Hello. This is Stanton Jones and Sunder Sarangan with what’s important in the IT and business services industry this week.
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What You Need to Know
Hiring in the IT and business services sector remained subdued in the second quarter of 2025 as providers continue to use a wait-and-see approach in the face of continued business uncertainty.
Data Watch
Background
As we predicted earlier this year, headcount growth in the IT and business services sector continues to be largely flat in the first two quarters of 2025 as discretionary spending remains under pressure.
This week’s Data Watch shows growth sentiment was positive leading into 2025. But, as business uncertainty ramped up and revenue from discretionary spending shrunk, hiring began to slow.
For the last two quarters, providers have been primarily focused on backfilling for attrition and maintaining already-elevated utilization levels.
The Details
- The industry added approximately 9,000 employees in 2Q25.
- Total headcount is up 3% YoY while revenue is up 4%.
- Meanwhile, almost 75% of providers reported an attrition increase in 2Q25, marking the second consecutive quarter in which a majority of providers reported an uptick.
What’s Next
Given our low single-digit-growth forecast for 2025, this “wait and see” approach to hiring will likely continue into the second half of 2025. Providers are unlikely to hire ahead of anticipated demand and, instead, will continue to focus on optimizing existing resources. That said, even though most providers report an uptick in attrition, we’re not seeing any significant impact on staffing or transition timelines.
And finally, the million-dollar question: is AI the reason hiring is slowing in the sector? We don’t think so. This current slowdown is likely driven by uncertain demand rather than by any improved productivity providers might be seeing from the deployment of LLMs in their delivery operations.
That said, it’s important to remember that AI is both a growth opportunity and a disruptive threat to the traditional pyramid-based global delivery model of the IT and business services sector. AI will have an impact – eventually. The question is when.
About the authors
Stanton Jones
Stanton helps enterprise technology leaders, IT service providers and buy- and sell-side professionals make sense of the global IT services sector. Stanton's weekly briefing - the Index Insider - is read by thousands of industry stakeholders each week.
