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In the early 2020s, most IT dashboards looked deliciously green – until you cut them open. That “watermelon problem” summed up the gap between what SLAs said and how people actually felt at work: 99.8% uptime on paper, but slow logons, clunky multi-factor authentication, and chatbots that couldn’t understand what anyone really wanted. Experience was an afterthought, AI was a sideshow, and creativity was nowhere to be found in the contract.​

When SLAs ruled the world

Back then, three things defined the status quo. AI was narrow and local, sitting on the edge of workflows answering FAQs or routing tickets rather than orchestrating work. Experience measurement lagged reality, with annual or quarterly surveys surfacing issues long after the damage was done. And creativity simply didn’t exist in the metrics; contracts cared about uptime, not whether people had the cognitive space to experiment or innovate.​

The result was a strange split-screen. On one side, leaders proudly cited their SLA success. On the other, employees wrestled with friction that didn’t fit any KPI: context-switching between tools, re-entering the same data, and watching “helpful” chatbots miss the point. XLAs were occasionally piloted  (an NPS here, a satisfaction score there) but rarely changed actual design or investment decisions.​

Now: XLAs as control towers for human-AI work

Fast forward to 2026, and AI is no longer the sidekick; it is the backbone of digital work. GenAI assistants, low-code agents, and orchestration platforms now sit inside service desks, digital workplace platforms, and line-of-business apps. XLAs have emerged as the language that decides whether all this AI is genuinely helping humans do better work or just adding more noise.​

Three big shifts define the “now.” Agentic AI makes XLAs real-time and contextual, correlating technical signals like latency and crashes with human signals such as sentiment, task completion, and time to productivity. It can trigger automated remediation, from self-healing endpoints to conversational agents that guide users through fixes, and spotlight experience hotspots for specific personas or workflows. IDC’s 2025 Future of Work survey shows 79% of organizations now actively measure the relationship between employee and customer experience, with two-thirds having proof of causal linkages, while 94% of AI-enabled work adopters report productivity gains and over half see significant improvements.​

Making creativity a measurable outcome

The most interesting XLAs no longer treat creativity as a fuzzy aspiration. They track uninterrupted focus time per persona, link AI automation to freed-up hours, and measure innovation throughput:  ideas submitted, prototypes built, experiments completed. Instead of only asking if AI is fast or accurate, organizations track “human-plus” metrics: how much better decisions, proposals, and options become when humans and AI work together.​

Governance grows up

This evolution is forcing governance structures to grow up fast. AI-focused Centers of Excellence increasingly use XLA dashboards as strategic instruments, challenging deployments that look great on technical metrics but poor on human outcomes. They prioritize changes that build trust and agency, such as better explainability, robust feedback loops, and human override capabilities, and retire tools that consistently score badly on ease of use or learning curve.​

Metrics are diversifying accordingly: about 69% of organizations use productivity scores such as task-based speed and throughput to assess AI, while 42% also track employee satisfaction and 44% monitor skills proficiency. XLAs have become a proxy for hard questions: Are we making it easier for people to solve novel problems? Are AI tools empowering experts or boxing them in? Where is digital friction quietly killing initiative?​

Tomorrow: XLAs as the OS for co-creation

Looking ahead, XLAs are set to become the operating system for human/AI co-creation. Emerging “experience-risk” indices predict burnout or disengagement, while creativity capacity scores combine focus time, use of exploratory tools, and psychological safety indicators. Agentic AI will increasingly use XLAs as experience-intent parameters  – goals like maximizing focus time for data scientists or ensuring frontline staff resolve most issues in under three minutes  – and autonomously orchestrate tools, notifications, and workflows to hit them.​

Contracts will catch up too, moving from green dashboards to models that reward innovation, protect against “experience debt,” and explicitly safeguard time and cognitive bandwidth for meaningful work. For service providers, the mandate is clear: anchor XLAs on outcomes only humans can deliver, make creativity visible on the dashboard, build strong feedback loops, and use XLAs as guardrails against over-automation. XLAs are no longer just a friendlier way to measure IT; they are becoming the central platform for keeping human potential at the center of an AI-driven future of work.

For more information see IDCs upcoming research documents: “Measuring What Matters: XLAs and the 2026 Digital Workplace” and “Control Towers for Human Potential: The Growing Importance of XLAs in the Age of Agentic AI”.

If you have a question about this or any other IDC research, drop it in here.

Meike Escherich - Associate Research Director, European Future of Work - IDC

Analyst Profile
Meike Escherich is an associate research director with IDC's European Future of Work practice, based in the UK. In this role, she provides coverage of key technology trends across the Future of Work, specializing in how to enable and foster teamwork in a flexible work environment. Her research looks at how technologies influence workers' skills and behaviors, organizational culture, worker experience and how the workspace itself is enabling the future enterprise.

By Bo Lykkegaard, Associate VP for Software Research Europe with advice and review by Ewa Zborowska, Research Director, AI, Europe

Providers of SaaS solutions across the world have been through the market capitalization bloodbath during the past six months. Despite presenting solid indicators of growth and margins for 2025, almost all publicly traded companies have seen share price reductions 10% to 60% with the average reduction being in the 30-35% range.

Forget about looming trade wars, recession fears, missed revenue goals, and other conventional share price depressants. This is about AI disruption of the current SaaS user experience, licensing model, and product architecture. Investors are starting to fear that the SaaS ‘rental model for software’ will become invisible ‘featureware’ inside an AI agent layer.

What Are the Market Cap Reductions Telling Us?

We have examined the market cap reductions of public traded SaaS vendors over the past six months. Based upon this, we can make the following observations:

  • All SaaS vendors are affected across solution areas, geographies, size of vendor, recent growth KPIs, and size focus (SMB vs. enterprise). This means that investors are reexamining their assumptions related to SaaS growth prospects in general.
  • Vendors of workflow automation solutions and vendors targeting small and medium-sized businesses appear particularly exposed. Commercial workflow software is seen as exposed to replacement by new AI agent technologies. Also, vendors targeting small businesses are seen as more exposed to churn and price pressures.
  • SaaS vendors headquartered in EMEA do not appear harder hit than those headquartered in North America and the market cap correction has hit the largest as well as the smaller SaaS vendors.

Changes that All SaaS Vendors Are Facing

Firstly, the conventional SaaS user experience must change. In a conventional SaaS application, the user executes tasks manually within defined workflows. In an AI-powered application, the system adds to these structured workflows with probabilistic outputs, where it generates, predicts, recommends, or executes. Also, AI-powered applications can accept and react to all kinds of conversational user inputs. Furthermore, just like today’s LLM-based apps, business applications understand context and remember past interactions, which make recommendations and predictions more relevant and precise. Finally, AI-powered business applications are more proactive in nature and help users with monitoring tasks and relevant notifications.

Secondly, the conventional SaaS licensing model must evolve. The talk of the town these days is ‘outcome-based pricing’, i.e. the notion of pricing an application on outcomes (e.g. number of invoices issued) as opposed to number of users. If agentic workflows increasingly automate core business processes in the future, the user of a, say, financial application will be an agentic workflow as opposed to a human user. As AI agents increasingly become users of business applications, the user-based revenue model of SaaS application collapses. Investors are looking for SaaS vendors to at least align licensing better to business outcomes.

Thirdly, the conversional SaaS product architecture must be rethought. Adding AI to a conventional SaaS solution in the form of a chatbot or other form of AI-generated add-on does not make a meaningful difference. Real modernization requires rethinking the SaaS workflow from the ground up. AI changes all levels of the SaaS product stack and needs foundation model(s), embedding layer, vector database, retrieval-augmented generation (RAG), orchestration layer, guardrails, monitoring, and prompt/version management.

AI is making several other significant changes in SaaS. Development and maintenance as well as running costs have become more volatile and unpredictable. Data management requires new approaches, as application data now serves as a key source for training AI-powered SaaS solutions. Product roadmaps and release cadences are increasingly driven by AI model upgrades rather than traditional update schedules. Software vendors face new risk management challenges related to hallucinations and regulatory compliance. And both vendors and end-user organizations need to adapt their teams with new sets of skills. And most importantly, the overall competitive landscape has shifted, with AI-based startups and hyperscaler offerings emerging as new challengers.

The changes above certainly apply to SaaS vendors in Europe. However, in addition, vendors in Europe – as they adapt solutions and business models to become AI-driven – must pay particular attention to four areas in order to successfully transform.

Firstly, there is the GDPR, NIS2 and EU AI Act compliance, often accompanied by various national or industry-specific regulations. If they cannot document and showcase complete compliance to customers, they cannot sell their AI-powered solutions to compliance-sensitive European organizations.

Secondly, increasingly we see data residency requirements from customers in Europe, particularly in public services, financial services, and healthcare. Buyers in such industries can require EU-hosted data and sovereign cloud guarantees and approaches and can seek to avoid subjection to the US CLOUD Act and to exposing data for foundation model training.

Thirdly, Europe is multi-lingual and buyers require multi-language model performance. A conversational SaaS application is great but only if the conversation happens in the local European language where the application is deployed. We have seen many cases where non-English conversational capabilities are years behind English.

Fourth, European AI-powered SaaS vendors should expect higher demand for transparency and explainability. European customers have a strong preference for understanding how AI systems make decisions, a need often reinforced by regulations like GDPR and the EU AI Act. This means vendors must provide clear logic behind decision criteria, bias mitigation documentation, human oversight mechanisms, and comprehensive audit trails. Black box AI approaches such as “Pick this candidate because the recruiting application assigned a high AI score” simply will not fly in Europe, where trust is key and it heavily depends on being able to trace and justify how conclusions are reached.

Join the Conversation

At IDC, we help you navigate these changes with deep market research, robust data analytics, and tailored custom solutions. Whether you need strategic insights, benchmarking, or support in adapting your business model, our experts are ready to guide you.

Contact us to discuss your unique challenges and discover how IDC can empower your next steps in the evolving, AI-disrupted European software landscape.

Sources:

Bo Lykkegaard - Associate VP for Software Research Europe - IDC

Analyst Profile
Bo Lykkegaard is associate vice president for the enterprise-software-related expertise centers in Europe. His team focuses on the $172 billion European software market, specifically on business applications, customer experience, business analytics, and artificial intelligence. Specific research areas include market analysis, competitive analysis, end-user case studies and surveys, thought leadership, and custom market models.

In January, Carla Arend, Rahiel Nasir and Luis Fernandes presented IDC’s predictions for cloud in 2026 and beyond. Below is a summary of the main points that were made in the webcast.

The need for digital resilience has never been more crucial

  • Tariffs, supply chain glitches, regulations, skills shortages… digital organisations are being assaulted from all sides.
  • For the majority of EMEA organisations, maintaining operational resilience and cyber security is the top priority.
  • To survive, organisations need to ensure their tech stack is robust and assess the strengths of their tech partner ecosystem. Adaptability and financial stability will also be key weapons to add to the armoury.

Digital sovereignty could help

  • Around half of organisations in EMEA have increased interest in implementing digital sovereignty solutions due to all the geopolitical uncertainties, such as trade tensions, regional conflicts, and regulatory shifts, witnessed in 2025.
  • Digital sovereignty solutions offer data owners complete control and autonomy over their digital assets – maintaining operational resilience is a key tenet of sovereignty.
  • Governance, risk and compliance solutions will be the key focus for organisations looking for sovereign cloud providers, especially for their AI. This will help them reassess their cloud provider options, determine the right IT venue for their workloads, and help to create a more robust tech stack.

The right venue for AI workloads

  • Enterprises are shifting to specialized AI providers and edge infrastructure to maximize performance and efficiency.
  • By 2028, physical AI use cases will experience explosive growth with cloud providers powering the bulk of these deployments at the edge with industry-specific AI agents and high-performance edge infrastructure.
  • By the end of this decade, at least 30% of advanced GPU needs will be met by specialised AI cloud providers offering true cloud features, flexible pricing, APIs, and software services (unlike GPU-only providers).

 AI and cloud modernisation

  • Cloud modernisation continues while legacy systems are re-platformed for AI, using autonomous agents to automate operations and orchestration.
  • Over the next two years, more than half of enterprise apps will leverage SaaS platforms to orchestrate predefined app functions and AI agents for real-time workflows, enabling modular and interoperable solutions.
  • By 2030, 45% will use cloud AI-infused tools to assess cost and performance metrics to optimise workload placement. Furthermore, a fifth will use AI agents to automate workload orchestration.

 Recommendations for cloud users

  • With geopolitical turmoil continuing into 2026 (and probably beyond), organisations are advised to take a risk-based approach to their cloud and AI strategies.
  • Choose the most appropriate venue for your workload. This should be supported by a hybrid and multicloud ecosystem of partners who offer services tailored to your needs.
  • The time to modernise your cloud estate to get ready for AI is now.

Watch the European cloud predictions webcast here:

For the EMEA FutureScape predictions webcast, click here.

If you would like more information on any of the above, please drop your details in here.

Rahiel Nasir - Research Director, European Cloud Practice, Lead Analyst, Digital Sovereignty - IDC

Analyst Profile
Rahiel Nasir is responsible for leading and contributing to IDC's European cloud and cloud data management research programs, as well as supporting associated consulting projects. In addition, he leads IDC's worldwide Digital Sovereignty research program. Nasir has been watching technology markets and writing about them throughout his professional life.

Work in 2026 is being rewired around human-AI teams, where people who learn to collaborate with intelligent systems are gaining a clear edge in productivity, creativity, and career growth. IDC’s latest FutureScape and Future of Work insights show that this is no longer a distant trend but the operating reality for leading organisations worldwide.

The new shape of work

According our 2026 Futurescape for the AI-enabled Future of Work around 40% of roles in the G2000 will involve direct engagement with AI agents by 2026, fundamentally reshaping how entry, mid-level, and senior jobs are designed. In Europe specifically, we expect around 70% of new positions to be directly influenced by AI, blending technical fluency with human-centred capabilities like problem solving, empathy, and domain expertise.

AI is simultaneously and subtly absorbing much of the background work. Our analysis suggests AI tools can save workers over 40% of their typical workday, with IT workers gaining up to 45% of their time back as routine tasks are automated. Instead of spending hours on status reports, basic analysis, or rote documentation, employees can focus more on designing solutions, making decisions, and collaborating with customers and colleagues.

Agents as instruments, not co-workers

One of our most important messages though is that AI agents should be treated as instruments that extend human capability, not as synthetic co-workers to be managed like people. When AI is framed as a powerful tool in a human-led process, organisations are less likely to over-automate and more likely to invest in skills, governance, and thoughtful workflow redesign.

This mindset shift is already visible in how leaders talk about AI “co-pilots” across development, operations, and knowledge work. We predict  that as agentic AI matures, organisations that focus on measuring and improving AI–human collaboration, rather than just raw productivity, will see margin gains of up to 15% by the end of the decade.

The skills crunch: $5.5 trillion on the line

The biggest drag on this transformation is no longer the technology but the skills to use it well. Our data shows that over 90% of global enterprises will face critical skills shortages by 2026, with AI-related gaps alone putting up to $5.5 trillion of economic value at risk through delays, missed revenue, and quality issues. Yet in our Global Future of Work Decision Maker only about a third of organisations say they are fully ready for AI-driven ways of working, and just a similar share of employees report receiving any AI training in the past year.

This imbalance is already reshaping labour markets. The 2025 IDC Employee Experience survey shows that that 66% of enterprises are reducing entry-level hiring as they deploy AI, and 91% report roles being changed or partially automated. Routine-heavy junior tasks are disappearing fastest, while demand grows for roles that can design, supervise, and continuously improve AI-infused workflows.

How to ride, not resist, the wave

For leaders and professionals, the 2026 question is not “Will AI take my job?” but “How quickly can my organisation and my skills adapt to human–AI collaboration?”. Our research into AI, automation, and Future of Work points to a few practical priorities that separate frontrunners from the rest.

  • Build AI literacy for everyone, not just specialists: core skills now include prompt design, interpreting AI output, and knowing when to override or escalate decisions.
  • Redesign roles around human strengths: shift job descriptions toward judgment, creativity, relationship-building, and cross-domain problem solving, with AI handling repeatable analysis and orchestration.
  • Invest in trustworthy data and governance: companies that neglect high-quality, AI-ready data will see productivity fall behind as they struggle to scale agentic solutions.
  • Measure collaboration, not just output: by 2029, organisations that track and optimise human–AI collaboration are projected to enjoy up to 15% higher margins than those that chase automation alone.

Work has been rewired, but the most valuable node in the system is still the human at the centre of an intelligent network of tools, agents, and collaborators. In 2026, the winners will be those who treat AI not as a threat or a crutch, but as a force multiplier for distinctly human ambition.

For more information see IDC FutureScape: Worldwide Future of Work 2026 Predictions

To watch our EMEA FutureScape predictions presentation, click here.

If you have any questions, please drop them in this form.

Meike Escherich - Associate Research Director, European Future of Work - IDC

Analyst Profile
Meike Escherich is an associate research director with IDC's European Future of Work practice, based in the UK. In this role, she provides coverage of key technology trends across the Future of Work, specializing in how to enable and foster teamwork in a flexible work environment. Her research looks at how technologies influence workers' skills and behaviors, organizational culture, worker experience and how the workspace itself is enabling the future enterprise.