Professional services leaders have never shied away from making bold proclamations and predictions about technology disruption and transformation in other industries. The arrival of generative AI has triggered a particularly loud, unwelcome refrain for the industry itself: services are dead.
On this week’s episode of AI Knowhow, Pete Buer sits down with Chris Barbin and Michelle Swan of Tercera, an investment and advisory firm focused exclusively on next‑generation IT services businesses, to pressure‑test that narrative. The trio digs in to Tercera’s recently published guide, A New Services Playbook for the AI Era, and discusses what the facts and figures actually say about how AI is already impacting the services landscape and what the years ahead hold.
Their conclusion is clear: AI is not an extinction‑level event for services companies, but it is forcing a fundamental rewrite of how services firms create value, compete, and grow.
Here are a few takeaways from the episode that services leaders should be thinking about as we head into 2026 and beyond.
A $1.5 Trillion Industry Doesn’t Disappear, It Evolves
The services industry is enormous, complex, and highly segmented. Treating it as a monolith that will be wiped out by AI misses the more likely reality.
As Chris puts it, AI will absolutely introduce pressure on pricing, delivery models, and labor structures, but sweeping generalizations about the collapse of services ignore what’s already happening. New and different service lines and delivery models will emerge that capitalize on the mixture of man and machine, or carbon and silicon, as Tercera puts it in the New Services Playbook.
The real question isn’t whether services survive. It’s where value migrates next.
The Rise of Services-as-Software
One of the most important concepts from Tercera’s new research is the emergence of a third category that sits between traditional software and traditional services: services delivered through a software‑like experience.
These offerings automate portions of service delivery, compress timelines, and radically change cost structures. The result isn’t the elimination of services. It’s a shift in how they’re packaged and priced.
This new category will take share from both software and services. Growth won’t come from expanding the market as much as it will come from winning share within it.
For services firms, that means the scoreboard is changing, and so is the game.
From Billable Hours to Outcomes…Finally?
For years, the industry has talked about outcome‑based pricing. AI may finally force the issue.
When work that once took six weeks can now take six days, billing by the hour becomes harder to justify. Buyers are increasingly focused on results, not inputs—and providers are being pushed to meet them there.
That said, this shift won’t happen overnight. Expect experimentation: fixed fees, retainers, deliverable‑based pricing, and hybrid models as firms search for what works.
The important signal is directional: value delivered matters more than time spent.
The Bottom Line
AI is reshaping professional services, but not by eliminating the human element. Trust, judgment, and relationships still matter deeply. What’s changing is where differentiation lives.
The firms that win will:
- Automate what no longer differentiates
- Move up the value stack
- Embrace new delivery and pricing models
- Use AI deeply inside their own organizations
The old playbook no longer applies. A new one is emerging. Watch or listen to the full episode of AI Knowhow to hear Pete Buer’s complete conversation with Chris and Michelle, and be sure to download Tercera’s New Services Playbook for the full set of recommendations.
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Show Notes
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- Connect with Chris Barbin on LinkedIn
- Connect with Michelle Swan on LinkedIn
- Download Tercera’s A New Services Playbook for the AI Era
- Visit the Tercera website
- Connect with Pete Buer on LinkedIn
- Try Knownwell free for 30 days
- Schedule a guided Knownwell demo
- Follow Knownwell on LinkedIn
