
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