The application development and maintenance (ADM) market in Europe is undergoing a major transformation as enterprises increasingly leverage generative AI (GenAI) in their service delivery models, according to a new report by Information Services Group (ISG), a global AI-focused technology research and advisory firm.
Europe’s ADM landscape is moving toward a co-intelligence approach, where human engineers collaborate seamlessly with AI systems. By integrating AI into every stage of the software lifecycle, organizations are achieving higher performance while adhering to regulatory requirements.
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The 2025 ISG Provider Lens AI-Driven ADM Services report for Europe highlights that over the past year, enterprises have incorporated GenAI agents into their delivery lifecycles, revolutionizing how applications are developed, tested, and managed. Initially, GenAI was primarily used in code generation and quality assurance. Today, it drives end-to-end delivery processes, enabling targeted modernization of legacy systems without replacing them entirely, as these systems remain critical to enterprise technology infrastructure.
“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.”
Organizations are expanding GenAI applications beyond code generation to continuous code review, predictive observability, and compliance mapping. AI agents now co-own service delivery alongside engineering teams, enhancing productivity and quality. In response, European governments and businesses are accelerating investments in sovereign AI infrastructure, including Germany’s planned GenAI gigafactories and EU programs such as GenAI4EU and InvestAI, which promote secure, open innovation.
ISG notes that enterprises are standardizing GenAI adoption through service engagements tied to business outcomes. Success is increasingly measured against key performance indicators such as faster time to value and improved customer experience, rather than mere productivity gains. Yet, data governance and compliance challenges persist, particularly under GDPR and the EU AI Act, which demand transparency, auditability, and strict access control.
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“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 identifies the convergence of AI ecosystems as a key trend, with enterprises collaborating with large language model vendors, cloud providers, and sovereign data platforms to build modular, compliant AI solutions. Sustainability, AI-driven talent reskilling, and public–private investment initiatives are further shaping the European ADM market.
ISG evaluated 33 providers across three quadrants: Application Development Outsourcing, Application Managed Services, and Application Quality Assurance. Accenture, Capgemini, Cognizant, DXC Technology, HCLTech, Infosys, and Wipro were named Leaders across all three quadrants. Atos, Deloitte, IBM, T-Systems, and TCS earned Leader recognition in two quadrants each. NTT DATA emerged as a Rising Star, while LTIMindtree secured the global ISG CX Star Performer award for 2025, achieving the highest customer satisfaction scores in ISG’s Voice of the Customer survey.
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