Research

2026 Software Industry Outlook

5 key trends shaping the software industry in 2026

November 18, 2025

Software trends in 2026

Software enters a new battle for IT budget share
Cloud-only is no longer enough. Software providers are moving to hybrid models that blend cloud, edge, and on-device AI to cut latency, control costs, meet compliance needs, and support emerging agentic architectures.
AI redefines software creation
From planning through deployment, AI is transforming the SDLC, boosting engineering productivity and velocity for teams that pair AI-first workflows with strong governance and clear metrics.
AI success comes from better data, not bigger models
With access to similar foundation models, software companies are differentiating through proprietary, AI-ready data using modern platforms, governance, and human oversight to turn trust into a sustainable moat.
Disruption risk rewrites the M&A playbook
Investors are valuing software targets on the distinctiveness of their AI capabilities, data assets, and vertical expertise, driving consolidation toward platforms with clear, defensible AI advantages.
AI forces a rethink of labor-heavy delivery models
AI-augmented services are upending traditional, labor-based outsourcing as buyers and providers renegotiate contracts around outcomes, automation, and managed services built on smarter AI, not cheaper headcount.

The Year of Relentless Reinvention

“The software industry is being rewired in real time. Competitive advantage is shifting faster than at any point since the dawn of SaaS, as AI transforms how companies build, sell, and deliver technology. The transformation ahead will rival the SaaS and cloud revolutions of the early 2000s—only this time, the pace is exponential.

The leaders of 2026 won’t just bolt AI onto products. They’ll use AI to accelerate innovation, connect products and services, and create experiences that truly set them apart. They’ll know where their value comes from and double down on it—leveraging AI internally to speed up development, improve operations, and scale what works. The best will master the balance between serving today’s customers and reinventing for what’s next."

Dhaval Moogimane

Senior Partner, High-Tech & Software