By Adam Mills
AI Editor
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Enterprise tech budgets are going up. The expectations attached to them are rising even faster.
That precise pressure will be the focus of Newsweek’s upcoming “AI Impact Forum” webinar, “The Trillion-Dollar Question: Who Wins and Who Loses in the Services Economy?” scheduled for Thursday, May 28 at 10 a.m. Eastern.
In the session, Dr. Ranjit Tinaikar, host of the series and former CEO of Ness Digital Engineering, will sit down with Noshir Kaka, senior partner at McKinsey & Company, to examine how AI is redefining enterprise technology economics—and what that means for services, software and the companies competing across them.
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“Work is not the constraint anymore—the outcome is,” Kaka told Newsweek recently. In other words, leaders are no longer judging technology spending only by the amount of work it supports, but by whether it produces measurable business results.
Even as budgets grow—often in the mid-single digits—those gains are being offset by new demands. Organizations are funding AI adoption, data transformation and modernization simultaneously, without a proportional increase in overall spend, creating a reallocation problem across the market and forcing difficult trade-offs.
Kaka said that pressure is likely to fall on legacy technology spending—not because older systems are obsolete, but because they are no longer the priority. To make room for AI, companies may have to cut spending elsewhere, often by wide margins, while maintaining operations. That pattern is not new in technology cycles, but the pace and magnitude are.
“If you’re increasing your budget by 6 or 7 percent, but you need 20 percent more capacity to meet demand, that gap has to come from somewhere,” Kaka said.
The addressable market for technology-enabled services is also expanding, even as the structure of that market begins to change.
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Services firms have traditionally focused on implementation and integration, while software companies built products designed to perform specific tasks. AI is beginning to blur that distinction, with services firms moving into areas traditionally dominated by software, while software providers and platform companies embed services-like capabilities into their offerings. The result is a broader, more competitive market.
“The opportunity is increasing,” Kaka said. “But so is the competition.”
Kaka noted that the scale of that expansion could run into the trillions of dollars.
Today’s global services market represents a fraction of the total technology ecosystem, sitting alongside a significantly larger software market and broad professional-services categories such as legal, accounting and consulting.
As AI lowers the barrier between these categories, services firms are gaining access to new areas of demand—but they are also competing with a growing set of players, from hyperscalers to startups.
Incumbent services providers now face a dual challenge: defend existing business while repositioning for a much larger—and more contested—opportunity.
“If you are an incumbent services player and you do not dramatically change your operating model, you’re toast,” Tinaikar told Newsweek.
Incremental improvement will not be enough. Delivering AI at scale will require new operating models, talent strategies and approaches to delivery.
Enterprise AI transformation is increasingly defined by three efforts: reimagining workflows, modernizing the underlying technology and data stack and redesigning the organization itself. While advances in AI are accelerating progress in some areas, others are becoming more complex.
“Modernizing the tech and data stack is getting easier,” Kaka said. “Reimagining how work gets done—and how organizations operate—is not.”
As companies move from experimentation to deployment, attention is shifting from what AI can do to how it is integrated into real-world systems. That change is exposing gaps in governance, talent and operating structure—areas that will determine whether those investments ultimately pay off.
If AI is expanding the market but raising the bar for participation, who ultimately benefits?
Some organizations will use the moment to expand into new areas, capture emerging demand and redefine their competitive position. Others may struggle to adapt to the speed of change, particularly if they remain tied to legacy models built for a different era. That divide will be a central focus of Tinaikar and Kaka’s discussion.
Rather than focusing on the technology itself, the upcoming webinar will examine the economic and strategic decisions shaping how AI is deployed—and how those decisions are beginning to redraw the competitive landscape.
“Going from 5 or 7 percent productivity to 50 or 60 percent is not a small adjustment,” Kaka said. “It requires fundamentally rethinking how the organization works.”
As enterprise leaders navigate rising expectations, constrained budgets and expanding opportunity, the outcome is not yet clear—but the direction is: The companies that succeed will not be the ones that simply adopt AI, but the ones that restructure how they operate around it.
Sign up for the webinar, for free, today.
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