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The report investigates how AI impacts IT service firms in Denmark, Finland, and Sweden. The report highlights how companies adapt to automation, shift towards product-driven models, and redefine their value propositions.
AI drives structural change, not decline
Despite investor concerns, the analysts argue that AI will not shrink demand for IT services. Instead, it will shift the focus of services. Historically, new technologies have always redirected – not reduced – IT spending. Over the past five years, the European IT services market has grown by 6 per cent annually, outpacing nominal GDP.
“AI is just another wave of transformation,” said Yiwei Zhou, one of the report’s authors. “It will automate repetitive tasks, but also create new opportunities for companies with strong intellectual property.”
Custom software developers better positioned
The report categorises Nordic IT firms into two groups: custom software developers and system integrators. Companies like Netcompany and Trifork, which develop bespoke software, are seen as better positioned for the AI era. Their intellectual property (IP) ownership allows them to scale like software firms and resell solutions across clients.
System integrators like Columbus focus on implementing third-party platforms like Salesforce and Microsoft. These firms face more risk from AI automation, especially in maintenance services. However, their exposure to standard software maintenance is relatively low – around 10 per cent of revenue.
Two common misperceptions
The analysts addressed two widespread investor concerns:
- AI will eliminate revenue by automating code generation. In reality, code writing accounts for only 15–30 per cent of billable hours. The real value lies in domain expertise, system architecture and regulatory understanding.
- Maintenance contracts are at risk. Custom software maintenance is complex and sticky. For example, Netcompany’s work with the Danish Tax Ministry requires frequent updates due to legislative changes, making it a stable revenue source.
Four factors for long-term success
The report identifies four key factors that will determine future winners:
- Scalability through automation and productisation. Netcompany leads with 80% of revenue tied to its IP and fully automated code generation.
- Product-driven business models. Companies with unique offerings in sectors with high barriers to entry – such as public services, aviation and healthcare – are better positioned.
- Pricing model reinvention. Moving from hourly billing to fixed-price and value-based contracts helps firms retain productivity gains from AI automation. Netcompany now generates nearly 80 per cent of its Danish revenue from fixed-price contracts, which explains its superior profitability compared to its competitors.
- Strategic partner potential. Corporations increasingly demand AI-ready IT platforms and AI-driven transformation, requiring IT service companies to have deep domain, regulatory, and compliance knowledge to support them through the entire AI transformation journey. The IT service companies with unique products, scale and scope of capabilities will be rewarded as strategic partners and a competitive advantage.
AI readiness will drive revaluation
The sector has seen a valuation dip due to recent macro-related market weakness and investors’ misperceptions about potential AI impacts. However, the analysts believe this is temporary. As market conditions improve, companies with “future-proven” business models in the age of AI – such as Netcompany, Gofore and Trifork – will likely be re-rated the most.
The report in its entirety is only available to SEB’s institutional customers.