Konecta Hybrid Customer Experience Combines Human Expertise with Advanced AI and Digital Capabilities

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Konecta Analyst Day, Madrid, May 28, 2025 — Konecta invited industry analysts to the 20th annual ExpoContact, a company-organized event that welcomed more than 1,000 industry leaders, including clients, technology partners and organizations that are looking to improve competitiveness by modernizing customer management. In the morning, Konecta held a special in-person and virtual event for industry analysts in which Konecta executives, clients and technology partners discussed in detail the company’s vision, digital portfolio, and generative AI (GenAI) and agentic AI approach. TBR attended Konecta’s first analyst day event and was impressed by not only the openness of the company and its willingness to communicate with the analyst community but also the closeness of its relationships with partners and clients.

Konecta’s vision and ambition are to become the trusted technology, data and operations partner for clients’ agentic AI transformations

During the event, Konecta CEO Nourdine Bihmane shared details about Katalyst 2028, the company’s three-year plan to become a technology, data and operations partner. Essentially, the company’s goal is to provide AI-driven hybrid customer experience solutions (CX) that combine human expertise with advanced AI and digital capabilities. The plan includes four steps: 1) accelerating the adoption of data, GenAI and agentic AI; 2) increasing digital growth; 3) strengthening the partnership ecosystem; and 4) expanding global reach. The company raised €150 million (or $176 million) to fund the transformation plan. Konecta’s goal is to increase revenue to €2.5 billion (or $2.9 billion) by 2028 and generate between 30% and 40% of total revenue from AI and digital services.

To achieve these targets, the company is training more than 7,100 people on role-specific GenAI technologies and offering proprietary GenAI solutions. Konecta is also launching a new global Digital Business unit with digital offerings and 2,500 employees, including more than 300 trained sales leads. Konecta’s digital services revenue was €150 million (or $176 million) in 2024, and the company plans to increase revenue in the segment to €250 million (or $293 million) in 2027, representing a CAGR of 20%.

Expanding its partnership ecosystem will serve as a lever for future growth, such as by establishing strategic partnerships around GenAI with Google Cloud and Uniphore, and with STC Group in the Gulf Region around GenAI-powered CX solutions. Konecta’s partner ecosystem combines technology leaders, such as hyperscalers, cybersecurity providers, GenAI and large language model (LLM) vendors, hyperautomation and service platform solutions providers, and consulting companies to enable coinnovation and codevelopment with clients.

Notably, Konecta’s open ecosystem has been designed on joint IP, shared outcomes and scalable transformation models. Partnerships among IT services providers and technology vendors are a leading lever for portfolio expansion, and Konecta is moving in a similar direction alongside multiple IT services providers. According to TBR’s 1Q25 IT Services Vendor Benchmark, “The roles of alliance partners are changing in the rapidly evolving professional services market. During the past several years, multiple professional services companies took a technology-agnostic approach to offer flexibility to buyers that were wary of vendor lock-in.

As macroeconomic pressures force buyers to examine their existing technology stacks to ensure they maximize ROI, these buyers are consolidating vendors, compelling professional services companies to develop a preferred, if not exclusive, list of alliance partners. … Vendors are leveraging partners to launch agentic AI offerings to automate tasks and drive operational efficiency, and GenAI offerings to boost productivity and create cost efficiency, encouraging adoption by solving clients’ particular business challenges. NVIDIA-enabled agentic AI solutions dominated alliance announcements during the quarter, including new joint offerings with Accenture, Capgemini, Cognizant, IBM and Wipro.”

Konecta plans to expand by establishing a sales organization that is structured for global reach and local engagement. Notably, the company is opening new delivery centers in Bengaluru, India, and Cairo and is establishing five new AI Global Competence Centers, located in India, Egypt, Spain, Colombia and the U.S., to diversify service delivery capabilities and expand client reach. Such activities will help Konecta improve its global revenue distribution, as presently the company’s revenue is generated mainly from Europe and Latin America, while English-speaking markets and the U.S. contribute approximately 4% of total annual revenue, though the company plans to increase this figure in the coming years. In January Konecta established Egypt as its regional headquarters to serve clients in the Middle East, Africa, Europe and the Americas and announced the opening of a global delivery center and global Center of Excellence (CoE) for GenAI in Cairo.

The company is investing $100 million over the next three years and is planning to hire approximately 3,000 people with digital and technical skills to provide AI solutions, digital transformation, cybersecurity, big data and analytics, IoT, technical support, and multilingual customer services in English, French, German, Italian and Spanish. Konecta is also partnering with the Information Technology Industry Development Agency in Egypt to provide training and upskilling programs for local people, creating future employment opportunities for skilled talent. Konecta’s partnership with Uniphore, announced in November 2024, to deliver industry-specialized AI solutions that enhance CX with hyperpersonalized interactions will augment Konecta’s client reach in the U.S. and U.K. and contribute to revenue expansion in English-speaking markets.

Konecta provides experience services and digital solutions around service design, technology implementation and process optimization
Headquartered in Madrid, Konecta is provider of transformative experiences and an expert in CX solutions enabled by AI. Konecta has approximately €2 billion (or $2.3 billion) in annual revenue, 120,000 employees across 26 countries and 5,000 digital experts, and supports more than 30 languages. The company offers customer and employee experience services, digital marketing offerings, and products and solutions, such as around CX automation and analytics, all underpinned by AI and GenAI services and advisory and consulting services. Konecta expanded in size and client reach during 2022 through the merger with Comdata, an Italy-based BPO services provider. Comdata had 50,000 employees and annual revenue of approximately €980 million (or $1.15 billion) generated from services such as customer care, back-office and credit management. Since mid-2023 the merged companies have operated under the Konecta brand and currently serv more than 500 blue chip clients. The clients are spread across Europe, Latin America, North Africa, the Middle East and Asia and have an average client tenure of more than 20 years, underscoring Konecta’s emphasis on long-term relationships.

Utilizing a renewed management team will be a critical lever for successful execution of the Katalyst 2028 plan. Notably, over the past several months, Konecta has attracted experienced executives with strong technology and industry expertise from its France-based peer Atos, which has been challenged by attrition due to a turbulent and prolonged transformation initiative. Bihmane, who took the position of Konecta’s CEO in April 2024, previously worked at Atos for more than 23 years, including as global CEO and head of Atos’ Tech Foundations business line. In March Adil Tahiri was appointed head of Advisory and Professional Services. Previously, Tahiri’s 21-year tenure at Atos included roles as advisor to Atos’ CEO and head of CTO. Oscar Verge, also a long-term Atos leader with 20 years of experience at the company, joined Konecta in October 2024 as chief Ai deployment officer.

Konecta is shifting from providing simple automation to orchestration, and AI is a core enabler

While according to Tahiri, “Agentic AI is in the nascent phase,” Konecta’s ambition is to actively transform the industry and create differentiation through digital services. Konecta attracts clients by offering intelligent business orchestration, applying new levels of creativity, such as through real-time and context-aware hyperpersonalized experiences across channels, and orchestrating human and specialized agent interactions. The company provides clients with robust execution through composable agentic platforms and strategic technology and business advisory capabilities to guide clients through their transformations and speed up time to value.

As clients typically have a multitude of business applications, and each has its own data repository, the proliferation of agents creates complexities. Konecta is moving from simple automation to orchestration, and agentic AI adapts to dynamic application landscapes and automatically understands, reasons and sets code to extract data and support decision making. Investing in orchestration capabilities, and development of IP, such as solution accelerators and methodologies and specialized talent enables Konecta to address clients’ needs around managing their agentic AI environments.

Shifting from utilizing industry LLMs to employing customer-specific LLMs enables Konecta to generate business value from customer-specific data. Delivering high-performing and personalized agentic AI based on real-time, proprietary customer data and workflows enables Konecta to benefit from contextual data intelligence and establish trust with clients. The complexity of digital transformation is pushing Konecta to establish a strategic partner ecosystem, including foundational AI providers and niche domain experts, that is complementary to the company’s expertise.

Egypt is an attractive location for IT services providers
Konecta’s expansion in Egypt is driven by the availability of talent with language skills and technical capabilities and will support the company’s global revenue diversification. However, IT services providers such as Accenture, Capgemini, Atos, IBM and Deloitte are utilizing Egypt for global service delivery, are planning to expand their resources in the country, and are actively working with government bodies and local educational organizations to develop in-demand skills to support future recruitment. Intensified recruitment interest from IT services  providers might challenge Konecta’s expansion activities in the country. For example, in April Capgemini announced it will open an AI CoE in Cairo to enable GenAI and agentic AI adoption for clients globally. The center will consist of data scientists, architects, product engineers and project managers. Capgemini plans to double its headcount in Egypt to approximately 1,200 professionals in digital transformation and innovation by the end of 2025 and to expand to 3,000 people through 2026.

Offering GenAI and agentic AI solutions in an open platform increases Konecta’s value proposition

Konecta provides clients with an industrialized, modular and complete GenAI stack that comprises three solutions — Insights for strategic CX intelligence; Co-pilot for real-time agent augmentation; and Auto-pilot for seamless, AI-driven engagement. The Insights solution converts customer interactions into actionable intelligence, automatically mines 100% of voice and chat logs, correlates to KPIs and identifies agent-level coaching insights to forecast outcomes. Co-pilot provides agents with contextual AI to uplift conversations; summarizes prior interaction and customer context; and provides intent recognition, nudges and compliance suggestions during calls. Auto-pilot enables conversational automation of activities and provides escalation to human agents for exceptions. Offering GenAI And agentic AI capabilities in the Konecta platform, which is based on open and modular technology stacks, and offering the solutions as an extension not a replacement of human-delivered services improves the company’s value proposition around deriving productivity gains and expands its client reach.

Investing in GenAI-enabled solutions creates growth opportunities for Konecta, given ongoing buyer interest in adopting GenAI solutions. According to TBR’s November 2024 Digital Transformation: Voice of the Customer Research, “GenAI continues to influence digital transformation (DT) budgets as buyers grapple with juggling hype, ROI and FOMO (fear of missing out). With over three-quarters of respondents combined allocating 26% or more of their DT budgets to GenAI two years after the technology came on the market, it is evident that buyers are eager to explore the possibilities the technology can bring. We do not expect this trend will slow down anytime soon given that the majority of respondents plan to increase their GenAI spend by 10% or more in the next year.”

As macroeconomic pressures force buyers to examine their existing technology stacks to ensure they get the most ROI, Konecta’s GenAI stack demonstrates material outcomes for clients. For example, the Insights solution increases revenue conversion by up to 20% and decreases the ramp-up time for new agents by 20%. The Co-pilot solution enables 98% accuracy in all European languages and a decrease of 30% to 50% in average handling time in managing email and written communication. The Auto-pilot solution automates around 50% of inbound contacts on voice and written channels and reduces cost of interaction by 30%. Demonstrating ROI is critical for solution adoption.

According to TBR’s 1Q25 Digital Transformation: Analytics Professional Services Benchmark, “Enterprises are juggling fear, hype and hope surrounding the potential impact of generative AI (GenAI) on their operating models. This has heightened their expectations for vendors to deliver timely ROI tied to ongoing business process and/or IT modernization transformation, as the implications of technology complexities extend beyond data science, thus creating opportunities for vendors that can manage broad organizational relationships.”

In conclusion

According to TBR’s 2Q25 Accenture Earnings Response, “Transforming the CX domain will remain low-hanging fruit for the next two to three years, offering companies a clear path to apply agentic AI systems for productivity gains. This presents Accenture with a blank canvas to showcase its capabilities at scale and strengthen its position among chief marketing officer buyers. As CX evolves into experience operating systems, powered by continuous feedback and contextual inference, Accenture will need to consider applying multidomain context integration in an era when hyperpersonalization has become table stakes, at least from a communications standpoint.”


Konecta is moving in the right direction, and strict execution of its strategic initiatives and investments in platform-based services will enable the company to reach its revenue growth target of €2.5 billion (or $2.9 billion) by 2028. While Konecta’s competitors are making similar investments, the company will succeed due to its emphasis on helping clients reimagine operations, experience and outcomes with AI, platforms and human creativity, and established local client reach and best-shored service delivery model.

Cloud Ecosystem Report

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AI data needs raise expectations about how services vendors and hyperscalers should be thinking about their relationships, with region-specific guardrails further testing joint GTM durability

Key trends
Hyperscalers’ dispersion across the globe requires these vendors, along with their services partners, to carve out new operating models that prioritize both go-to-market success and adherence to local requirements. This balance translates into a case-by-case — or rather, country-by-country — approach with local partnerships being the common thread. This is especially true for hyperscalers competing for local market share — particularly in the European Union (EU) — to the extent of relinquishing operational control (e.g., Microsoft Bleu), creating a direct opportunity for regional system integrators (SIs) and local infrastructure operators. While global SIs (GSIs) are also in contention, they must account for these vendors as they build out local presence, along with their commercial, staffing and partner models. Meanwhile, regional legislation is pushing hyperscalers to commit to investment pledges to ensure business continuity, with implications for services partners and buyers, further testing the limits of their relationships.

Go-to-market strategy
Enterprise buyers are becoming increasingly conflicted in their expectations of how vendors can best support their technology needs. When it comes to interoperability, many customers look to leverage third-party vendors, and a smaller percentage expect their cloud vendors to address these concerns directly. At the same time, buyers continue to identify technology expertise as a key skills gap in vendors’ value proposition across regions. These dynamics are further amplified in vendors’ regional go-to-market strategies, especially when it comes to accounting for the role of AI and niche vendors that bring specialized knowledge. In a nutshell, vendors cannot rely on a one-size-fits-all AI ecosystem strategy across regions. Success will require region-specific approaches: IP-led initiatives in APAC, orchestration frameworks in Europe, and startup-centric marketplaces in the Americas. All must be underpinned by interoperable APIs and strong governance to help IT services providers capture and monetize local demand. Executing against such expectations while continuing to rely on a traditional labor-arbitrage model will test professional services firms’ readiness to transform their own operations while maintaining trust with hyperscalers, which continue to explore the opportunity to drive professional services revenue by simplifying the sales process and marketplace through the use of agentic AI.

Vendors
In addition to launching bespoke operating models and investing in local infrastructure, hyperscalers are investing at the infrastructure layer to support workload portability and management capabilities that help customers adhere to sovereignty regulations. Google Distributed Cloud is probably the most sovereignty-forward example, but similar comparisons can be made for both Microsoft and Amazon Web Services (AWS). Security is another critical area hyperscalers are investing in, whether it is Microsoft’s new deputy chief information security officer (CISO) role for Europe or Google’s continued effort to expand Mandiant’s assets to prevent breaches. Orchestrating these evolving offerings into a cohesive IT estate will be an opportunity for services vendors, especially when deciding how to configure them in a way that is suitable for country-specific needs. Services — including migration, implementation, consulting and advising — all play a role in navigating the increasingly complex regulatory and security environment, requiring broad hiring in the EU, where the opportunities are the greatest.

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Data location will remain a leading barrier to cloud adoption, but interoperability and breaking down data barriers across platforms will present the bigger opportunity for services vendors

As highlighted in TBR’s 2H24 Cloud Infrastructure & Platforms Customer Research, data location ranked as the second-highest cloud pain point after security, with 40% of respondents expecting their cloud vendors to directly address these concerns — largely due to vendors doing a better job of making customers aware of the various data center hosting and encryption options. Conversely, when it comes to interoperability, many customers will leverage third-party vendors, and a smaller percentage expect their cloud vendors to address these concerns directly. This speaks to both the skills that services-led firms have amassed across multiple technology platforms and the high degree of lock-in the hyperscalers still create across their infrastructure. That said, from a technology perspective, vendors are doing a better job of integrating their offerings, particularly in the area of agentic AI, which necessitates more robust data sharing. As more open frameworks, including Google’s A2A (Agent2Agent), mature and become enterprise-ready, they could create a needed level of standardization that GSIs can leverage to build new agents alongside their ISV partners. Deloitte’s partnership with Google Cloud to build ServiceNow-specific agents on A2A is a good example.

“It [sovereign cloud] helps, significantly helps. A completely separated, air-gapped environment different from the regular public cloud itself. And Switzerland, by the way, is a great example. AWS put up two regions in Switzerland. It’s a tiny country. But even then, they had two regions to satisfy this condition of resilience, etc.” — Managing Director (Firmwide) & Chief Data Architect, Financial Services

Cloud vendor insights excerpt

Microsoft’s Cloud Services & Ecosystem Strategy

Microsoft Cloud’s Latest Ecosystem Initiative (Source: TBR 1H25)

Microsoft Cloud’s Estimated Ecosystem Statistics for 1H25 (Source: TBR)

 

Private Cellular Networks Market Forecast

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While the 5G PCN ecosystem is maturing, it remains underdeveloped compared to older technologies such as Wi-Fi and LTE, slowing the pace of adoption

Robust Wi-Fi and LTE ecosystems, coupled with an underdeveloped 5G-compatible device ecosystem and relatively higher costs, hinder private 5G adoption

The private 5G network market will see robust growth through this decade as a wide range of industries and governments adopt the technology. However, TBR now projects the market will reach $5.3 billion in 2030, down dramatically from our October 2022 forecast of $15 billion in 2030. TBR still believes the private 5G network market will ultimately be several times larger than the projected peak of the private LTE market, but the market is taking much longer to scale than previously expected.

The private 5G network market is challenged by enterprises viewing Wi-Fi and/or LTE as good enough for most non-mission-critical use cases. 5G (including infrastructure as well as endpoint devices and modules) remains far more expensive than Wi-Fi, and enterprises are more comfortable using Wi-Fi; most enterprises choose Wi-Fi as the primary connectivity medium for their private network, with private cellular typically utilized for internet redundancy, backup and failover. Essentially, enterprises have more clarity around LTE and Wi-Fi and are uncertain about 5G PCN ROI, causing them to lean toward existing options.

The limited selection of 5G-compatible endpoint devices (excluding smartphones) remains one of the greatest impediments to private 5G network adoption among enterprises. Ultimately, the device ecosystem for 5G needs to become broader and more dynamic to more closely resemble the device ecosystems for LTE and Wi-Fi and to provide greater selection and lower costs to adopters.

The slow development of the PCN market is partially due to vendor offerings that are not tailored to the enterprise and require trained resources to manage what are effectively scaled-down versions of communication service provider (CSP) RAN infrastructure. However, firms such as Celona are increasingly coming to market with lightweight, Wi-Fi-like PCN solutions that are built for enterprises and do not require specialized labor resources to roll out and manage. Incumbent telecom vendors are also scaling down their offerings to compete with Celona. These innovations will help alleviate this slow development over the course of the forecast.

U.S. will overtake China as the highest-spending country on 5G PCNs, partially due to maturation of the CBRS ecosystem

China has led the market in 5G PCN spend since the market’s inception, but TBR estimates the U.S. will outspend China in 2026. TBR expects the maturing CBRS ecosystem in the U.S. to contribute to growth. Vendors are increasingly coming to market with CBRS-based solutions to meet demand. In September Ericsson debuted Ericsson Private 5G Compact, its scaled-down CBRS-based solution, which followed Nokia’s October 2023 launch of a scaled-down version of its Digital Automation Cloud (DAC) PCN solution called DAC Private Wireless Compact. These solutions are aimed at small and midsize industrial sites, carpeted office environments, and campuses — areas where the traditional private 5G solutions from these vendors would be unnecessarily large and expensive. Ericsson and Nokia are the suppliers for some of the best reference cases for CBRS-based 5G PCN deployments, including Tesla (Ericsson) and Deere & Co. (Nokia) factories. In carpeted enterprises, Celona has made significant inroads, thanks to its lightweight PCN solutions that aim to make PCNs as easy and cost-effective to deploy as Wi-Fi.

5G CBRS momentum should spur growth for minor players in the market. For example, Samsung’s alliance with Amdocs focuses on PCN opportunities that use CBRS spectrum, with Amdocs providing systems integration (SI) in joint engagements. Although DISH has gained minimal traction in PCN thus far, the vendor will benefit from its vast CBRS PAL (priority access license) spectrum licenses, which cover 98% of the U.S. population; DISH won the most CBRS licenses in the 2020 auction.

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TBR estimates the private 5G network market will grow at a slower rate than the industry originally expected, reaching $3.5B in 2028, due to persistent ecosystem maturity challenges

Private 5G Network Infrastructure Spend for 2023 through 2028 Estimate (Source: TBR)

TBR Assessment: TBR expects the private 5G market to grow at a more gradual rate and take longer to reach maturity than the industry originally expected as compatible endpoint devices and key 3GPP (3rd Generation Partnership Project) standards are slowly commercialized.

Most non-CSP entities are being selective about where and how to use 5G. The more mission-critical the environment, the more likely 5G will be utilized. In instances where reliability, speed and/or security are the top concerns, companies are prioritizing 5G.

Though enterprise and government interest in 5G remains robust, the timing of deployments is contingent on ROI and the availability of compatible endpoint devices. The fact that Wi-Fi remains a legitimate alternative to cellular technologies for private networks, mitigating some of the need for 5G, is also a headwind.

Private 5G spend will lag private LTE spend through the forecast as the market is hampered by a slowly maturing device ecosystem and lack of certainty around ROI

Global Private Cellular Networks 5G & LTE Spend for 2023 through 2028 Estimate (Source: TBR)

TBR Assessment: TBR expects growth in the private LTE market will slow and then decline during the remainder of the forecast period, but the slowdown will be more than offset by robust growth in private 5G investment as enterprises and governments adopt the next-generation technology for a broad range of use cases.

Private LTE has been in use for over a decade, and there is a robust vendor, device and application ecosystem that underpins this market, which reduces costs. LTE is sufficient in handling many popular and proven use cases for PCN, reducing the need for 5G. Enterprise CIOs who adopt LTE are reassured about achieving ROI, while 5G ROI is unproven.


Another reason LTE remains the dominant technology is that some vendors offer software upgradability of private LTE solutions to 5G. This approach optimizes TCO and entices enterprises to commit to their platforms before they adopt 5G. Due to these dynamics, TBR expects 5G spend to lag LTE spend through the forecast period.

Telecom AI Market Landscape

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CSPs have an opportunity to capture meaningful value from AI, but realizing this opportunity requires action and investment

Most CSPs look for quick-hit ROI from GenAI; there is still hesitancy to commit to larger-scope AI initiatives that require significant upfront investment

Leading CSPs are all dabbling with GenAI, with some use cases already commercially scaling, especially in customer care and BSS.

CFOs at some leading CSPs are getting directly involved in AI programs to give visibility to these initiatives and ensure they are paying off, looking for quick ROI.

So far, CSP managers like what they are seeing and are hopeful about the prospects of AI delivering significant outcomes, but this hope has yet to translate to large-scale investments tied to broad transformations. Rather, CSPs are focused on more tactical, smaller-scope solutions that address specific pain points or that promise fast ROI.

TBR believes it will take some time for most CSPs to evolve this investment behavior, but some other considerations also need to be factored into the equation, such as uncertainty about governance, regulation and data efficacy. For example, AI’s effectiveness correlates closely with the volume and quality of the data input into the model. The reality is that data inside CSP organizations are usually highly disaggregated in silos and on legacy systems, which poses a major challenge to undergoing large-scale AI transformations.

Realizing the $170 billion total opportunity TBR estimates AI presents the telecom industry by 2030 requires CSPs to act differently

AI presents a once-in-a-generation opportunity for the telecom industry to achieve two key objectives: generate new revenue and reduce costs.

However, there is real risk that most CSPs globally will miss out on the AI opportunity due to cultural (behavioral) and regulatory encumbrances, such as long decision cycles, an unwillingness to invest what it takes to win and general risk aversion. These encumbrances, which are endemic to the telecom industry, have resulted in CSPs largely missing out on every major opportunity in the last two decades (e.g., cloud computing opportunity, video streaming opportunity, digital advertising opportunity), many of which were won by the hyperscalers that were willing and able to take these risks.

Though leading CSPs have been investing in AI, TBR notes that most of these investments seem to be myopically focused on quick-hit wins, which is acceptable in the short term, but true opportunity capture will be contingent on broader-scope initiatives, coupled with upfront investment.

CSPs cannot afford to miss out on another opportunity, especially one that has such transformational qualities as AI. Getting AI right should be of paramount concern to CSPs, as competitors that transform with AI may obtain unapproachable differentiation compared to CSPs that do not invest in AI. Said differently, CSPs that do not get AI right may not be competitive anymore, leading to longer-term questions about their viability.

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CFOs need to evangelize AI across their organizations to seize this critical opportunity. True digital transformation with AI will require significant upfront investment, and the payoff of some investments take a longer time to realize than others. CFOs need to balance investment levels with outcomes, but more support is needed from the top to approach AI in a broader manner.

TBR notes that of the $170 billion CSP AI opportunity by 2030, an estimated 50% is likely to be realized in APAC, where there are many CSPs aiming to take a leadership role in the AI market. The lack of domestic hyperscalers (outside of the U.S. and China) and government desire to have sovereignty over technologies of national importance gives CSPs an opportunity to fill in the gaps in the market. China-based CSPs are already diving headfirst into the AI opportunity, and they are likely to generate billions of dollars in new revenue and save billions of dollars in costs from AI by 2030.

Telcos have a data usability problem, which could slow the pace of AI adoption in their businesses; addressing this issue requires significant additional investment

CSPs have a data preparedness problem, which is an underestimated issue and will be costly to rectify

The efficacy of and value provided by AI are contingent on the quality, type and volume of data the AI model is trained on. It is therefore imperative that CSPs ensure their data is ready for AI and that the data is managed and governed in a sustainable way. This is especially pertinent now that GenAI can train on a broad range of structured and unstructured data.

The reality is that CSPs’ data does not reside in one data lake. Rather, it is highly disaggregated and siloed across the organization and, in some cases, may be incomplete. There are also restrictions (e.g., regulatory, privacy) and security considerations around certain types of data, which hinder the utility and accessibility of the data, creating another major challenge that companies will have to address before they can appropriately leverage AI.

Individual CSPs have access to petabytes of data, but most of this data resides in legacy systems and/or is subject to other restrictions, creating challenges around pooling and preparing the data to be leveraged for AI.

To rectify this issue, CSPs will need to clean up their technical debt and assemble their data in a single, unified platform. This horizontal data layer will be required to run and realize AI-driven outcomes at scale. Most CSPs will likely need assistance with this task, opening up opportunities for the vendor community.

Addressing this issue will also require significant investment and human resources, and TBR believes CSPs that are in the initial stages of their GenAI initiatives have underestimated or overlooked the problem.

TBR believes this issue could extend CSPs’ timelines for AI commercialization. Vendors and hyperscalers will try to mitigate the data issue by training AI models on their own datasets, which could also be fed by partners’ data, but there is a risk that this will not be sufficient and that AI models will need to be tuned to a specific CSP’s needs to realize desired outcomes. TBR also believes it will be common for stakeholders in the telecom ecosystem to be protectionist regarding their data, not wanting to (or being able to) share their data for fear of regulatory reprisals and a nullification of competitive advantages.

Sovereign cloud requirements have the potential to be a meaningful revenue driver for CSPs in select regions and countries

Countries (e.g., China, Saudi Arabia, Qatar, United Arab Emirates, South Korea) and alliance entities (e.g., NATO) that are more impacted by geopolitics and/or have strong data privacy rules and regulations (e.g., European Union [EU] member countries) are looking into establishing national AI infrastructure (e.g., data centers), also referred to as sovereign cloud.

Sovereign clouds would theoretically be set up and managed by domestic players for national security reasons and could be an area of opportunity for CSPs that reside in those countries or regions, whereby the CSP might host the cloud and provide some value-added services to manage those environments on behalf of the government and related entities.

However, TBR ultimately believes it is more likely that U.S. hyperscalers will participate in some way in the AI value chain for most countries given the broad scope of their involvement and dominance in the global AI ecosystem, despite intentions for national sovereignty. This includes CSPs partnering with hyperscalers to jointly develop, operate and manage cloud resources in-country, as evidenced by Orange’s use of Microsoft’s cloud and AI technology for its sovereign cloud joint venture with Capgemini (called Bleu) in France.

TBR estimates the potential annual AI-related opportunity for CSPs will reach $170B by 2030, approximately 53% of which is new revenue and 47% is cost efficiencies

CSPs have been largely sidelined from the new revenue opportunity presented by AI since the emergence of GenAI in 4Q22, but this is starting to change, evidenced by significant deals won by Lumen and Zayo to provide transport between data centers for AI workloads. There are also some green shoots of demand for hyperscalers to leverage CSPs’ network facilities (e.g., wire centers and central offices) and other real estate assets to colocate AI infrastructure closer to end users, as evidenced by efforts being made by Verizon and AT&T.

All CSPs that are investing in AI currently expect to reap cost efficiencies from the technology. The new revenue opportunity is more nuanced and is CSP- and market- specific in nature. APAC-based CSPs are likely to be the largest beneficiaries of new revenue from AI due to government protections, stimulus and cultural orientations toward early adoption of emerging technologies.

Total Annual Potential Value of AI to CSPs by 2030 (Source: TBR)

The Future of Managed Services: Partner-led Growth and the Ongoing Market Disruption

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Register now: The Future of Managed Services

 

The future of managed services: Partner-led growth and the ongoing market disruption

Once dominated by global systems integrators (GSIs) and traditional outsourcers, the managed services market has seen rising competition over the past few years as cloud providers, infrastructure OEMs, VARs and specialized pure play managed services providers (MSPs) vie to deepen their engagements with customers and grow their recurring revenue bases.

 

Join TBR’s Principal Analyst Patrick Heffernan and Senior Analyst Ben Carbonneau Thursday, Aug. 28, 2025, at 1 p.m. EDT/10 a.m. PDT for live insights into how a widening variety of industry groups are leveraging their unique strengths, expanding partnerships, and providing new offerings and pricing models to differentiate their value propositions and cement their share in the ever-growing managed services market. From traditional IT outsourcing to cybersecurity offerings and managed AI solutions, TBR market analysts will discuss how these enterprise and SMB services continue to evolve.

 

In this session on the future of managed services you’ll learn:

  • How commercial models in the managed services market are evolving
  • The emergence of multivendor collaboration: How GSIs, hyperscalers and pure play MSPs forge partnerships for scale and specialization
  • TBR’s forward-looking expectations for the managed services market in terms of leaders, laggards and emerging disruptors

 

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TBR Insights Live: The Future of Managed Services

 

TBR Insights Live sessions are held typically on Thursdays at 1 p.m. ET and include a 15-minute Q&A session following the main presentation. Previous sessions can be viewed anytime on TBR’s Webinar Portal.

 

 

DOGE drives civil sector slowdown; defense contractors gear up as Trump’s budget shifts billions to military priorities

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DOGE generated significant initial turmoil in federal IT that could linger through the end of FFY25, but in the longer term, the key technology focus areas of Trump 2.0 will generate new growth streams

Following the January 2025 inauguration, President Trump’s administration immediately generated upheaval across the federal IT segment with the creation of the Department of Government Efficiency (DOGE). Within weeks, thousands of technology and professional services contracts described by DOGE as “non-mission critical” were canceled or scaled down. Federal IT and services vendors also struggled with an initial lack of clarity and transparency as to how DOGE’s advisory board would evaluate the merit of federal contracts, making effective strategic planning nearly impossible.

As 1Q25 progressed, the IT priorities of Trump 2.0 began to take shape, and the administration slowly increased its collaboration with technology industry vendors to develop and implement digitally based solutions to drive greater efficiencies in government operations. The administration’s IT strategy is heavily biased toward accelerating the digital modernization of federal IT infrastructures, maximizing border security with advanced digital technologies, and implementing software-defined capabilities across defense and national security operations while pivoting from a hardware-centric to a software-centric approach in technology procurement.

The Trump administration also has plans to leverage digital technologies to fortify the nation’s electrical grid, modernize air traffic management, ensure dominance in the maritime and space domains, and enhance healthcare services for veterans. The Department of Defense (DOD) is prioritizing the development of the “Golden Dome” missile defense shield, and federal IT contractors with large-scale DOD-based operations like Booz Allen Hamilton (BAH), CACI, General Dynamics Technologies (GDT) and Leidos are already collaborating with Pentagon planners to develop initial pilot programs.

The specifics behind Trump 2.0’s investment imperatives regarding defense and national security, IT modernization and other areas are still in development, though early indications from the administration’s 2026 budget request suggest federal IT vendors can expect significant new outlays by Trump 2.0 in digital transformation and in technologies that support DOD and Intelligence Community (IC) missions. The federal IT community will have to navigate additional disruptions from DOGE and the typical budgetary turmoil in Congress as new budgets are debated and discussed, but the longer-term outlook for the sector is positive in TBR’s view.

DOGE’s impact varies across the vendors covered in TBR’s Federal IT Services Benchmark. The contractors with the most extensive footprints in the defense and intelligence sectors experienced minimal DOGE-based disruption to their P&Ls or order books in early 2025. The opposite was true for vendors with a significant share of their operations in the civilian sector, though, and was especially apparent among the consulting-led vendors (i.e., Accenture Federal Services, BAH, Deloitte Federal, IBM Consulting and, to a lesser degree, CGI Federal).

The impact of DOGE on the federal M&A market, which saw a minor resurgence in activity in 2024, remains unclear, though Leidos did end its two-plus-year M&A hiatus with the purchase of a cybersecurity specialist early in 2Q25.

BAH and ICF brace for contraction in FY26 as defense-aligned peers prepare for growth under Trump’s pro-defense agenda

BAH and ICF International were hit particularly hard by DOGE in 1Q25, and each company’s respective outlook for the remainder of FFY25 and the beginning of FFY26 is a clear reflection of how DOGE has upended the civil market. BAH’s Civil unit posted flat sales in 1Q25 following 13 consecutive quarters of double-digit growth from 3Q21 through 3Q24, and the company expects low-double-digit contraction in civilian-sourced revenue in its FY26 (ending March 31, 2026), which in turn will significantly moderate the firm’s FY26 overall sales growth.

BAH is projecting that its FY26 revenue will be flat to up only 4% following three straight years of double-digit top-line expansion, with the steep deceleration driven exclusively by the company’s expectations for contracting civilian growth. ICF’s full-year revenue growth guidance currently ranges between -10% and 0%, which translates to between $1.82 billion and $2.02 billion in revenue during 2025.

The Trump administration’s recent “skinny” budget proposal for FFY26 suggests that nondefense spending will fall from around $720 billion in FFY25 to approximately $557 billion in FFY26, representing a 23% decline. Contractors with any level of exposure to the civilian sector can expect agency reorganizations, layoffs, budget reductions and in-depth contract reviews within civil agencies for the remainder of FFY25 and likely into at least the first half of FFY26. The pace of new awards has already slowed significantly at some civilian agencies, as has the rate of new bookings on existing civilian engagements.

BAH, CACI and Leidos anticipate continued strong growth in their DOD and IC units in FY26. This is consistent with what TBR has observed at other defense- and intelligence-focused federal IT peers, which appear to be well aligned with the Trump administration’s emerging defense and national security priorities. Defense discretionary spending will not be reduced, according to the Trump administration’s skinny budget proposal, and could even surpass $1 trillion when factoring in the House and Senate Armed Services Committees’ proposed defense reconciliation bill.

The federal IT community should expect some progress toward federal procurement reform during Trump’s second term, including a marketwide shift to more fixed-price and outcome-based structuring of IT engagements. Some federal professional services and IT vendors claim they have been advising federal clients to embrace more fixed-price contract approaches for years. Others are already working with federal procurement organizations, such as BAH, which is helping the General Services Administration develop innovative ways to transform federal procurement using digital technologies.


TBR has already observed several federal IT contractors adjust their go-to-market messaging to emphasize how they deliver innovation at speed within outcome-based contracting arrangements, as well as to deemphasize anything that could be considered consultative in their portfolios. Vendors will also be tapped by federal agencies to navigate the elimination of regulations and ways to enhance public-private collaborations between government agencies and industry.
Having a well-managed, robust ecosystem of partners will be key for federal IT vendors to navigate the near-term DOGE-based disruption and to position strongly for new opportunities to digitally enhance operating efficiencies in the later years of Trump 2.0.

 

TBR’s Federal IT Services Benchmark focuses almost exclusively on the U.S. federal IT market. The benchmark 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. We detail some additional developments and/or market trends in other public sector markets in the report’s appendix, but our principal research and analytic focus remains the U.S. federal IT sector. To gain access to our latest federal IT data and analysis, start your TBR Insight Center™ free trial today.