How to Think as a Partner in the Era of GenAI

Unpacking the Evolution of Alliance Partnerships

Mature alliance partnerships have enabled vendors across the spectrum to collaborate as they realize the value of the ecosystem. Cultural, portfolio and leadership DNA have shaped vendors’ behavior when it comes to go-to-market efforts and partner strategies, which is not surprising given vendors often lean on what they do best when pursuing opportunities.
 
In the below TBR Insights Live video, Principal Analyst Bozhidar Hristov, Senior Analyst Catie Merrill and Analyst Alex Demeule deep dive into TBR’s latest ecosystem research. Viewers will gain a better understanding of how relationships between OEMs, cloud providers and services providers are changing and learn how these vendors are adjusting their business models to account for implications stemming from the advent of generative AI (GenAI).
 
Additionally, the team reveals what our findings say about partnership satisfaction levels among OEMs, cloud providers and service providers and preferred commercial, staffing and go-to-market models among the partner groups.
 

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TBR’s Voice of the Partner Ecosystem Report provides a view of partners within a market, including information on alliance preference and selection criteria, satisfaction analysis, and commercial and go-to-market evolution. The research looks at how OEMs, IT services vendors and cloud vendors are determining who to partner with and provides partners’ true perceptions of the alliance ecosystem. Additionally, it follows the opportunity shift from legacy to emerging technologies and platforms.
 
The most recent report features OEM vendors Dell Technologies, Cisco, Hewlett Packard Enterprise, IBM, NetApp, Pure Storage and Fujitsu; cloud vendors Microsoft, Amazon Web Services, Google Cloud, Oracle Cloud Infrastructure, Alibaba, SAP, Oracle, Salesforce, Workday, ServiceNow, Snowflake, Databricks and Red Hat; and services vendors Accenture, Capgemini, DXC Technology, IBM, Deloitte, EY, PwC, KPMG, McKinsey & Co., Boston Consulting Group, Slalom, Cognizant, HCLTech, Infosys, Tata Consultancy Services and Wipro.
 
Access the most recent Voice of the Partner Ecosystem Report with a free trial of TBR Insight Center™.

State of the Federal IT Market: Continued Opportunities Amid Slowing Growth

What Does the Waning Bull Market Mean for Federal IT Services Contractors?

Aggressive investment by federal agencies to modernize and secure monolithic IT infrastructures, particularly healthcare-related IT systems, and digitize defense networks has resulted in an expanding federal IT market. In federal fiscal year (FFY) 2020, FFY21, FFY22 and FFY23 the market experienced unprecedented growth, at 8.1%, 8.5%, 7.9% and 8.5% year-to-year, respectively, on a weighted average basis.
 
Additionally, TBR is currently tracking federal IT annual revenue growth of 6% to 8% to between $68 billion and $69 billion in total market value by the end of FFY24 (ending Sept. 30, 2024). (Data based on total federal IT revenue earned by the 11 federal systems integrators tracked in TBR’s Federal IT Services Benchmark.)
 
Looking toward FFY25, the Biden administration is seeking the smallest increase in federal civilian technology spend in many years, while the Department of Defense’s FFY25 request for IT and cyberspace activities is down from FFY24.
 
As was the case in 2020, election-related disruptions could undermine the ongoing boom in the civilian IT market, at least temporarily. IT leaders in agencies are under increasing pressure to demonstrate how effectively they have invested the IT budget windfall they have enjoyed since FFY20. Even with slowing budget growth, tech priorities remain unchanged, with citizen-facing agencies investing heavily in AI and other technologies to optimize citizen experience and engagement.
 
In the below TBR Insights Live video, Federal IT Services Senior Analyst John Caucis, Principal Analyst & IT Services Practice Manager Patrick Heffernan, and Federal IT Services Analyst James Wichert deep dive into the current state of the federal IT market and expectations for the future, including sharing key findings from TBR’s most recent Federal IT Services Benchmark.
 
The team will highlight top trends in civilian, defense and intelligence sectors and detail the newest alliances, acquisitions and solutions introduced. Additionally, they’ll look at how TBR-tracked federal systems integrators are positioning for Federal FY2025.
 

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TBR’s Federal IT Services Benchmark focuses almost exclusively on the U.S. federal It market. This research provides growth data and analysis specific to the federal defense and federal civilian sectors. Some of the vendors we track have operations in public sector markets outside the U.S. federal government sector.
 
Additionally, we detail some additional developments and/or market trends in other public sector markets in the appendix, but our principal research and analytic focus remains the U.S. federal IT sector.
 
To access the research and dataset, sign up for your TBR Insight Center™ free trial today!

Peraton Revenue on Track for $8B Despite Shaky Start to 2024

Peraton Appears on Course to Surpass $8B in Annual Revenue in 2024

As a private company, Peraton does not report backlog, bookings, book-to-bill ratio or other financial metrics. While Peraton may have started 2024 off on the wrong foot by losing a $1 billion contract to Deloitte to provide human resources IT support to the Defense Manpower Data Center, Peraton is still poised to surpass $8.0 billion in annual revenue.

 

During 2Q23 Peraton revealed it was submitting around 1,200 bids per year worth $40 billion. The company also disclosed that its trailing 12-month (TTM) book-to-bill ratio was around 2.0, higher than many other vendors and up from 1.95 in July 2022. During 4Q23, Peraton made some notable announcements, including unseating Jacobs Technology on a $2.8 billion contract to support United States Special Operations Command (USSOCOM) and revealing its Space & Intelligence sector secured over $1.2 billion in classified awards during 2023.

 

TBR estimates that Peraton’s full-year revenue grew in a low-to-mid-single-digit range to between $7.7 billion and $7.8 billion in 2023 as the company navigated supply chain headwinds and likely dealt with lingering integration-related issues. Approximately 45% of sales are expected to have come from the Department of Defense (DOD) and intelligence community (IC). TBR anticipates that Peraton will continue to more efficiently convert its backlog (last reported at $24.4 billion in the middle of 2022) into revenue while the company also keeps capitalizing on federal budget priorities favoring civilian, defense and healthcare agencies.

 

A government shutdown in 4Q24 could still disrupt Peraton’s expansion, but TBR believes Peraton will still reach between $8.0 billion and $8.1 billion in annual revenue during 2024, representing growth of between 2.6% to 5.2% over 2023.

Peraton IPO Expected in 2025 as the Company Continues to Optimize Operations and Reinforce Its Position as a Cloud Services Broker

The Company Is Ensuring Operations Are Running Smoothly Before Launching an IPO or Acquiring Another Key Player

While Veritas Capital has not announced that it will take Peraton public, private equity firms have historically cashed out their investments as a matter of course. The companies’ leadership teams are ensuring that Peraton is well positioned to keep capitalizing on its pipeline of opportunities in the national security, federal civilian and health spaces. They want to avoid any additional high-profile losses, such as the recent $1 billion IT Global Enterprise Management Services (GEMS) task order, as they assess Peraton’s market position.

 

Once the leadership teams are confident that Peraton can reliably meet revenue estimates, Veritas will exit the picture. TBR still anticipates that Peraton will issue an IPO in early to mid-2025, barring any further M&A activity to rapidly expand Peraton’s capabilities with emerging technologies.
 

TBR Senior Analyst John Caucis and TBR Analyst James Wichert review key trends and happenings from 2024 as well as provide their outlook for the sector in 2024 — Click the image below to watch the full video now

 

Peraton Aims to Leverage Growing Federal Demand for Cloud Services While Ramping Up Investments in 5G and Other Emerging Tech

Now that Peraton is no longer focused on integrating its assets, the company has shifted its resources. For example, Peraton deepened its relationships with SoftIron and UiPath during 2023. Peraton is utilizing SoftIron’s Hypercloud technology and the AI-powered UiPath Business Automation Platform as government agencies look to establish their own secure and customizable cloud platforms.

 

With agencies adopting an “as a Service” model, Peraton is better positioning itself as a cloud services broker to win deals like the Cloud Hosting Solutions III contract. Peraton is strengthening its relationships with Amazon Web Services and other key partners as it helps clients achieve their desired environments.

 

Additionally, Peraton will accelerate efforts to harness 5G as well as other emerging technologies to narrow the gap between it and other Tier 1 vendors like General Dynamics Technologies.

Implementing a Comprehensive Strategy: Infosys Enhances Talent Development, Sales Efficiency and Profitability

While too soon to call it a trend, the combination of an uptick in sequential performance in Financial Services and record-breaking large deal wins in 2Q24 highlights Infosys’ relentless focus on execution and maintaining its position on the services supply side.

 

Infosys is not immune to the broader macroeconomic trends, but the company’s ability to recalibrate its portfolio and employee skills while maintaining strong client retention and new deal expansion positions it for accelerating performance once discretionary spend at scale improves.

 

Infosys Cobalt, Infosys Topaz and now Infosys Aster will continue to act both as the backbone of IT services modernization and as access points to generative AI (GenAI)-related opportunities. With many of its peers are pursuing similar strategies and poaching key Infosys executives to emulate success, the company needs to remain vigilant and maintain transparent communication with stakeholders to avoid client and talent confusion and secure its long-term success.
 

Are you curious about the performance of global systems integrators (GSIs) in 2023 and early 2024? Check out the below TBR Insights Live session for insights into the world of hardware-centric, legacy GSIs and what lies ahead for these vendors.

 

2Q24 Update: Infosys’ Corporate Strategic Objectives

Execute on ‘Navigate Your Next’ Strategy Via Improved Sales Efficiency, Increased Automation and Cost Rationalization

Developing digitally versed talent and using an integrated sales approach enable Infosys to target opportunities across core and new business areas. The company is investing in talent initiatives largely enabled by the Infosys Lex platform and centered on GenAI-enabled tools. Additionally, while investing in onshore, nearshore and offshore development and delivery centers provides opportunities for local talent to join the company, it also pressures Infosys to maintain service quality through training and development.

Become an AI-first Company

Broad-based portfolio investments in proprietary and partner-enabled solutions and frameworks, such as the launch of Infosys Aster, highlight Infosys’ efforts to establish trust and credibility within the ecosystem at a time when many of the company’s peers are also vying for client mindshare.

Reclaim Industry-leading Profitability by Investing in In-demand Portfolio Offerings and Global Delivery Model

Infosys’ operating margin improved on both an annual and sequential basis, to 21.1% in 2Q24, landing within the guided range of between 20% and 22%, bolstered by the benefits of ongoing cost-cutting initiatives, stabilized attrition and improving productivity. Using automation and GenAI for internal operations and sales management as well as client delivery will help Infosys improve its operating margin and meet its FY25 guidance of between 20% and 22%.

GenAI Disruption: Rewriting the Business Models of Tech Titans and Consultancies

As the efficiencies of automation, analytics and AI begin benefiting technology companies themselves, not just their enterprise clients, TBR sees the latter half of 2024 as fundamentally business model disruptive for pretty much every technology company we cover, from McKinsey & Co. to Infosys to Dell Technologies to Amazon Web Services to IBM to Ericsson to NVIDIA. In this blog we look at what happens when GenAI comes for the IT services companies, the consultants and their technology ecosystem partners; what happens when GenAI “customer zero” starts to scale inside IT services firms, consultancies and technology ecosystem partners; and more.

The Collapse of the Classic Labor Pyramid

At the same time that post-pandemic macroeconomic conditions led most enterprises to prioritize cost reductions and operational optimization over digital transformation and new growth, technology companies and large consultancies began adopting GenAI-enabled solutions to their own operations and delivery. IT services companies, telecom equipment providers, and others across the IT ecosystem built business models around long-term contracts with limited flexibility. In a sustained inflation macroenvironment, cutting costs helps maintain margins and deploying AI can be a quick move for cutting costs.

 

As the efficiencies of automation, analytics and AI begin benefiting technology companies themselves, not just their enterprise clients, TBR sees the latter half of 2024 as fundamentally business model disruptive for pretty much every technology company we cover, from McKinsey & Co. to Infosys to Dell Technologies to Amazon Web Services (AWS) to IBM to Ericsson to NVIDIA.

Sometimes We Are So Smart It Is Scary

In 2017, in a market untouched by GenAI hype, TBR wrote the following in a special report, Service delivery model evolution, metrics and survival tips: “Development and adoption of analytics-enhanced service delivery and project management platforms signal vendors’ delivery future lies in cognitive-enabled automation, not labor arbitrage.” And we explained why: “The integration of automation solutions positions vendors to not only offset investments in onshore digital talent and client centers but also monetize their own IP through value-added service offerings.”

 

Put another way and updated only slightly to account for GenAI succeeding automation, what happens when GenAI comes for the IT services companies, the consultants and all their technology ecosystem partners? Massive business model disruption littering the competitive landscape with successes and failures.
 
For TBR, the next transformational wave generated by GenAI will come from the implementation of GenAI-enabled solutions within the companies delivering services around technology. As we said in 2017, the “future lies in cognitive-enabled automation” (read: GenAI), not the perfect resource pyramid.

 

In summer 2023, TBR noted that GenAI use cases that resonated the most were “customer zero” — that is, companies developing GenAI-enabled solutions, deploying them internally, and measuring the benefits while working out the kinks so they could then credibly tell clients, “This really works, and here’s the impact.”

 

Internal knowledge management, sales and marketing enablement, and supply chain enhancement are all use cases that have been touted by tech companies and consultancies as being tested and tried internally before being deemed ready for pilot projects and maybe even scaled deployments. Among the most-hyped customer-zero use cases were the ones promising a reduction in labor hours dedicated to routine tasks, including software coding and testing.

 

Some of those labor hours were precisely what clients were paying for, as they were what tech companies and consultancies brought as their value proposition. While perhaps an oversimplification from the perspective of an IT veteran skeptical that GenAI-enabled automations could implement, test, troubleshoot and upgrade, from the IT buyer’s perspective, isn’t this what all the GenAI hype was all about: getting to decisions faster, minimizing costs and leveraging technologies, especially the ones enterprises already paid for? More on the last point below, but the short answer is yes. The early GenAI promises were not about changing the world; they were just taking out the mundane tasks.

 

So what happens when customer zero starts to scale inside IT services vendors, consultancies and other ecosystem participants? Disruption, yes — and when we look at our data, listen to our clients and check inside our crystal ball*, we see the following:

  • Low-risk, fast-return GenAI solutions compelling companies to invest time and cost savings into upskilling and training, or companies displacing people who are unable to add value on top of the tasks that AI and automation took over
  • Traditional staffing pyramids morphing into obelisks, diamonds and multiple other shapes, challenging talent managers at technology and services companies to maintain a balance between enough skilled people to meet clients’ demands for expertise at scale and too many people sitting on the bench, diminishing financial performance
  • Persistent disruption across the technology ecosystem generating headlines around layoffs, mergers and bankruptcies, all while enterprise buyers continue to pay their IT utility bill, thus enabling technology companies with scale, agility and adept financial and resource management strategies to continue growing profitability, even while the market roils
*data = TBR benchmarks; listen to clients = TBR special reports, project work, Voice of the Customer research; crystal ball = our vast body of quarterly work

Tech Purchased for Central Digital Transformation Initiative
 
As stated above, at the same time that post-pandemic macroeconomic conditions led most enterprises to prioritize cost reductions and operational optimization over digital transformation and new growth, technology companies and large consultancies began adopting GenAI-enabled solutions to their own operations and delivery. Figure 1 shows analytics jumped to the top place in technologies bought to support digital transformation initiatives, underscoring enterprise buyers’ need not for flashy new AI, but for the outcomes — through analytics — that come from deployed technologies.

 

As the efficiencies of automation, analytics and AI begin benefiting technology companies themselves, not just their enterprise clients, TBR sees the latter half of 2024 as fundamentally business model disruptive for pretty much every technology company we cover, from McKinsey & Co. to Infosys to Dell Technologies to AWS to IBM to Ericsson to NVIDIA.

People Who Use GenAI Are Displacing People Who Do Not

Every company that TBR tracks recognized in early 2023 that training and upskilling around GenAI needed to be prioritized as an immediate-term investment. Nearly every $1 billion, $2 billion or $3 billion GenAI announcement included some callout around professional development. One year later, many companies have publicly touted their training successes; although with no industry standards, no one can definitively say which companies have followed through and which ones have not. Anecdotally, TBR has had its 2023 assessments confirmed: companies that train their people well were the quickest to train on GenAI, and companies that focused on training to their partners’ technologies and solutions have best leveraged the GenAI ecosystem.

 

TBR has long questioned the conventional thinking that automation would allow people to do more higher-value tasks. If those tasks have always been higher value, someone is already doing them or maybe they do not need doing at all. GenAI, as it is deployed at scale within technology companies, will begin rapidly exposing who can and who cannot find and do those higher-value — and GenAI-enabled — tasks.
 

According to TBR’s 2017 special report, Service delivery model evolution, metrics and survival tips: “Just like the use of automation results in the need for new technologies to be integrated with existing systems, grooming the right skilled bench will remain a key challenge and an opportunity for IT services vendors, which for many years have relied on an army of people to develop, deploy and manage what today can be seen as low-level tasks. Educating and developing technical experts who can create differentiating business applications and processes in the era of AI will guide suppliers in their resource management strategies. We do not believe automation will black out the outsourcing industry, but rather partially eclipse it [emphasis added], creating new partnerships between humans and machines, demanding society readiness and fine-tuning the public-private trust.”

If You Thought the Pandemic Was Hard on HR Managers, Watch What Happens in the GenAI Age

Add some GenAI complexity to the usual recruit-and-retain challenges in the technology space, and TBR anticipates a collapse of the traditional staffing pyramid, especially in IT services. Some quick context: Accenture employs over 700,000 people, making it the fourth-largest employer in the world. Tata Consultancy Services (TCS), with over 600,000 employees, is sixth. When these companies adjust their pyramids, the entire IT market will feel it. After the rash of layoffs in 2023, tech sector leaders saw an opening to improve financial metrics and trim staff.

 

Concurrently, as noted above, these same companies invested heavily in training the remaining workforce on GenAI. Raise a toast to the HR managers who navigated the pandemic successfully and then had to grapple with firings and upskilling demands.

 

One year later, TBR sees IT services and consultancies, in particular, on the brink of a sea change as their business models have to adjust to a GenAI reality, brought on, in part, by these companies themselves. At their core, IT services companies and consultancies rent out talent to their clients. Need a strategy whiz, an experienced SAP implementer or a whole team of people who can guide your company through a digital transformation? Look to McKinsey, Infosys and Accenture. For a fee, and maybe with a little risk-sharing thrown in, you get people with skills and knowledge for as long as you need them, without the hassle of hiring, promoting or firing them.

 

So what happens when GenAI-enabled solutions can capably and reliably do many of the routine tasks typically handled by junior-level IT services employees and entry-level consultants? And what happens when the apprentice model gets displaced by AI-enabled learning, when skills become more critical than accumulated — and highly searchable — knowledge? Pyramids collapse, and experienced IT services professionals and consultants manage a small team of people equipped with a big team of bots.

 

Consulting might be the third-oldest profession, and the business model at times seems unshakable as people will always want to turn to other people for advice. On the consulting services value spectrum — tell me what to do, help me do it, do it for me — that first request will always remain a human-driven endeavor. But the army of consultants gathering data, assembling knowledge and filtering options will disappear, leaving only the captains, lieutenant colonels and generals (plus the IT guy).
 

According to TBR’s Top 3 Predictions for Global Delivery in 2022: “It took a pandemic for IT buyers and decision makers to fully appreciate the capabilities of AI-enabled automations, although adoption has been neither universal nor without challenges. Just as the pandemic highlighted the business case for cloud computing, virtual delivery from everywhere highlighted the case for increased use of automation for as many routine tasks as possible, with the added benefit that AI-enabled platforms could begin learning which tools performed best and which assets were essential to a fully functioning process. In short, the robots used the pandemic to get smarter and will now begin hiring other robots to speed up automation adoption [emphasis added] across enterprises.”

News Is Not a Trend, and Leadership Still Matters More Than Marketing

TBR’s research consistently shows that IT spending grows year after year, at roughly the same pace, almost like utility rates governed by a state board. But the company that gets a larger share of that IT budget pie changes constantly, as is also borne out by TBR’s research.

 

Tracking quarter-by-quarter leaders and laggards the way TBR does provides value to professionals looking to understand the intricacies of the technology ecosystem, but the larger picture appears to show chaos and uncertainty as mercurial leaders generate headlines and record-setting valuations make household names out of previously niche players. Throw the magic of GenAI into the mix, and clarity may seem unlikely to some in the near term.

 

TBR begs to differ. Leading tech companies continue to do a few things exceptionally well, even as the news coverage presents a maelstrom and the markets do their fickle thing. First, leading companies lean on their scale or the scale of their ecosystem partners. No client wants to wait. Clients do not want the B team. No client wants to choose which internal demands to prioritize if they believe it can all be done concurrently. And scale, as with all strengths, is relative, allowing even small tech companies to leverage scale, provided they know their market and — critically — know how to use their ecosystem.

 

Second, leaders at successful tech companies move with precision. Sometimes quickly, sometimes with patience, but always with well-communicated strategic intent. TBR can point to a number of tech companies and consultancies that leapt on the GenAI bandwagon without strategic purpose or a clear understanding about what would come next or what the billions invested were intended to deliver. Smarter leaders articulated a strategy, positioned their companies for 2024 and beyond, and stayed focused on executing. Agility is not making decisions fast; it is moving precisely and with a purpose.

 

And third, TBR’s research demonstrates that tech companies and consultancies with robust talent management consistently outperform peers. CHROs matter as much — maybe more — than CFOs, as was made blindingly clear during the pandemic. As described above, the talent challenges will only grow tougher in the GenAI age. And an evolving tech ecosystem will further demand that companies train their people on their partners’ technology and value proposition.

Until GenAI Do Us Part

As described in TBR’s special report, PwC stepping up when technology fails to deliver value, and the 2Q24 AI & GenAI Technology Market Landscape, IT buyers and C-Suite decision makers have tired of technology. Decades of multiyear implementations, delayed delivery of promised gains and admonishments to buy the next wave of emerging tech have cooled the lust for the latest thing, a sentiment sometimes overshadowed by the hype around GenAI.

IT companies and consultancies can continue making money from run-the-business IT, and the more adept ones will make more (and more profitable) money off confusion, FOMO and genuine risk-taking around GenAI. (Note: TBR has extensive research on technology companies’ strategies for becoming more adept, as well as the data to show which ones have succeeded.)  
 
Year-to-year Headcount and Revenue Growth for Benchmarked Vendors
 
Lurking behind all this, and waiting to surface like the shark in Jaws, is the business model disruption that will be coming to IT services vendors and consultancies. Accelerated adoption of previous emerging technologies like cloud, blockchain and edge did not compel most technology companies to entirely rethink their staffing models and consider 10% to 20% workforce reductions. GenAI, particularly for services companies, is dependent on people – people doing tasks, many of which can be replaced by cheaper and faster GenAI-enabled solutions.

 

As shown in Figure 2, at the end of 2023 and for the first time since TBR started tracking the offshore headcount of the largest IT services companies, those companies decreased their overall headcount while increasing their revenues. GenAI will, in the near term, accelerate that trend. For IT services companies and consultancies, as we wrote in our 2017 special report, the near future “lies in cognitive-enabled automation, not labor arbitrage.” For the unprepared, here comes the shark.

Adapting to Market Needs: How Consultancies are Investing in Talent and Partner Ecosystems

Consultancies that invest heavily in talent — including structure and skills training, in addition to managing an expansive partner ecosystem — will be better equipped to deliver on market needs. Refreshing portfolios and business line structures enables consultancies to more efficiently provide advisory services around business functions, operations and technology needs.

Consultancies’ Current Focus: AI, Partnerships and Talent

Management Consulting Outlook

While macroeconomic uncertainty remains across markets, the consultancies look to develop core services such as around AI, partnerships and networks of physical centers to strengthen client engagements and continue advisory discussions. Increasing technology complexity, operational cost-driven optimizations and data strategies will draw on consultancies’ core experience to successfully drive digital transformation programs.

 
Maintaining client trust will be paramount moving through 2024 as vendors keep a close eye on branding and market positioning.
 
TBR Principal Analyst Patrick M. Heffernan, TBR Principal Analyst Bozhidar Hristov and TBR Senior Analyst Kelly Lesiczka delve into emerging tech trends for 2025 and their predictions for IT services vendor leadership — Click the image to watch the full video now 

 

Management Consulting Key Trends

Technology continues to threaten the nature of consulting engagements, requiring consultancies to showcase value and deliver on outcomes. Greater investment in talent frameworks, structures and skills will equip staff to lead client discussion and effectively leverage technology to assist workflows.

 

Partnerships remain a core piece of the technology integration, bringing in new expertise and go-to-market opportunities that enable consultancies to meet a wider variety of client needs. Client retention remains a priority across consultancies but will require the firms to effectively deliver value through services.

New CEOS Among the Big Four Will Execute on a Shift in Go-to-market Strategies to Remain Key Contenders

With both EY and PwC getting new CEOs effective July 2024, we expect to see these firms recalibrating their go-to-market strategies to adapt to a tech-dominated era.

 

Judging by Deloitte’s internal restructuring efforts, we expect Deloitte to follow a similar pattern, likely going deeper with a select few clients and executing through leaner organizations enabled by optimized partner-enabled portfolio offerings. Deloitte has a leg up against its Big Four peers in the implementation and operate phases, but that may not last long as these rivals turn to service delivery partners for scale and get closer with key tech powerhouses.

 

Over the next few years, PwC will return to its unified tax, assurance and advisory branding and showcase its value to clients, leaning on its strong reputation to differentiate from peers. The firm’s ability to evolve its consulting offerings by infusing technology assets that have been developed internally as well as acquired through alliances enables PwC to not only guide its clients’ application of AI but also enhance processes and leverage data from across its own business.

 

The next two years will challenge KPMG’s leaders to execute on the promise of transformation during the next wave of macroeconomic pressures, talent management battles and technology revolutions. At the same time, KPMG’s leaders recognize that their priorities are transforming the firm’s go-to-market approach, unlocking the power of the firm’s people, reimagining ways of working, and innovating capabilities and service enhancements.

 

Success in executing these priorities, in TBR’s view, will come as KPMG shifts from building a foundation to scaling alongside the growing needs of its clients and as the era of GenAI presents yet another opportunity and challenge. Striking the right balance between elevating the potential of GenAI as a value creator and accounting for commercial and pricing model implications will test the durability of KPMG’s engagement and delivery frameworks.

Technology Consulting and Operations Consulting Lead Revenue Growth as Consultancies Execute on Cost and AI Needs

Technology consulting led revenue growth among the four tracked service lines as consultancies supported clients’ application of digital workplace services, generative AI (GenAI) and cloud solutions to improve business and drive additional value. As consultancies grow their numbers of technology-specialized advisory talent, the firms will be better positioned to generate revenue in the segment.

 

Operations consulting trailed technology consulting in terms of growth, as clients continued to prioritize cost initiatives and operational efficiency. GenAI is impacting the operations consulting market landscape, as consultancies leverage the technology to deploy large language models and knowledge management tools, which address client needs in a less traditional way.

How AI Is Revolutionizing Cost Efficiency and Customer Experience in Telecom

The History of AI in Telecom

AI has been utilized in the telecom industry since the early 2010s, primarily in helping communication service providers (CSPs) reduce costs. AI began in telecom with predictive solutions that leveraged structured data. Common use cases have included anomaly detection (from a cybersecurity, fraud and network performance perspective) as well as chatbots for basic customer care tasks.

 

Employing predictive AI to optimize energy consumption has become a more common use case following geopolitical events and the impact of the COVID-19 pandemic, particularly as CSPs have become more focused on reducing costs. CSPs are also under pressure in certain markets to align with environmental, social and governance (ESG) agendas, and AI has emerged as a technology that can help CSPs reduce their carbon footprint.

 

The next stage of AI evolution pertains to generative AI (GenAI), which leverages unstructured data and opens up a broader range of use cases for CSPs.
 

Join TBR for insights into the current state of GenAI adoption in the telecom industry and the types of business outcomes the industry can expect from AI and GenAI — Save your spot today

TBR Insights Live: GenAI Impact on Telecom Industry

GenAI Promises Better Customer Outcomes and Cost Reduction of Up to 80%

TBR’s latest telecom research indicates customer care, which includes contact centers, will be profoundly transformed by AI. Though traditional AI has been utilized in customer care for many years (e.g., chatbots and interactive voice response), GenAI will take customer care to an advanced state.

 

TBR estimates that GenAI could reduce the costs of running contact centers by up to 80%, and this is an area telecom operators are keenly interested in as they remain focused on cutting expenses across their businesses.

 

GenAI can also optimize the customer experience, essentially creating a super agent that is able to handle more complex tasks and lead the customer to better outcomes, thereby reducing churn and potentially driving upselling and cross-selling opportunities.

CSPs Will Expect Vendors to Share Cost Savings Realized From the Use of AI

When vendors are able to bring true AI capabilities and solutions to CSPs, the CSPs will find value in a variety of use cases such as AI-based applications for network maintenance or optimization, which will increase the efficiency of network operations.

 

Vendors will also benefit from cost efficiencies gained from AI, but TBR’s research indicates that CSPs will expect vendors to pass along some of the cost savings from the use of AI, such as costs freed up from a reduction in human resources.

 

Automation, analytics, AI and machine learning technologies will all prove critical to helping vendors improve margins during the 5G era and beyond. Examples include portions of Nokia’s AVA (Analytics, Virtualization and Automation) portfolio and Ericsson’s Operations Engine.

Most CSPs Will Remain Technology Consumers, Not Technology Producers of AI, Limiting Their Ability to Generate New Revenue in This Area

The 2 Primary Ways CSPs Will Derive Revenue-related Outcomes from the Use of AI

Leveraging GenAI to cross-sell and upsell existing subscribers may provide optimal revenue capture on a per-subscriber basis, while on the revenue protection side, CSPs will likely use GenAI to improve churn by better addressing customer pain points and root causes leading to the decision to switch operators.

 

The primary location where GenAI technology will be incorporated is the CSP’s contact center and potentially during the digital sales journey, such as interaction with a GenAI-enabled chatbot in the CSP’s digital storefront.

Most CSPs Are Expected to Rely on the Vendor Community and Hyperscalers for AI Innovations

CSPs will rely on vendors (including hyperscalers) to provide, and in many cases support and manage, AI solutions in their operations. For example, traditional network solution providers like Nokia and Ericsson as well as disruptive network solution providers would bring AI innovations as it pertains to the RAN and core to CSPs, in many cases incorporating AI innovations into software and processes.

 

Meanwhile, hyperscalers would likely be the de facto foundational large language model and other types of AI model providers, on which CSPs would leverage for their telco-specific use cases, such as in the areas of network operations, contact center and customer journey.

GenAI Shift from Hype to Reality Begins: How the Telecom Industry Will Be Impacted

The Coming GenAI Telco Impact

Reality is starting to set in regarding Generative AI (GenAI). Though GenAI (and traditional AI) is expected to have a broad, transformational impact across the telecom industry, the technology is still immature and there is currently a big gap between hype and commercialization of GenAI for communication service providers (CSPs).
 
In the below TBR Insights Live video, Principal Analyst Chris Antlitz deep dives into the current state of GenAI adoption in the telecom industry.
 
Chris also discusses how AI models will be leveraged for the telecom industry, including which models have staying power, and what kind of use cases and business outcomes the industry can expect from AI and GenAI.
 

 

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TBR’s Telecom AI Market Landscape covers how communication service providers (CSPs) and vendors that supply CSPs are adopting AI (both “traditional” AI and generative AI [GenAI]) in their internal operations and in their products and services. This telecom industry-centric report covers AI use cases, adoption trends, business outcomes, and AI-related offerings as well as AI-related partnerships and M&A in the global telecom ecosystem. We also provide commentary about how AI is likely to evolve the telecom industry.
 
The report covers key companies that enable AI for the telecom industry as well as leading CSPs that are adopting AI as part of their digital transformations.
 
To access the research and dataset, sign up for your TBR Insight Center™ free trial today!

Next-generation AI PCs: What It May Mean for the Next Refresh Cycle

How Will AI PCs Impact Future Profitability of Windows PC OEMs?

After seven consecutive quarters of contraction, PC revenue among TBR’s benchmarked devices vendors returned to growth in 1Q24, expanding at an estimated 2.6% year-to-year. The long-awaited rebound in the market centers on PCs purchased during the pandemic reaching the end of their useful lives as well as increasing macroeconomic confidence on the part of commercial organizations.
 
However, PC OEMs across the industry are bullish on the opportunity presented by on-device AI, believing that the advent of the AI PC will drive an accelerated generational refresh cycle in an otherwise commoditized PC market. As such, OEMs are investing heavily in the development and sale of AI PCs based on the most cutting-edge processors from companies such as Intel, AMD and Qualcomm.
 
In this TBR Insights Live video below, Senior Analyst Ben Carbonneau and Research Analyst Alek Maxfield discuss key findings from TBR’s most recent Devices Benchmark, such as what year-to-year PC revenue growth means for refresh cycles and how AI PCs will impact future profitability of Windows PC OEMs.
 
Additionally, the pair will share what TBR is seeing from PC OEMs and silicon providers and their expectations for Intel, ADM and Qualcomm’s fight for share in the emerging Copilot+ PC category.
 

 

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TBR’s Devices Benchmark tracks the performance of nine leading devices vendors across five segments: PC, PC services, smartphone, tablet and smart device. The report includes overviews of quarterly performance and industry trends within each segment, as well as more detailed analysis of vendors’ quarterly revenue, profitability and business strategies at both a corporate and product category level.
 
Acer, Amazon, Apple, Asus, Dell Technologies, HP Inc., Lenovo, Microsoft and Samsung are covered in the available data spreadsheet.
 
To access the research and dataset, sign up for your TBR Insight Center™ free trial today!