2026 Predictions: Managed Services

Digital Transformation Principal Analyst Bozhidar Hristov unpacks TBR’s predictions for the next three to five years of change in the IT services market. The conversation explores a fundamental shift underway in managed services: from a cost-optimization and labor-arbitrage model to a growth-oriented, insight-driven entry point for consulting, integration and modernization services. Boz explains why managed services are increasingly becoming a “door opener” rather than a back-end support function and examines why this pivot has been difficult for many consultancies to execute.

Boz concludes with a peek at TBR’s forward-looking research agenda for 2026 and beyond, covering changes to commercial models, the decline of time-and-materials pricing, evolving ecosystem dynamics, and how service providers must rethink partner strategies as digital labor becomes a core part of managed services delivery.

Episode highlights:

• Leading with managed services to drive other business

• Changing staffing pyramids

• Changing pricing models

“We’re starting to hear vendors starting to think about investments into the whole notion of agent-managed services as well, because, you can say, why do you care about managed services when agent, agentic AI will likely be substituting a lot of the human-enabled delivery? I think there’ll be parts of that, but I think there’ll be still the last mile of the support where it will be needed from a human perspective, and that human-in-the-loop kind of involvement will remain critical. And that’s why I think some of those vendors will use that as they try to pivot their business models; they try to adjust their business model moving forward because this is where the trust comes into place. Where you are able to answer the CFO’s questions, the chief system information [officer’s], the CISO questions and so forth. … I think 2026, we’re going to hear more examples of it, but I think this is the model of the future, at least for the next three to five years,” said Hristov.

Listen and learn with TBR Talks!

Submit your Key Intelligence Questions for Patrick and his guests

Connect with Patrick on LinkedIn

Learn more about TBR at ⁠⁠⁠⁠⁠https://tbri.com/⁠⁠⁠⁠

TBR Talks is produced by Technology Business Research, Inc.

Edited by Haley Demers

Music by Burty Sounds via Pixabay

Art by Amanda Hamilton Sy

2026 Predictions: Telecom

TBR Talks Host Patrick Heffernan: Welcome to TBR Talks: Decoding Strategies and Ecosystems of the Globe’s Top Tech Firms. Where we talk business model disruption in the broad technology ecosystem from management consultancies to systems integrators, hyperscalers to independent software vendors, telecom operators to network and infrastructure vendors, and chip manufacturers to value-added resellers. We’ll be answering some of the key intelligence questions we’ve heard from executives and business unit leaders among the leading professional IT services and telecom vendors. 

I’m Patrick Heffernan, Principal Analyst, and today we’ll be talking about our 2026 Managed Services Predictions with Boz Hristov, Principal Analyst for TBR’s Digital Transformation Practice. 

Leading with managed services to drive other business

I’m here with Boz Hristov, whose portfolio covers digital transformation, ecosystems, and professional services. So, we want to talk about 2026 in two different ways. First predictions and then what you are excited to be researching next year. So, let’s start with predictions first. Out of all the predictions that you were involved with coming up with this year, as we end 2025, what is the one that you’re most excited about, you’re most confident about? Maybe the one you’re afraid might actually come true in 2026.

Bozhidar Hristov, TBR Principal Analyst: *laughs* Yeah, predictions are a tricky one. Thanks for having me. So I think looking at the way the market has evolved in the last three years, and maybe what’s coming, not just in 26, but maybe looking even beyond that kind of a one year, but maybe into the three-year horizon as well, because I feel like we are starting to make some pivots into the next three-year, three to five year kind of a change in the marketplace. I think the biggest shift that’s going to start kind of paving the way for the next three years is the role of managed services and how the companies that have been investing in managed services position it. As historically we know the outsourcing, labor arbitrage has been enabled, a lot of the low-cost providers to drive a significant amount of business, but it’s been a support mechanism for the large enterprises, has enabled some businesses to come around and to make a name for themselves. And it has been, again, being kind of like, okay, a cost driver, cost optimization driver. 

I think what we’re going to start seeing is how companies are looking at and considering managed services and the capabilities that they have been investing in both the skills and the tools in the last three years to use them as a business growth driver and be not just kind of essentially pivoting from the low-cost delivery model and factory model to more of a business growth model for those organizations. And looking in to understand how supporting the client’s environments will provide them with the insights that are needed for potentially new consulting opportunities, for better process improvement opportunities, and just trying to think about how they can service the clients better. I mean, one can argue and say, well, that’s essentially managed services what it has been, right? But I think the change here is that vendors will look into managed services as a door opener, not as a door closer, essentially. So, it’s in a way, they will lead with managed services to drive consulting. They will lead with the discussion around process optimization, which essentially, in a way, it’s almost like a Trojan horse for them, it allows them to increase that stickiness, to learn the client environments. I think some of the vendors like the India-based outsourcing companies have a very strong foothold and a starting point. We’ve seen some of the consultancies like Deloitte and Accenture trying to go in that direction and kind of change the paradigm. We know others like, you know, some of the other- the rest of the Big Four also have been investing in managed services. I don’t think they’re going to go that far that way to lead with managed services, but I think the investment profile suggests that they’ll try to definitely lean more heavily than they have in the past. 

So, I think this is kind of the big change, is kind of changing the paradigm and lead with managed services to drive consulting, lead with managed services to drive integration services, modernization services, and so forth. That on itself is not going to be an overnight phenomenon. I think we are in a transition year that we’re going to start seeing that model evolve and be a version of it potentially in the next three years, five years. 

We’re starting to hear vendors starting to think about investments into the whole notion of agent-managed services as well, because, you can say, why do you care about managed services when agent, agentic AI will likely be substituting a lot of the human-enabled delivery? I think there’ll be parts of that, but I think there’ll be still the last mile of the support where it will be needed from a human perspective, and that human-in-the-loop kind of involvement will remain critical. And that’s why I think some of those vendors will use that as they try to pivot their business models, they try to adjust their business model moving forward because this is where the trust comes into place. Where you are able to answer the CFO’s questions, the Chief System Information, the CISO questions and so forth. So, this is, I think that’s what we’re going to- we’re starting to hear about it right now. I think 2026, we’re going to hear more examples of it, but I think this is the model of the future, at least for the next three to five years.

Patrick: So, two quick questions and an observation. So, the two questions, quick questions. When you talk about managed services and growth, you’re seeing the managed services revenue growth continue up. And then what you’re talking about is sort of a sliver or a piece of it directly tied- a piece of consulting revenue directly tied to those managed services opportunities that’s going to grow alongside it and faster, yes?

Boz: Yes. It’s exactly- it’s both, actually. I think it’s, you know, managed services, yes, will continue to grow, but it’s exactly that. It will create opportunities for the management consultancies to drive up and to expand, you know, what has been a struggling market in the last couple of years for consultancies. And it’s a way of them to deliver value, to deliver outcomes, you know, and to be a little bit more tangible in their offerings because we know consulting and outcomes can be sometimes a little bit like up for interpretation. And when the consultants and the services providers talk about outcomes, in this case, I think we’ll require them to be a little bit more concrete as a way to demonstrate the value rather than just saying, you are going to be getting some kind of an outcome, but very kind of a wishy-washy.

Why hasn’t this model happened before?

Patrick: Right, so, then a quick question on that, and sort of maybe you’re answering it right there, but it makes so much sense for managed services to be an entree to consulting. Why hasn’t it happened? Or more importantly, what are the things that will prevent some companies from being able to- some IT services companies and consultancies from being able to execute on that model?

Boz: Yeah, I’ll probably start with a second here. I think what’s going to prevent is a lot of it is going to boil down to internal challenges, because especially consulting firms, they are known for, that’s their brand is to lead with consulting, right? So, it’s very hard for take BCG or anybody else like, you know, has been known to start with managed services, even some of the Big Four firms, as much as they’ve been investing in managed services, it’s going to be much harder for them to, say, we are now managed service providers first then consultants.

Patrick: So, BCG starts with consulting, so it’ll be hard for them to start with managed services.

Boz: To make that change. It’s a branding headwind. It is an internal kind of a stakeholder change, you know, change management headwind. And I think that has been probably one of the key reasons why it has not happened. I think the other part is that it will be hard for those companies, some of those companies, to convince buyers that they actually are good at managed services, or they have the right price point for managed services.

Patrick: Right.

Boz: I think that’s part of it as well. Just like it’s hard for those companies to convince buyers that they can develop and sell software, which we know it’s-

Patrick: We know that story really well.

Boz: We know that story well, and we know it’s coming around again now with GenAI, agentic AI. So, I think this is kind of like the, it’s- we’re kind of circling right back to what we’ve been saying for years. It’s staying within your own swim lane probably is your best strategy. And when you need to partner first rather than trying to build yourself. Not even, I’ll say partner, build, buy, try to maybe change that kind of the sequence of those things. But yeah, that’s how I see it.

Topics of interest for 2026 portfolio: The changing staffing pyramids and pricing models

Patrick: So, what you just said leads to an observation for me that I think is part of the next question, the big question I have for you. And what I think you’ve been saying is that the last couple of years have been just so disruptive with GenAI first and then agentic AI. And just we’ve had two or three years where the change is happening so fast. But now we’re about to go into a three to five year stretch where change is going to happen more slowly and some of the more strategic decisions and some of the more, the decisions like around how you change to a managed service led business model are going to play out in a longer horizon. 

Boz: Yup.

Patrick: So if that’s the case and you said, right, so I’m going to take it as it is, what are, when you look out next year, 2026, but even three years, what are some of the issues that you’re looking forward to diving into deeper. Where do you want to go deeper with some of the research?

Boz: Yeah, I think if we start looking into that horizon of the managed services led, kind of a business services, business model, essentially, for most of the companies, there’s a couple of things that will certainly, for us, will be on the horizon from a research perspective and going deeper immediately. I would say understanding the changes of the staffing model of the companies. Understanding the mix of the staffing model between humans and digital FTEs, understanding how that’s going to impact the P&L of the companies that we track closely. I mean, we know those companies’ P&L fairly well. We understand the ins and outs of the P&L in terms of hiring, understand the cost of services structure, and whatnot. Now when you start adding the digital FTE, I think that’s going to be a big element of change because when it comes to managed services, you’re also trying to, at the same time, trying to introduce new technology as an enabling to those managed services, how do you account for that as part of your talent pyramid? How do you account for that as part of your pricing model? How do you account for that when it comes to your profitability levels and predictability levels? So, I think these are some of the questions we’ll be going after to better understand the implications and what are the variables that are shaping in a digital FTE build out. I mean, you know, we know what a human costs, you know, it looks like, right? 

Patrick: Right.

Boz: Salary, benefits, insurance. But then we think about digital FTE, like what are some of the variables that need to be accounted for and how do you blend that with the humans? And then most importantly, how do you monetize that? How do you price it to the client so that client understands what they’re paying for? Because that’s another thing that clients are increasingly looking for, enterprises are increasingly looking for is transparency. So, I think for us, that will keep us definitely very busy understanding the changes of the staffing pyramid to account for the inclusion of digital FTE. That’s going to be a big factor. Changes in the commercial models of the organizations we track closely now will be another factor for us to, from a research perspective, understanding who’s really making a pivot in there. Because if we look at the times and materials being kind of the predominant commercial model today, probably it’s fair to say that in the next five to seven years, that times and materials, there’ll be probably a fraction. Maybe if we’re at 90% today, probably going to be less than 10% in the next five or seven years. 

Patrick: Right.

Boz: And that’s understanding those incremental changes, that’s going to require to make those companies who certainly will keep us busy. And then last but not least is also, all these changes cannot occur in a vacuum. They occur in the ecosystem, right? So, understand the implications of your partners and communication and setting up the right strategy as you’re going to market. I mean, those digital FTEs, as I mentioned, they can be viewed as a piece of software, they are a piece of software, but your partners may see them as being a threat to their business model as well. So how do you then build that in a way that your partners understand the value proposition of a digital FT versus not being seen as a threat to their core business? Those agents, it’s a very fluid word, agents, right? 

Patrick: Right.

Boz: So, I think you have to be very careful how you message your evolving value proposition within your partner ecosystem as well.

Patrick: That’s fantastic, and in a minimum guaranteed, we’re going to see sometime in the next year to three years where the benchmark, one of the benchmarks you work on, the Global Delivery Benchmark, will have to become the Global and Digital Delivery Benchmark, right?

Boz: Very likely. I mean, understanding the changes in the composition, it’s going to be a big part of it. Understanding those, like I said, digital FTEs are becoming an element. We are keeping an ear out, essentially, we have some anecdotal examples at this moment, but again, it’s more of a time horizon. It’s not an overnight change, but it’s beginning to kind of like everyone’s accounting for those changes.

Final thoughts

Patrick: Excellent. Thanks, Boz.

Boz: Thank you.

Patrick: Next week, I’ll be speaking with Ben Carbonneau and Angela Lambert about 2026 Devices and Infrastructure predictions. 

Don’t forget to send us your key intelligence questions on business strategy, ecosystems, and management consulting through the form in the show notes below. Visit tbri.com to learn how we help tech companies, large and small, answer these questions with the research, data, and analysis that my guests bring to this conversation every week. 

Once again, I’m your host, Patrick Heffernan, Principal Analyst at TBR. Thanks for joining us, and see you next week.

TBR Talks: Decoding Strategies and Ecosystems of the Globe’s Top Tech Firms

Join TBR Principal Analyst Patrick Heffernan weekly for conversations on disruptions in the broader technology ecosystem and answers to key intelligence questions TBR analysts hear from executives and business unit leaders among top IT professional services firms, IT vendors, and telecom vendors and operators.

“TBR Talks” is available on all major podcast platforms. Subscribe today!