September 2025

Devices Benchmark

09.09.25/by TBR

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Vendors will continue to leverage their global manufacturing footprints and supply chain agility as they navigate tariffs

Key 1Q25 Devices Benchmark takeaways

AI PCs will remain a focus of vendors’ investment and product strategies over the next several quarters

OEMs are focused on developing PCs that incorporate neural processing units (NPU), which enable PCs to handle AI workloads locally. Over the next several quarters, the three major Windows PC OEMs — Dell Technologies (Dell), Lenovo and HP Inc. — will continue to develop and promote these AI PCs, releasing them in waves as the technology matures. As 2025 progresses, vendors will continue to invest in methods to differentiate their AI PC lineups from the competition, looking to gain share in the burgeoning subsegment to drive long-term revenue and margin growth within their devices businesses. Commercial devices will remain a particular focus for vendors as they build out their AI-enabled PC portfolios, due to stronger demand and those devices tending to carry higher average revenue per unit (ARPU) and stronger attach rates for services and peripherals.

Vendors outline plans to navigate the current tariff environment

During several devices vendors’ recent earnings calls, leaders were asked how they intended to navigate the current volatile tariff environment. A common thread across the responses was the confidence in each company’s ability to leverage its current business model and diversified supply chain to handle the impacts of tariffs. Dell and HP Inc. cited wide geographic reach as beneficial for navigating a challenging tariff environment, with the latter outlining plans to ensure by June that almost none of its devices sold in North America are manufactured in China. Dell and Lenovo both downplayed the effects of tariffs on their 1Q25 results, with Lenovo executives noting that the company is less concerned with the tariffs themselves than with their rapid onset. Moving forward, Lenovo will continue to leverage the in-house design and manufacturing capabilities underpinning its ODM+ model, as well as its wide global footprint.

Vendors expect the commercial PC refresh cycle to gain momentum in 2H25

For several quarters, cautious spending among both enterprises and SMBs has resulted in soft demand in the commercial PC market. During this period PC vendors have remained confident that the next major commercial PC refresh cycle, induced by factors including an aging install base and the upcoming end of Windows 10 support, will drive a rebound in the market. In 4Q24 Dell reported strong results among small and midsize businesses, something the company claimed has historically been an early indicator of a rebound in the overall commercial market. During its 1Q25 earnings call, Dell cited growing demand among both SMBs and enterprises, reporting that the refresh cycle is ramping up, although it is still “behind prior cycles.” Given these factors, TBR expects the PC segment will continue to build momentum throughout 2025, with the strongest growth coming in the second half of the year.

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Google reported the strongest year-to-year devices revenue growth during 1Q25, while Apple continued to lead in terms of total revenue and gross margin

Graph: Devices Revenue Growth vs Devices Gross Margin (Source: TBR)

TBR expects PC services revenue to return to year-to-year growth during 2Q25, gaining additional momentum in 2H25 as PC unit shipments continue to climb

1Q25 conclusions on the PC Services segment

The majority of PC services revenue continues to stem from premium support, warranty, asset recovery, security and other close-to-the-box attached services.
PC services revenue is closely correlated with PC hardware revenue, but revenue recognition is often deferred. As a result, the trends in the overall devices market are slower to materialize in the PC services segment. For several quarters, segment revenue has declined as PC unit sales contracted sharply across the industry. During 1Q25, the segment declined slightly due largely to contracting revenue on the part of industry leader Dell.
Growth on the commercial side of the market will be vital to performance in this segment going forward, as those PCs carry higher attach rates for services than their consumer counterparts. As the PC market gradually recovers throughout 2025, TBR believes the PC services segment will return to year-to-year growth.
Vendors are currently focused on promoting PC services offerings designed to stimulate PC hardware refresh such as AI PC assessment services, Windows migration services and asset recycling services.

Google led benchmarked devices vendors in terms of growth during 1Q25, while Apple remained the largest vendor by total revenue

Graph: Smart Device Revenue Growth vs Smart Device Gross Margin (Source: TBR)

U.S. Federal Cloud Ecosystem Report

09.09.25/by TBR

Key IT Services Takeaways

Federal systems integrators (FSIs) are under mounting pressure to bring to market a broad portfolio of cloud offerings underpinned by a robust network of commercially centric cloud partners

TBR estimates the total available market in federal cloud was roughly $17 billion in FFY24, and we believe this figure is set to rise to between $20 billion and $21 billion in FFY25. We anticipate total federal cloud spending will expand by between $13 billion and $15 billion to surpass $30 billion by FFY28. Modernizing legacy IT infrastructures remains a paramount, strategic objective for civilian, defense and intelligence agencies that are actively migrating IT systems to the cloud and/or replacing outdated and monolithic IT networks with cloud-native technologies. The advent of AI, generative AI (GenAI) and agentic AI, and the mandatory adoption of zero-trust security infrastructures are also accelerating cloud adoption. The Pentagon maintains a robust pace of cloud implementation, and the next iteration of the $9 billion Joint Warfighting Cloud Capability (JWCC) is in development. DOGE’s actions will upend civilian IT spending patterns through the remainder of FFY25, with disruption likely extending into the first half of FFY26. Federal IT vendors have struggled with budget cuts, headcount reductions, and delayed procurement and project delivery cycles at many civilian agencies since DOGE began reviewing budgets in January 2025. In the long run, TBR believes DOGE will prompt a resurgence in demand for cloud-based solutions as civil agencies and departments are vigorously pushed to outsource increasingly larger shares of IT functions (particularly tasks once provided by now dismissed government employees), migrate to multicloud and hybrid cloud environments, secure their IT networks with zero-trust architectures, and digitally enable mission-critical systems.

Key Cloud Takeaways

Leading vendors look for ways to extend commercial products and go-to-market motions to the U.S. federal space as cloud opportunities increase

The JWCC contract continues to represent the single biggest opportunity for the cloud market’s leading players within the U.S. federal government: Amazon Web Services (AWS), Microsoft, Google Cloud and Oracle. As of 1Q25, roughly $2 billion in task orders have been allocated to these four vendors, with Oracle securing the biggest award to date, after the U.S. Army — with support from Accenture Federal Services (AFS) — migrated its legacy PeopleSoft deployment to Oracle’s Government Cloud. This win highlights the advantages of being rooted in legacy software and partnering with commercial SIs like Accenture that have experience modernizing business applications. JWCC is still in its early days — and an extended contract dubbed JWCC Next is under development — but Google’s recent IL6 (Impact Level) accreditation for Google Distributed Cloud (GDC), available as an air-gapped solution, should be a big step forward for not only Google but also JWCC, as all participating vendors can now deliver at the highest accreditation levels. That said, as the Department of Defense (DOD) starts to more actively leverage infrastructure from distinct cloud providers, it raises the question of interoperability; buying cloud services from multiple providers and leveraging multicloud environments are two different things. It will be interesting to see how agencies work to overcome integration challenges, which could include enlisting more PaaS vendors as part of JWCC Next, and if the four hyperscalers can deliver joint solutions that work with each other. Civilian spend remains strong, with the impacts of DOGE seemingly starting to fade, though defense spending will outpace civilian in the near term. AI opportunities within the sector are also increasing, namely for agencies that already have their infrastructure and applications in the cloud and are best positioned to take advantage of AI.

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Cloud technologies are the foundation for digital transformation across the federal market; overall demand and opportunities for IT modernization remain prevalent

How do IT services vendors view the cloud opportunity?

Despite the growth in cloud spending outlined earlier in this report, large swaths of the federal government’s IT infrastructure remain in dire need of updating to cloud to accommodate the implementation of various AI technologies, advanced zero-trust security solutions, and other emerging technologies (e.g., quantum computing). DOGE disrupted federal IT spending in 1H25, but federal IT vendors remain undeterred in their pursuit of cloud-based digital modernization opportunities. Vendors and their federal customers are collaborating closely to map out future cloud migration and consolidation programs that will increasingly leverage commercially sourced cloud technologies, such as shifting federal data centers to cloud-based architectures to enhance data accessibility.

What do vendors need to develop or deploy to tackle the cloud opportunity?

The Trump administration is prioritizing enhancing data security, availability and cost-effectiveness via cloud technologies as a cornerstone of its federal IT strategy, and vendors are pivoting to align with the administration’s IT vision. FSIs must showcase their successful deployments of mission-enhancing cloud infrastructures that improve agencies’ operating efficiencies while crafting strategies for agencies to reinvest savings from DOGE-driven budget cuts and for the eventual implementation of next-generation technologies to support future missions. FSIs are adjusting marketing messaging to emphasize their ability to deliver innovation at speed within outcome-based cloud deployment engagements. Possessing the scale to deploy cloud infrastructures across agencies is still important for vendors. Equally critical are offering customers the broadest possible suite of partner-enhanced cloud solutions and having a vendor-agnostic approach to migrating federal IT workloads to cloud environments. Agency IT decision makers prefer not to be restricted to using products or services from a single vendor or a small cadre of IT providers. FSIs believe federal agencies will continue leveraging the cloud as the principal destination for legacy systems and for modernizing those systems and fully expect to accelerate adoption of SaaS and PaaS solutions, as reflected by federal IT contractors’ M&A, alliance and joint venture-related activities in 2024 and 2025.

Microsoft’s and Oracle’s hold on the U.S. government is unwavering, but AWS’ early IaaS lead and defense ties are elevating its standing in JWCC and the broader market

Unsurprisingly, Microsoft and Oracle are driving the bulk of prime awards, with the overwhelming majority stemming from traditional license and support contracts. Prime award value for Microsoft dipped in 2024, as large support renewals from the Department of Justice (DOJ) and Department of State that occurred in 2023 and have since expired. Meanwhile, Oracle’s jump in 2024 almost entirely reflects Cerner-related services for the Department of Veterans Affairs (VA). Though AWS does not have the legacy software ties that Microsoft and Oracle do, the company is very competitive in the market. In 2024 AWS saw a big jump in defense-related wins, including those associated with the Defense Information Systems Agency (DISA) and the JWCC contract. Other notable prime awards for AWS during this time include the National Nuclear Security Administration, within the Department of Energy, which is leveraging S3 and other IaaS services.

Graph: Hyperscaler Share of Prime Awards Won for FFY23 to FFY25 (Source: TBR)

Graph: Current Prime Award Value by Vendor (Source: TBR)

Channel Partner Market Landscape

09.09.25/by TBR

Channel partners continue to invest in the expansion of services capabilities to bolster margins and win AI deals

Portfolio key trends

Channel partners across the industry continue investing in the expansion of their services capabilities and cloud marketplace platforms to increase their hardware-adjacent revenue streams. While this initiative is driven in part by recent softness in the hardware market, software and services margins also tend to skew higher than hardware margins, and by taking a solutions-led approach, channel partners can drive deeper customer engagements and a higher level of differentiation in the market.
TBR expects channel partners will increase go-to-market messaging around AI in 2025 as more industry-specific use cases develop, including by emphasizing that AI is built into their own service delivery platforms and by becoming certified to deploy and manage partners’ AI-based solutions.

Operations key trends

As channel partners remain focused on growing their services revenue mix, they will continue to strategically rebalance headcount in roles such as sales and services delivery to expand their capabilities while maintaining profitability.
Streamlining operations through digital transformation remains a key priority as channel partners seek to build a more agile business and buying experience while reducing costs. Examples include the proliferation of e-commerce portals, cloud marketplaces and analytics-based solution configuration. In growth areas, including cloud and services, digital transformation helps solution providers manage complex, multicloud environments and easily aggregate multivendor solutions.

Financial key trends

Despite pockets of demand strength, such as in AI infrastructure, the overall channel partner hardware market has faced challenges over the past two years tied to cautious commercial spending and increasing competition for deals from both OEM partners as well as global systems integrators (GSIs) that are becoming increasingly interested in the resale of hardware to support the delivery of full-stack AI solutions.
Multiple trends will likely help improve customer spending in 2025 including PC refresh in the commercial space and improving enterprise server demand.

M&A key trends

Acquisitions continued to be driven by channel partners’ desires to expand skill sets in cloud, cybersecurity and advisory services. TBR believes industry consolidation remains a pervasive trend among channel partners and will help companies acquire niche services capabilities. Additionally, channel partners will continue to target strategic acquisitions to expand their geographic footprints.

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Services revenue is expected to see the most robust growth among all segments of the channel partner market

Segment trends

Relatively soft hardware demand acted as a headwind for most channel partners in 2024. However, looking ahead to 2025, TBR sees the continued ramp of the next major commercial PC refresh cycle synergizing with rebounding enterprise infrastructure spend, leading to forecasted aggregate growth of 4.1% among covered channel partners.

Demand for AI solutions remains elevated, and VARs are competing with both OEMs and GSIs to develop and deliver end-to-end AI solutions to customers. However, TBR believes VARs’ recent services and portfolio investments, coupled with the sheer scale of the AI opportunity, will allow all parties to benefit from the industry trend in 2025.

As VARs continue to invest in the expansion of their services capabilities to drive solutions-led engagements and as distributors further develop their cloud marketplace platforms, TBR believes channel partners’ margins will gradually expand over the next few years.

Generally speaking, channel partners with greater services emphasis fared best in 2024 amid softness in the hardware market

2024 corporate trends

Estimated aggregate corporate revenue among covered channel partners remained flat on a year-to-year basis in 2024 as soft commercial hardware demand offset growing software and services segment revenues. However, the industry’s performance represented an improvement over the group’s results in 2023, when estimated aggregate corporate revenue contracted approximately 4.6% year-to-year.

Among all covered companies, Arrow Electronics’ ECS segment delivered the strongest growth in 2024 due to the rising success of its ArrowSphere platform, which drove industry-leading software segment revenue growth during the period.

Behind Arrow Electronics’ ECS business, TBR believes WWT delivered the second-strongest revenue growth rate in 2024 due to the company’s ability to leverage its labs and integration centers to help customers develop and validate their own AI solutions. Looking ahead, TBR expects WWT’s labs and integration centers to act as a significant tailwind to the company as an increasing number of enterprise customers adopt AI solutions.

Graph: Revenue Growth versus Operating Margin

Enterprise Systems Integrators Market Landscape

09.09.25/by TBR

Attributes related to vendors’ ability to execute on DT promises reflect changing buyer priorities from a year ago and send a strong message that vendors should not take relationships for granted

Main criteria for selecting digital transformation (DT) services vendors

Working knowledge of buyers’ IT infrastructure, digital-related security and privacy issues, and specific line of business or domain ranked as the top three attributes for vendor selection. The ranking was a major reshuffling from 2023, when industry knowledge, value-to-price, and complete line of professional services ranked as the top attributes. The change highlights buyers’ evolving priorities. While a year ago the attributes were oriented toward convincing stakeholders to spend on DT programs, this year it appears as though buyers are looking for vendors that can execute on the programs, aligning with the increase in overall DT spend. Existing vendor relationship remained the least critical attribute for vendor selection, underscoring that no single vendor’s position is guaranteed and that vendors must account for evolving stakeholder expectations.

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Addressing common gaps such as technical expertise could help vendors build a foundation around scale and quality as GenAI adds another layer of complexity that has to be tied to business outcomes

Customer recommendations for DT services vendors by region

Improving technical expertise remained among the top recommendations across regions for vendors to consider, which reflects the IT fluency of DT buyers and illustrates portfolio and skills gaps vendors struggle with despite ongoing investments. Other common recommendations, such as GenAI knowledge tied to business operations, also underscore the need for vendors to find a way to balance their technology-led discussions with business process knowledge, especially as the majority of buyers’ budgets are shifting back to business and tech advisory services. Supporting and taking responsibility for enterprises’ IT environments cannot be done in a vacuum, and vendors need to account for the impact of broader stakeholder ecosystems, especially as the adoption of emerging technologies increases the level of complexity. This is particularly the case among EMEA buyers, who ranked vendors’ expertise in ecosystem management within the top five recommended improvements, highlighting the importance of collaborating with regional vendors as a critical link in otherwise fragmented European-sourced opportunities. In comparison, APAC and North American buyers see a gap in vendors’ ability help them understand the impact of AI on the business, creating an opportunity for providers with strong consulting skills that can also demonstrate business outcomes through proven use cases.

ESIs and acquisitions — strategies that work

Successful M&A strategies follow one of two cadences in TBR’s research: constant or infrequent. In-between approaches or inconsistent cadences fail to deliver expected returns on investment and do not support sustained revenue growth.
Most ESIs that have doubled their revenues post-pandemic have acquired at an Accenture-like pace, adding complementary capabilities and/or expanding into new geographies (e.g., Persistent and Stefanini). In contrast, some ESIs have maintained high revenue-per-employee results in part by eschewing frequent acquisitions in favor of more organic growth (e.g., Ensono and Protiviti).

Why are these two opposite approaches successful? Evaluating, financing, acquiring, absorbing and bringing to market new assets requires experience that builds muscle memory. Do it often and get good at it or do it rarely so you are not wasting time and money. Inconsistency leads to uncertainty and inefficiencies.

Increasingly, according to TBR’s research, an approach favored by some global systems integrators (GSIs) and consultancies appears appealing to ESIs: invest, do not buy. Most ESIs cannot match GSIs’ dollars invested in corporate venture capital funds or startup incubators, but ESIs can emulate the business model. Investing in niche technology or complementary services providers demonstrates differentiation in a crowded field and potentially provides additional revenue streams.

Increasingly, ESIs will invest in startups and boutiques, expanding their portfolios without the costs of acquisitions and realizing new revenue streams.

ESIs and technology partners — ESI perspective

In TBR’s research, successful SI partnerships with technology vendors require the SI to understand and align with the technology vendor’s sales team. Clear incentive and compensation structures lead to smoothly functioning go-to-market initiatives.

ESIs, by their nature, can be more flexible than GSIs and can benefit from being named the best SI partner in their particular country or for their particular skills. GSIs can compete for global accolades while ESIs show their technology partners the benefits of more local recognition.

Of cloud and software respondents, 33% said, “We use niche providers for small and midsize clients as they offer better pricing flexibility and domain expertise.”
“I want to work with all the major technology companies, but I work with smaller niche companies too. So, when we were rationalizing who to work with and who not to work with, ultimately, it comes down to the TAM [total addressable market]. I want some revenue potential behind any new partners, and any new go-to-market offerings. So that’s what kind of the think tank is deciding behind the scenes.” — Senior Manager of Global Channels and Alliances, Cloud—TBR’s Summer 2025 Voice of the Partner Ecosystem Report

ESIs face core challenges similar to GSI, namely how to differentiate and get technology partners to recommend and even sell an ESI’s services. Without expecting technology partners’ sales teams to be fluent in an ESI’s offerings and value propositions, ESIs can sell themselves in three ways:

Offer flexible and responsive commercial models that play to tech partners’ metrics and compensation models
Provide access to personas and buyers that tech partners cannot reach, such as enterprise business line leaders or wholly new logos
Augment with highly specialized and responsive talent when tech partners’ own professional services teams are stretched too thin