ISG finds European firms embedding AI across software engineering

European enterprises are extending generative AI beyond coding assistance and embedding it across software engineering, according to ISG. The firm says companies are still prioritizing application modernization despite subdued economic growth, elevated energy costs and geopolitical uncertainty, with buyers seeking productivity gains, lower operational complexity and stronger resilience.

Organizations are favoring continuous modernization over wholesale replacement of older applications. ISG points to rising use of AI-assisted documentation, business-rule extraction, code transformation and automated testing, while development teams take on more operational responsibility and quality engineering moves earlier into the software lifecycle.

Engineering platforms are gaining importance as enterprises look for unified ways to manage application work from requirements through deployment and operations. Buyers also want to avoid dependence on a single foundation model, hyperscaler or AI platform, pushing providers to coordinate varied AI environments and support client flexibility.

The 2026 ISG Provider Lens AI-driven ADM Services report for Europe evaluates 35 providers across Application Development Outsourcing, Application Managed Services and Application Quality Assurance. Accenture, Capgemini, Cognizant, DXC Technology, HCLTech, Infosys and Wipro are named Leaders in all three quadrants, while Altimetrik is named the global ISG CX Star Performer for 2026 among AI-driven ADM service providers.