Infosys, Cognizant, TCS and Wipro ITS Double Down on Competitive Pricing Strategy While Trying to Enhance Client Engagement 

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TBR FourCast is a quarterly blog series examining and comparing the performance, strategies and industry standing of four IT services companies. The series also highlights standouts and laggards, according to TBR’s quarterly revenue projections. This quarter, we look at four India-centric vendors — Infosys, Cognizant, Wipro IT Services (ITS) and Tata Consultancy Services (TCS) — and analyze how investments in portfolios, training and innovation are positioning them for growth.

 
Although vendors experienced a small rise in discretionary spending among financial services clients in 4Q24, smaller deal wins, particularly those in consulting, remain infrequent, leading IT service vendors to reprioritize resources to align with market demand and invest in innovative and emerging technologies. India-centric vendors are leveraging competitive pricing enabled by largely offshore delivery, capitalizing on clients’ demand for cost optimization and operational efficiency.
 
According to TBR’s 4Q24 Cognizant report, “Amid an unfavorable sales environment, in which the procurement process is prolonged as IT buyers grapple with smaller budgets and additional layers of executive approval, Cognizant has increasingly relied on its legacy DNA as a low-cost IT services provider to compete on price. This approach is far from exclusive to Cognizant, as other India-centric peers such as Wipro ITS also compete on price. As part of this strategy, Cognizant has been increasingly engaging on a fixed-price basis, relying on automation to maintain margins on net-new accounts.” At the same time, many vendors outside India are executing on localization strategies to enhance client engagement and build signings.
 

TBR Fourcast: Insights into Accenture, Deloitte, IBM Consulting and Infosys, including Accenture’s extensive investment in GenAI and IBM Consulting’s and Infosys’ risk of falling into a downward trajectory

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A well-balanced portfolio with industry-specific solutions is key to enhancing client engagement

In addition to leveraging their low-cost pricing models, India-centric vendors will need to focus on deepening relations with clients to grow revenue. Applying emerging technology, such as AI and generative AI, to industry-specific solutions is allowing vendors to remain competitive by demonstrating competency as well as an in-depth understanding of clients’ needs. As localization strategies become more common, leveraging industry-specific solutions will be important for the India-centric vendors’ revenue growth.
 
All India-centric vendors are forming and expanding partnerships to accelerate the adoption of AI technology and expand client reach within and across verticals. For example, Infosys and NVIDIA released small language models (SLMs) for Infosys Topaz BankingSLM and Infosys Topaz ITOpsSLM, enabling enterprise data to be used over prebuilt SLMs, which help to facilitate the development of industry-specific use cases.
 
Similarly, TCS established the AI.Cloud business unit, highlighting the importance of integrated solutions that combine AI and cloud capabilities to maximize client value. This is further demonstrated by the creation of a dedicated NVIDIA unit within AI.Cloud to accelerate AI adoption across industries through tailored solutions leveraging NVIDIA’s technology.
 

IT Services Revenue and Headcount for Cognizant, Infosys, TCS and Wipro, 2024 (Source: TBR)


 
Although partners are key to a strong go-to-market strategy, especially when introducing emerging technologies and deepening client reach, it is important for the India-centric vendors to differentiate their offerings. Partnering with leaders in AI and cloud, such as NVIDIA and ServiceNow, is vital to remaining relevant; however, developing proprietary solutions internally will be important to distinguish the India-centric vendors from each other. Infosys’ recent portfolio additions will support the company’s revenue growth.
 
For example, the company launched the Finacle Data and AI Suite for banking clients to use AI to improve the customer experience and IT systems. Since July, Cognizant has been diligently building out its Neuro suite, which supports the adoption of automation and AI. Cognizant launched Neuro edge, which is an update to Neuro AI and includes Cognizant Neuro Cybersecurity and a multi-orchestration agent; Neuro Stores 360; and a Neuro AI Multi-Agent Accelerator and Multi-Agent Service Suite.
 
Similarly, TCS is focusing on internal development alongside strategic partnerships, notably establishing the TCS GoZero Hub, a center researching net-zero carbon emissions solutions for Australian clients, and the TCS Responsible AI Framework. Proprietary portfolio offerings around in-demand technology, namely AI, cloud and security, provide vendors with credibility among buyers seeking a third party that can solve their current and future problems.

Investments around innovation and training development build credibility and attract more clients

Cognizant, Infosys and TCS have been investing in building portfolios that balance partner-enabled and proprietary solutions. Meanwhile, Wipro ITS has relied heavily on partnerships to build its portfolio. Despite ongoing restructuring efforts, Wipro ITS continues to lag behind its India-centric peers in delivering in-demand and innovative solutions, especially those related to IoT and digital. Ensuring strong proprietary solutions requires vendors to continually invest in training development and innovation. Wipro ITS is investing in talent development to enhance its AI and digital skills and is increasingly hiring staff with skills in emerging technology. TBR believes these investments will boost Wipro ITS’ revenue performance but does not expect Wipro ITS’ performance to exceed that of Infosys and TCS.
 
Of the four vendors, Infosys provides perhaps the best example of how to invest in talent and innovation. The company is establishing a center in Kolkata, India, and will staff it with employees who have skills in cloud, AI and digital across industries. Beyond training, Infosys has expanded its innovative efforts by establishing an incubator and encouraging employees to bring forward ideas. Infosys’ training and incubator efforts will help propel the company’s growth. Likewise, TCS added freshers to the company in 2024 and will continue to do so in 2025, while remaining vigilant about the company’s cloud and AI training.
 
Given Infosys’ and TCS’ linear revenue growth models, their future performance continues to rely heavily on how well hiring, training and reskilling initiatives are executed, particularly around cloud and AI. The companies that remain more focused on employees and innovative capabilities can ensure that quality services are delivered to clients, allowing them to stay competitive and expand revenue share. In contrast to Infosys and TCS, Cognizant is ramping up its efforts to retain employees more reactively through rehiring former employees and increasing wages. Cognizant’s less pervasive training and innovation efforts could hurt long-term revenue growth, thereby aiding Infosys in its efforts to surpass Cognizant in revenue size, even with Cognizant’s recent acquisition of Belcan.

Improving revenue performance will depend on proactive go-to-market and resource management strategies

Ongoing and proactive investments in innovation, training around in-demand technology, and a balanced portfolio are key to competing for market share. Further, providing clients with industry-specific solutions from internal developments and having an in-depth understanding of partner-enabled and emerging technologies are vital to fueling revenue growth. In 4Q24 Infosys had the highest revenue per employee of the India-centric vendors, at $59,856, followed by Cognizant at $57,867, TCS at $49,600 and Wipro ITS at $45,812.
 
Wipro ITS could elevate its standing with investments in innovation and AI, enabling the company to develop more offerings internally and potentially secure more large deal wins. Cognizant and Wipro ITS could continue to trail behind Infosys and TCS in performance if they let service quality slip or do not continue to train employees on relevant skills. In addition to investing in innovation, training and portfolios, in the long term the four vendors would benefit from leveraging heavy India-based resources to help diversify revenue opportunities with local clients.
 

IT Services Revenue Forecast for Cognizant, Infosys, TCS and Wipro, 2020-2029 (Source: TBR)

 

5 Key Questions on Big Four Evolution and Strategy

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Amid ongoing organizational shifts at the Big Four, 5 key questions are consistently heard among their employees, clients and ecosystem partners

The Big Four professional services firms — Deloitte, EY, KPMG and PwC — have all been undergoing organizational changes in the last couple years. TBR regularly hears five questions about how these firms manage themselves, grow and change. Taking a longitudinal view allows TBR to see that recent restructurings, layoffs and offerings all reflect how these firms are trying to address the following: who gets the best talent, who decides what’s next, who sells, how everyone in a firm knows what everyone else does, and what role will managed services play.
 
At any given moment, one or more of these firms may have solid answers, a consistent strategy and a fit-for-purpose organizational structure. Eventually, all that changes. TBR keeps these five questions in mind as we cover the Big Four, and in this blog we’re unpacking each question and why it matters.
 

Find out what’s in store for IT services vendors and consultancies in 2025 in terms of strategy consulting, generative AI (GenAI) and ecosystem intelligence.
 
Download TBR’s 2025 Digital Transformation Predictions special report today!

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Question 1: Who gets the best talent?

The Big Four firms have some intellectual property, well-established brands and continually evolving alliances with technology providers, but their core asset is simply people. The firms bring clients talented people to solve business problems, provide assurance and/or implement a technology, leveraging a people arbitrage business model: I’ll supply the talent when you need it and for as long as you need it, then I’ll take that talent back. The catch? Within the firm, who decides which clients get the best talent? When capabilities around a particular technology or offering are in short supply, who decides how to allocate limited resources? Local office leaders, country leaders, regional leaders, global leaders, industry leaders, lead client service partners, technology alliance leaders?
 
Managing these competing demands for resources requires exceptional leadership and, as we’ve seen through the years, sometimes means upending the organizational structure to better suit a new way of deciding who gets the best talent.

Question 2: Who decides what’s next?

Over the last decade, the Big Four firms have launched practices in areas such as blockchain, cloud, AI, people advisory, a collection of SaaS offerings, and cybersecurity, to name a handful. Some of those practices have grown, some have disappeared and some just continue to be. In every case, a collection of partners made a business case to the partnership as a whole, getting enough consensus to invest people and money into building something new. At the same time, every Big Four firm has tweaked how it makes those decisions: which partners lead on new offerings, how consensus is built and how new offerings are evaluated over time — essentially, what’s next. If this seems like an inside-the-firm small consideration, look back at the list of practices — at least three generate significant revenue streams for each firm. With hindsight, maybe those new practices and offerings appear to be no-brainers, but some group of partners in each firm still had to make the case, pull together resources and convince the firm to bet on something new. Being late to market changes the way this question gets answered. So does the fear of being too entrenched in selling today to see what’s going to sell tomorrow.

Question 3: Who sells?

Speaking of selling, the Big Four have traditionally eschewed traditional sales teams, relying on every partner (and wannabe partner) to be responsible for landing new clients and expanding footprints within existing client bases. For generations, that worked well enough; however, as all of the Big Four firms’ offerings have become increasingly infused with technology, two developments have forced some changes.
 
First, highly skilled technology-focused talent didn’t always have the skills needed to sell and so couldn’t be evaluated, promoted and compensated in the traditional partner model. The Big Four all adjusted, creating new career paths for the valuable but not-partner-track professionals. Second, the technology-dependent offerings themselves became too complex for most partners to understand and sell on their own, creating an opening for professionals who combined tech skills and sales savvy. The ongoing challenges? Who decides which partners sell to clients? Software is fundamentally different from services, so if a firm experiments with selling software, is a dedicated software sales team necessary? How can partners in one service line sell clients on tech-heavy, specialized offerings from another service line? The Big Four firms continue bending the traditional selling model, and nearly every organizational change includes some element of tackling these “Who sells?” questions.

Question 4: How does everyone in a firm knows what everyone else does?

No one has conquered knowledge management — in any company, anywhere. The Big Four firms have repeatedly launched initiatives, platforms, and evaluation and compensation metrics trying to ensure that tax partners understand all the consulting offerings and that audit partners know when and how to bring in transaction partners. TBR believes the digital transformation and innovation centers that all four firms launched in the mid-2010s (e.g., PwC’s Experience Centers) were intended, as a side benefit, to enhance internal knowledge sharing. Big Four leaders have told TBR that their fellow partners across all service lines learned something new about their own firm every time they attended a client session at one of the centers.
 
Today, all four firms are leveraging AI-enabled platforms to enhance internal knowledge management and will likely see significant improvements. But the challenge will persist, as new offerings, capabilities, use cases, learnings and people constantly refresh the pool of knowledge, which needs to be shared for the Big Four to bring their entire selves to clients. Further, forming regional super-partnerships and reducing 100-plus member firms to a few dozen reflect the need for operational efficiencies, better service for international clients, and, yes, enhanced knowledge management so that everyone in the U.K. knows what everyone in Singapore is doing.

Question 5: What role will managed services play?

If the previous four questions have been perennial challenges for the Big Four firms, shaping organizational structure and leadership priorities, this last one has been a slow-building, nearly existential question. How will professional services firms built on a prestigious reputation and elevated fees staff, price, manage and even grow managed services practices that are, by nature, more transactional than the traditional client relationship model? Each of the Big Four firms has taken a different path (which is one reason TBR sees these firms as concurrently so similar and so different), and each firm has adjusted its vision for managed services at least once in the last four years.
 
And, once again, one common element among all the reorganizations and restructurings has been competing views — within the firms themselves as well as among the partners — about what happens next with managed services. In TBR’s view, the role of managed services may prove to be the biggest differentiator among these four firms over the next five years, even as managing talent in a generative AI (GenAI) world and keeping pace with technology partners’ shifting demands challenge Big Four leadership.
 

Watch Now: 2025 Predictions for Ecosystems & Alliances

Conclusion: What it all means for clients, partners and the ecosystem as a whole

If you’re reading news on the Big Four, keeping these five questions in mind can be useful to understand the “why” behind the “what.”
 
If you’re a client, other questions matter more. (Are they solving your problem or not? Do you trust them? Do they bring you people you like? Nothing else matters.)
 
If you’re a technology partner in the Big Four ecosystem, these five questions are critical to understanding where your alliance is headed. Does your Big Four partner have the right talent to dedicate to your shared clients? Are they innovating with you, and who is leading that effort? Can they capably sell your technology? Do you understand what they bring to the table and what differentiates them from the other Big Four firms and the sea of IT services companies? Are they investing for the long haul or for a quick consulting gig?
 
Circling back, if you’re running a Big Four firm, how you’re addressing these questions helps determine your internal organizational structure and your strategy for the next five years. And how you explain it all to your ecosystem partners may determine how fast you grow alongside them.

The Emerging Data Ecosystem: ISVs, Hyperscalers and Global Systems Integrators

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Watch The Emerging Data Ecosystem:
ISVs, Hyperscalers and Global Systems Integrators

There is no GenAI strategy without a data strategy

Realizing the long-promised ROI of generative AI (GenAI) will require customers look for ways to better access, integrate, manage and govern large amounts of unstructured data. Data-native ISVs, hyperscalers and global systems integrators (GSIs) are evolving their critical ecosystems of solutions to deliver on the commitments of GenAI for enterprise. As such, roles within the cloud ecosystem are shifting, and the increase in open APIs and architectures will have lasting impacts on many data cloud ISVs and GSIs, including how they partner with one another as they race to gain AI workloads.
 
In this TBR Insights Live session, TBR Principal Analyst Boz Hristov and Senior Analyst Catie Merrill share their insights into data cloud ISVs’ and hyperscalers’ strategies and their professional services partners, as well as how forming a triparty alliance structure at the data layer will help partners pursue higher-value GenAI opportunities.
 
Additionally, the pair share an exclusive look at TBR’s revamped Cloud Data & Analytics Market Landscape, which provides insight into enterprises’ data strategies, vendor analysis by workload, and where the market is headed through 2025 and beyond. TBR’s Cloud Data & Analytics research stream tracks all hyperscalers; SaaS vendors such as SAP and Salesforce; and data cloud ISVs including Boomi, Confluent, Cloudera, Databricks, Informatica, MongoDB and Snowflake. The research also looks at the overarching layers of the data cloud stack, from storage and querying to business intelligence.

Watch the below session on the emerging data ecosystem to learn:

  • The data cloud ISVs that have demonstrated success in alliance strategies
  • Ecosystem best practices of data cloud ISVs
  • C-Suite priorities regarding data management and GenAI
  • How hyperscalers are adjusting their partnering strategies to improve the flow of data and win new GenAI workloads
  • Why vendors are positioning around data intelligence, and the components necessary to succeed in this space

 

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Excerpt from The Emerging Data Ecosystem: ISVs, Hyperscalers and Global Systems Integrators

Cloud vendors want partners to understand the importance of data foundations before GenAI can be scaled

Compared to services and OEM vendors, cloud vendors ranked data strategy and data management as the top growth areas for partners, ahead of generative AI (GenAI). This sends a strong signal to partners about the importance of putting the right data foundations in place, breaking down silos and applying governance before GenAI can scale and ROI can be realized.
 
TBR Insights Live: The Emerging Data Ecosystem: ISVs, Hyperscalers and Global Systems Integrators Excerpt
 
Visit this link to download this session’s presentation deck here.
 
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.

Cloud Opportunity Expected to Increase Once DOGE Disruption Subsides

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The U.S. federal government will need modern cloud services to be most efficient, regardless of DOGE-driven changes

Rolling pockets of chaos and an overall cloud of uncertainty may be the best way to describe the first two months of the new Trump administration. One upside to federal contracts is that they tend to be long-term in nature, which provides some stability for all types of vendors with existing contracts. However, the current transition has been rocky, to say the least, as contracts are getting canceled, agency staffing is reduced, and the existence of entire agencies is called into question.
 
Beyond the distinct financial impacts that are occurring to many federal systems integrators (FSIs) and IT vendors, the overall uncertainty about future changes has complicated government contractors’ ability to conduct business as usual. Short-term uncertainty will likely persist, but eventually we will see a silver lining for the ecosystem of IT providers catering to the needs of the U.S. federal government. The government may become a more streamlined entity, in all respects, but IT will need to remain at the forefront of U.S. government operations.
 
Differences of opinion on optimal levels of funding will persist, but most people concur that the IT infrastructure supporting many core government agencies is antiquated and long overdue for upgrade. After the Department of Government Efficiency (DOGE) completes its cost-cutting and agency reorganizations, the overall approach to modernizing those systems will come into greater clarity, but third parties including FSIs and IT vendors like Amazon Web Services (AWS), Microsoft, Google and Oracle will all likely be a part of the solution enabling the reformed federal government to modernize and play an ongoing role eliminating waste, fraud and abuse using a refreshed IT infrastructure environment.
 

Explore the expected impact of DOGE on federal systems integrators and how it could shape the technology landscape

Read Special Report

 

Vendors hope federal spending materializes after the fog of dismantling and reducing headcount dissipates

Reducing the size of the federal workforce was an immediate focus for DOGE. With the “Fork in the Road” email sent by the Office of Personnel Management to encourage staff resignations and the nonvoluntary firing of workers across civilian agencies, the total number of employees shed from the federal workforce is estimated to have surpassed 100,000 in the first two months of the Trump presidency.
 
The entire federal workforce still totals more than 3 million, excluding 1.3 million active military personnel, and additional cuts are a certainty. Early in the formation of DOGE, the idea of cutting up to 75% of federal workers was floated, which could be far-fetched in reality. Regardless, it is clear the workforce-reduction efforts will continue to be a focus as DOGE expands its reach to additional government agencies and pushes further than just the probationary employees that made up the bulk of early reductions.
 
As headcount reductions continue, cloud and software vendors could assist the administration with those cuts while, at the same time, be impacted by the fallout of those cuts. On Workday’s FY4Q25 earnings call, CEO Carl Eisenbach painted the impact of DOGE in an opportunistic light, stating: “In fact, the majority of them [federal IT systems] are still on-premise, which means they’re inefficient. And as we think about DOGE and what that could potentially do going forward, if you want to drive efficiency in the government, you have to upgrade your systems. And we find that as a really rich opportunity.”
 
If, in the era of DOGE, government agencies undertake new, or continue existing, efforts to modernize IT systems and adopt cloud-enabled solutions, it would certainly be a big opportunity not just for Workday, but for the entire federal IT contractor market. The certainty of that opportunity is still questionable, however, given the rapidity with which major changes to how government operates are occurring. Any technology opportunities with USAID (United States Agency for International Development), for instance, are now dubious given the speed with which the agency has been dissolved, even as legal challenges abound.
 
Additional rapid changes will occur with the Department of Education given President Trump’s clear directive to new Secretary of Education Linda McMahon to dismantle the agency. On ServiceNow’s 4Q24 earnings call, CFO Gina Mastantuono noted some of this uncertainty while also remaining optimistic about the federal opportunity, stating the company’s guidance reflects a stronger U.S. federal performance in the back half of 2025, given changes brought on by the administration.

A build-it-yourself approach could challenge packaged IT solutions

DOGE head Elon Musk has clearly employed many of the same techniques and strategies he has used in the past, such as sending a “Fork in the Road” email to Twitter employees and requiring them to send a weekly email of their accomplishments after he purchased Twitter (now called X). With that in mind, it is relevant to think about the approaches to IT that Musk has used as CEO of Tesla and SpaceX for clues about what might occur in the U.S. federal space.
 
For some of the most important mission-critical IT and software decisions at Tesla and SpaceX, Musk deployed a proprietary software package that is shared by the companies to manage core manufacturing and sales, CRM and financial processes. Instead of utilizing a prebuilt solution from the likes of SAP or Oracle, internal teams at SpaceX and Tesla built, customized and manage their own ERP solution named WARPDRIVE. Musk could very well encourage a similar approach in federal agencies, either by licensing WARPDRIVE to those agencies or by directing more proprietary programs to be custom-built to reduce expenditures and theoretically achieve a superior technological solution. Either option would be challenging to implement but remains within the realm of possibility and would effectively reduce the addressable market for third-party IT solutions.
 

Watch Now: Deep Dive into Generative AI’s Impact on the Cloud Market in 2025

Scaling back new and existing awards will stifle revenue for cloud vendors in the short term

In the U.S. federal sector, SIs are a key conduit for how cloud and software companies capture opportunities. The opportunity pipeline and associated timeline for deals is notoriously long for federal spending, but the total opportunity has already decreased in size based on the cuts made by DOGE. Some of the strategies and actions recently used by leading SIs in the federal space are discussed in TBR’s special report, Leading Federal Systems Integrators React to U.S. Department of Government Efficiency. As outlined in the special report, all 12 of the leading federal SIs are looking to reduce expenses and prepare for a slowing of revenue streams in the near term. After a period of federal investment and expansion, this certainly is a change in trajectory for their businesses. In addition to making similar cost reductions, all 12 vendors are also doubling down on their competitive differentiation to secure growth moving forward. All of the recent market shifts, including security, AI and digital transformation, have led FSIs to reinvest in capabilities that provide the best opportunities for long-term expansion.
 
In the short term, even existing contracts with the federal government are subject to reductions or termination, which impacts not only the SI but also the IT vendors that have secured subawards to provide their technology as part of the overall engagement. One example TBR cited in the special report was the $1.5 billion award Leidos has with the Social Security Administration (SSA), which includes subawards for Pegasystems, AWS and multiple other IT vendors. The Leidos deal was scaled back by DOGE, marking the beginning of the disruption to awards with SIs and subawards with IT vendors. SSA represents a small portion of the federal budget, so when DOGE looks to larger agencies such as the Department of Health and Human Services for cost reductions and efficiencies, the impact on the federal SIs and supporting IT vendors will be even greater.
 
In terms of the scale of revenue at stake, AWS alone has won close to $500 million in subaward contracts in the last three fiscal years. That does not directly translate into revenue, however, as the money still needs to be outlaid, a process that is even more tenuous given the current spending environment and actions taken by the DOGE team. In addition to deals tied to FSIs, cloud vendors and software vendors also have direct deals/prime awards with federal agencies that are at greater risk. AWS, for instance, has won a total of $445 million in prime award contracts over the past three fiscal years.
 
Most of those awards are multiyear contracts that are not guaranteed, and the revenue could be reduced or not disbursed. In fact, only $104 million of those awards to AWS have been outlaid, meaning the balance, more than $340 million, could be impacted. It is also important to note these figures only reflect past deals; we anticipate the new federal deal pipeline for vendors like AWS to shrink due to uncertainty and the administration’s focus on cost reductions.

Big cloud deals such as JWCC and Stargate are expected to proceed without significant funding impacts

The impacts of DOGE should be widespread throughout the government, but we expect the top federal IT opportunities, the Stargate Project and the Joint Warfighting Cloud Capability (JWCC) contract vehicle, to avoid major funding challenges. Though both projects are in the early stages and still subject to competitive jockeying between technology providers to secure task orders, we expect the funding to remain available even amid broader spending reductions.
 
The JWCC was announced in 2022 with a total of $9 billion in funding available to Oracle, Microsoft, AWS and Google Cloud. Oracle has been a leading provider under the contract to date. Roughly $2.5 billion has been awarded to the five vendors thus far in the contract, leaving more than $6 billion in additional task orders in the entire project. The spending bill passed in mid-March to avoid a federal shutdown illustrates the appetite to sustain, if not increase, defense spending. All the participants in JWCC have donated to and publicly supported the administration, which could solidify the longevity of the engagement.
 
Stargate was introduced by President Trump in the early days of his presidency, indicating that the project is likely to proceed in some fashion regardless of any budgetary pressure. The project will be a joint venture with OpenAI, SoftBank and Oracle to initially build a $100 billion data center in Texas. Over the next four years, the project aims to build additional large-scale data centers, with a total of $500 billion in funding, making it the largest centralized data center investment in history. The funding includes significant financial backing from the U.S. government, with contributions from SoftBank, a firm known for its long-term investment strategies. OpenAI, SoftBank, Oracle and MGX are the initial equity investors, while Arm, Microsoft, NVIDIA and OpenAI have been named as technology partners and will have some involvement in the project.

Modern cloud IT solutions should have an elevated role in the restructured federal government

The headcount reductions, eliminations of agencies, and overall uncertainty will disrupt business as usual in the U.S. federal sector at least through the end of 2Q25. Once the new, smaller and streamlined structure emerges, we expect the value of modern IT solutions to be recognized and spending to resume and even increase compared with the prior trajectory. Having fewer human resources, likely fewer skilled IT professionals, and an altered view of budgeting and ROI for all initiatives, IT included, all amplify the value that can be added by modernizing the infrastructure and solutions that support the mission of government agencies.
 
Across fragmented environments, many of which are still traditional on premises and based on aging technology, consolidation and use of government-grade cloud delivery can improve performance and reduce the total cost to deliver even over a relatively short three-to-five-year time frame. On the commercial side, many of the organizations we speak with note that the simplification of their IT environments is one of the strongest drivers of cloud adoption. AI and generative AI capabilities add to the benefits that can now be enabled. And for government agencies, preexisting data protocols and procedures increase their readiness to apply next-generation data analysis and AI. We see the business use cases for AI becoming more compelling on the commercial side, which bodes well for adding real value in the U.S. federal sector as it adapts to a more streamlined way of operations.

2024-2029 Devices Market Forecast

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TBR expects cyclical PC market dynamics and AI adoption to drive a single-digit devices CAGR from 2024 to 2029

After declining for several quarters due to market saturation and tightened corporate IT budgets, PC demand is gradually recovering, particularly on the commercial side of the market as organizations begin to refresh their fleets of devices. TBR expects the devices market to grow at roughly a 2.7% CAGR from 2024 to 2029 as this recovery in PC demand is supplemented by growing smartphone and tablet revenue. TBR also expects demand for AI advisory and consultancy services will increase as organizations invest in implementing AI across IT infrastructure and client devices.
 
The proliferation of AI across the IT space presents devices vendors with a range of growth opportunities. PC OEMs will remain focused on driving AI PC adoption and gradually increasing these devices as a mix of total PC shipments to drive long-term revenue growth and average revenue per unit (ARPU) expansion. To help speed this adoption and increase services revenue, vendors will also continue to build out suites of services designed to help organizations take advantage of the productivity gains offered by AI PCs. TBR expects vendors to continue to increase their non-PC revenue mix, capitalizing on growth opportunities presented by AI and sheltering their top lines and margins from potential fluctuations in the PC market.
 

Graph: Devices Market Share, 2024 and 2029 (Source: TBR)

Devices Market Share, 2024 and 2029 (Source: TBR)

Dell’s strong direct sales motion will help it maintain its top position in PC services revenue through 2029

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. PC sales declined for several quarters throughout 2022 and 2023, offering vendors less opportunity to attach services and constraining revenue growth in this segment. As 2025 progresses and PC unit shipments continue to expand year-to-year, PC services revenue growth momentum will gradually accelerate. Recovery in the commercial PC space will boost PC services performance, as commercial PCs carry higher services attach rates than their consumer counterparts.
 
Vendors will remain focused on mitigating the impacts of negative margin pressures on PC hardware by continuing to focus on increasing their PC services revenue mix relative to PC hardware revenue, with an emphasis on sustainability, cybersecurity and predictive analytics.
 
As AI becomes increasingly prevalent in the devices space, vendors will also continue to promote offerings designed to help organizations effectively adopt AI infrastructure and AI-enabled end-user devices. Offerings such as Lenovo’s AI Fast Start program and Dell Technologies’ Implementation Services for Microsoft Copilot are both designed to help organizations take advantage of the productivity gains that AI PCs offer.
 

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Although China is a weak market for some vendors, TBR expects Lenovo to take advantage of AI PC opportunities in the country to expand APAC revenue

TBR expects the APAC devices market to grow at a 2.7% CAGR from 2024 to 2029 — a rate on par with the global devices market.
 
Over the last several quarters, vendors such as Apple and HP Inc. have reported China as being a particularly weak market for their devices businesses due to persistent softness in demand.
 
TBR expects that among the vendors included in this forecast, Lenovo will reap the greatest benefit from recovering PC demand in China due to its already large market share and its AI PC strategy in the country. In May 2024 Lenovo rolled out a lineup of devices in the country it dubbed its “five-feature” AI PCs, including a personal agent and local large language model (LLM). The company reported strong initial uptake of these devices during its 2Q24 and 3Q24 earnings calls, and TBR expects ongoing momentum in China will help drive Lenovo’s PC segment and top-line growth throughout the forecast period.

3Q24 IT Services Vendor Benchmark

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Overall revenue growth year-to-year for the vendors in TBR’s IT Services Vendor Benchmark will accelerate during 2025 aided by managed services activities, innovative portfolios and upskilling

As we review financial results from 3Q24 and 4Q24, we will likely see that macroeconomic uncertainty caused an overall IT services revenue deceleration in 2024. However, IT services spending will continue as clients seek run-the-business managed services opportunities to operate in challenging market conditions.
 
A new wave of outsourcing demand is picking up speed as buyers are inclined to switch from innovation to business resiliency in the event of economic turbulence. Multiple IT services providers are racing to capture as much business in the managed services space as they can before GenAI [generative AI] picks up and threatens the core value proposition centered on human-backed service delivery.
 
While vendors are experiencing a slowdown in consulting activities due to limited discretionary spending, the U.S. Federal Reserve’s three federal funds rate reductions during 4Q24 and general market expectations of two cuts in 2025, will likely improve buyers’ confidence and boost discretionary spending. TBR expects IT services peers with established consulting capabilities will race to capture the potential rise in spending, compelling vendors to constantly evaluate their value propositions to ensure trust and service quality. This is especially important as the prolonged slowdown in discretionary spending has given buyers an opportunity to assess digital stacks and vendors’ performance.
 
TBR expects IT services revenue growth for benchmarked vendors to accelerate during 2025 compared to rates in 2024. Broad-based investments in innovative portfolio offerings and acquisitions along with upskilling existing employees and recruiting higher-caliber talent in onshore and nearshore locations will contribute to revenue growth acceleration.
 

Graph: Overall Revenue and Growth for Benchmarked IT Services Vendors, 2024 Est. and 2025 Est. (Source: TBR)

Overall Revenue and Growth for Benchmarked IT Services Vendors, 2024 Est. and 2025 Est. (Source: TBR)

To position for growth in 2025, vendors continue to pursue opportunities around AI and GenAI, expand outsourcing capabilities through engineering services, and build local relationships in India

3Q24 Trends

Vendors invest in AI and GenAI solutions: While the overall short-term revenue growth slowdown in TBR’s IT Services Vendor Benchmark suggests some vendors might be in financial distress, the pipelines of AI- and GenAI-related opportunities suggest vendors are capturing emerging opportunities. Procurement, sales and marketing, customer service and software development are the go-to use cases around GenAI adoption. Use cases with demands on data, dependencies on external data and/or long horizons to ROI remain the subjects of innovation sessions, proofs of concept and road maps.
 
Vendors develop engineering services portfolios: Multiple IT services providers are enhancing their outsourcing capabilities by investing in engineering services and silicon design services. Such initiatives position vendors for a new wave of outsourcing services funded by operational technology buyers, which are a new type of buyers for some of the vendors. GenAI provides a new conduit for managed services opportunities, as the integration of new applications and infrastructure gives vendors a natural starting point to build their managed services pipelines. Enhancing outsourcing capabilities by investing in engineering services and silicon design services will help vendors control the GenAI-related disruption of human-driven service delivery models and mitigate potential revenue cannibalization.
 
Vendors develop innovation capabilities in India: India remains a region of investment — from both a revenue generation and a global service delivery standpoint — as vendors strive to build relationships with local clients to diversify geographic reach. According to TBR’s Fall 2024 Global Delivery Benchmark, “investing in India remains a priority for most vendors, as the low-cost labor in the country continues to offer a way for vendors to improve profitability. The difference this time is that vendors also aspire to drive sales from within the country. Lack of native industry-skilled consultants, combined with a smaller number of industries that are ripe for digital transformation compared to Western economies, might create a profitability headwind if vendors lack the C-Suite permission and brand recognition.”
 

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Vendors use acquisitions to deepen functional and industry expertise and grow revenues

IT services providers are gradually accelerating acquisition activities compared to 2023 as they strive to diversify portfolios with niche expertise and expand client reach. In 3Q24 IBM used acquisitions to expand client reach across sectors and enhance capabilities.
 
During the first nine months of 2024 IBM completed three acquisitions in IBM Consulting and five acquisitions in IBM Software, supporting IBM’s strategy to expand in hybrid cloud and AI. IBM paid a collective cost of $2.8 billion. In comparison, IBM completed seven acquisitions during the first nine months of 2023 for an aggregate cost of $5 billion, approximately $4.6 billion of which was for the Apptio acquisition.
 
Accenture’s acquisition strategy remains unrivaled, with the company spending $6.6 billion on 46 transactions in FY24 (ended in August 2024), up from $2.5 billion in FY23 and $3.4 billion in FY22. The company plans to spend another $3 billion in FY25. The broad-based targets Accenture pursues highlight the company’s efforts to maintain a diversified portfolio and skill sets while ensuring it captures inorganic revenue boosts and positions itself for long-term organic revenue growth.

Industry view

While financial services is a leading revenue contributor for some of the 17 benchmarked vendors with available data, accounting for 25% of total revenue in 3Q24, revenue growth in the vertical has declined for the past three consecutive quarters. Macroeconomic headwinds in financial services subsectors, such as mortgages, asset management, investment banking, cards and payments, have been negatively affecting vendors’ performance in the sector.
 
These headwinds have been driving revenue growth deceleration for some of the vendors in the U.K. & Ireland and in North America, typically the two largest revenue-contributing geographies for IT services activities in financial services for the covered vendors. Other vendors are alleviating revenue growth pressures by ramping up activities with large banking clients in areas such as cost takeout and transformation programs.
 
Financial services will remain a leading revenue-generating segment for some of the subset of 17 benchmarked vendors with available data. TBR expects revenue growth pressures in financial services to ease in 2025, as some of the leading IT services providers in the segment, including India-centric Cognizant, TCS, Infosys, Tech Mahindra and Wipro, experienced revenue growth in 3Q24, albeit in the low single digits.
 
Such vendors are benefiting from increased interactions among financial services clients, as these clients look to drive IT modernization and optimization for efficiency and enhanced experience. Financial services is a leading revenue generator for India-centric vendors. These vendors — along with Capgemini, which has stabilized revenue growth in the sector — are optimistic about future revenue performance in financial services, as discretionary spend continues to improve among clients in the capital markets, mortgage and card processing sectors in the U.S., a trend that began in 2Q24.
 
Other vendors, such as Accenture and Kyndryl, continue to report declining revenues but are ramping up activities with alliance partners and winning new deals, which will contribute to revenue generation and help alleviate revenue growth pressures during 2025.

1H24 Cloud Data Services Market Landscape

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Vendors lead with the data lake architecture and emerging frameworks to sell a message of data intelligence amid rampant GenAI adoption

The race for Apache Iceberg mindshare is on

Data lakes remain a valuable way for enterprises to simultaneously store structured and unstructured data, particularly as the latter increases due to generative AI (GenAI) and large language models (LLMs). Data lakes are also directly attributable to the rising popularity of Apache Iceberg, an open-source format regarded by developers for its ability to store data in tables and freely move that data across any data lake architecture.
 
Whether a customer is creating their own data lake (e.g., on Amazon Web Services [AWS]) or deploying a data lake platform as a product (e.g., Databricks), Iceberg is playing an increasingly larger role in helping customers navigate their big data estates with the most limited vendor lock-in.
 
How the two data lake giants — Snowflake and Databricks — are investing best speaks to the budding role of Apache Iceberg and its growing community. Earlier this year Snowflake adopted Apache Iceberg as the native format for its platform and subsequently launched Polaris, a tool that allows customers to catalog that data stored in Iceberg tables.
 
In only a matter of days, Databricks, which was born out of Delta Lake, an Apache Iceberg alternative, moved into the space with its acquisition of Tabular. Tabular was created by the founders of Apache Iceberg, marginalizing Snowflake’s recent investments and intent to attract more Iceberg-heavy users, which generally include digital and cloud-native companies. The hyperscalers, primarily AWS and Microsoft, work closely with Snowflake and Databricks and benefit from their respective integrations to boost interoperability for joint customers through Iceberg.
 
For example, Microsoft announced its data platform Fabric, which is based on a data lake architecture (OneLake), will support Iceberg via Snowflake. This is a major win for Snowflake that elevates the company’s role as an ISV partner in the Microsoft Fabric ecosystem and further challenges Databricks, which due to its native first-party integration with Azure, has always had a rich and unique relationship with Microsoft.

A select number of vendors are leading the shift to data intelligence

Though somewhat influenced by a degree of marketing hype vendors use to differentiate themselves, data intelligence has become an emerging topic in the market, led by GenAI. At its core data intelligence refers to the use of AI on data to deliver insights tailored to the business, but the other core component of data intelligence is the underlying data architecture foundation.
 
Databricks is largely associated with formalizing the concept of data intelligence and even markets its platform as the Data Intelligence Platform to convey the value of having both the data lakehouse architecture and the AI components (in Databrick’s case, Mosaic AI) that allow customers to build, train and fine-tune models. Other vendors have similarly adapted their messaging around data intelligence.
 
For example, as part of what it now calls its Data Intelligence vision, Oracle Analytics announced Intelligent Data Lake, a reworking of existing OCI (Oracle Cloud Infrastructure) services like cataloging and integration, to create a single abstraction layer that will support both Apache Iceberg and Delta Lake formats.
 

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Hyperscalers are taking different approaches to address the symbiotic relationship between data architecture and AI

Microsoft and Google Cloud are integrating and productizing their data services as complete solutions, exposing a lack of maturity in AWS’ fragmented approach

Microsoft made a big move when it launched Fabric, which essentially integrates seven disparate Azure data services — from data warehousing up to analytics — as part of a single platform underpinned by a unified data lake. Today, Fabric has amassed over 14,000 paid customers and a growing ecosystem of global systems integrators (GSIs) and ISVs building and selling applications on top of the platform.
 
Google Cloud, which has always had a strong play in data analytics, is trying to better unify key data and analytics capabilities in BigQuery to deliver a more complete, single-product experience. This includes BigLake, Google Cloud’s storage abstraction layer and services like Dataplex, so customers can apply governance tasks like lineage and profiling in Dataplex without having to leave the BigQuery interface.
 
Though Google Cloud’s approach may lack the level of integration compared to Microsoft Fabric, it is clear to see the direction the company is heading to help customers simplify their data estates, and ultimately capture more analytics and AI workloads.

AWS’ approach is different. Though offering the broadest set of data tools and services, from storage and ingestion up to governance, AWS is still lacking the platform mindset and strategy of its peers.
 
To be fair, the company has been working to better integrate services within its own ecosystem by improving data sharing between the operational database and the data warehouse (e.g., “zero-ETL” integration between Aurora and Redshift), but customers continue to stress that they have to take on more burden in the back end when crafting a data architecture on AWS.
 
This dynamic only reinforces the importance of AWS’ partnerships with complete data cloud platforms like Snowflake and Databricks, but of course Microsoft is also making sure it keeps these companies elevated within the Fabric ecosystem.

The GSIs are playing a prominent role in multiple facets of data, which could speak to maturing ecosystems and hyperscalers’ efforts to productize the entire data life cycle

Customers indicated that the GSIs play a prominent role in all aspects of the data strategy from change management to data architecture to governance. Just 12% of respondents say the GSIs were involved in their analytics stack, but this seemingly low percentage could be for many different reasons.
 
First, establishing the data architecture, or re-architecting disparate IT assets, such as data warehouses, is top of mind for many customers right now as they recognize it is a necessary step in GenAI deployment.
 
Secondly, the hyperscalers and pure play data platform companies are becoming more adept at delivering integrated solutions that deliver upper-stack capabilities, such as analytics based on a holistic data lake architecture. Microsoft Fabric, which has a growing ecosystem of both GSI and ISV partners, is a top example.
 
TBR’s newly launched Voice of the Partner Ecosystem Report found that cloud providers expect data strategy and management to be the biggest growth area coming from partners over the next two years. In fact, data strategy and management ranked higher than GenAI on its own, which is telling of what the cloud providers expect from their partners.
 

Graph: Role of GSI Partners in Data Strategy, 1H24 (Source: TBR)

Role of GSI Partners in Data Strategy (Source: TBR 1H24)

Though Informatica’s cloud-first vision will erode lucrative license and support revenue streams, the company is showing early signs in its ability to expand margins

Despite no longer selling perpetual licenses and actively migrating its support base to Information Data Management Cloud (IDMC) in the cloud, Informatica’s gross margins continue to expand.
 
Meanwhile, GAAP operating margin increased over 300 basis points year-to-year in 2Q24 as Informatica continues to benefit from economies of scale, and sign larger, more strategic contracts with customers.
 
Recognizing that it is navigating a highly competitive landscape, Snowflake’s investments in R&D are increasing. For context, Snowflake’s R&D accounts for a notable 50% of total revenue.
 

Graph: Data Cloud Platform Revenue, Growth and Profitability, 2Q24 (Source: TBR)

2Q24 Data Cloud Platform Revenue, Growth and Profitability (Source: TBR)

DOGE Federal IT Vendor Impact Series: Accenture Federal Services

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The Trump administration and its Department of Government Efficiency (DOGE) have generated massive upheaval across the board in federal operations, including in the federal IT segment. As of March 2025, thousands of contracts described by DOGE as “non-mission critical” have been canceled, including some across the federal IT and professional services landscape. TBR’s DOGE Federal IT Vendor Impact Series explores vendor-specific DOGE-related developments and impacts on earnings performance. Click here to receive upcoming series blogs in your inbox as soon as they’ve published.

AFS navigates DOGE disruptions: Strong 1Q25 growth amid federal IT spending cuts

Accenture Federal Services’ parent company, Accenture, released its 1Q25 (FY2Q25) earnings March 20, which included some details, albeit limited, about the impact DOGE’s cuts have had on the company’s $5-plus billion federal subsidiary. Although TBR estimates AFS’ quarterly sales in 1Q25 were $1.44 billion, up 18.3% year-to-year on a statutory basis and 7.6% on an organic basis (excluding the impact of the 2Q24 Cognosante acquisition), Accenture CEO Julie Sweet was careful to note during the company’s 1Q25 earnings call that AFS experienced delayed procurement cycles, particularly on net-new programs, during the quarter. That said, AFS’ estimated 1Q25 sales remained in line with TBR expectations.
 
TBR had projected AFS’ 1Q25 quarterly revenue would fall between $1.40 billion and $1.55 billion, implying statutory year-to-year growth of between 14.7% and 27.0% and organic year-to-year growth of between 4.0% and 16.3%. By TBR estimates, AFS achieved double-digit top-line organic growth in four of the six quarters between 4Q23 and 1Q25, and organic growth of at least 9% in the other two quarters. We anticipated the slowdown in AFS’ organic growth in 1Q25 but did not factor any DOGE-related impacts into our calculations.
 
All indications from the cohort of federal systems integrators (FSIs) tracked by TBR, as well as anecdotes from our secondary research, suggested that federal IT spending would begin to naturally cool down in federal fiscal year 2025 (FFY25) after a four-year bull market featuring unprecedented expansion of federal IT budgets and growth on behalf of the FSIs. After all, what goes up must eventually come down, but we could not have fully predicted or quantified the early impact of DOGE on AFS or the broader federal market.

TBR believes DOGE canceled nearly $93 million in potential AFS revenue across 10 DOE task orders

Sweet did not mention any specific programs culled from AFS’ book of business by DOGE’s cost-cutting actions. However, TBR is aware that in 1Q25, DOGE canceled 10 task orders on the U.S. Department of Energy’s (DOE) Chief Information Officer Business Operations Support Services 2.0 (CBOSS 2.0) blanket purchase agreement (BPA) for IT modernization and business process services. AFS was the incumbent on the first iteration of the program, CBOSS 1.0, winning the contract with the DOE in 2018.
 
AFS also secured the $3.5 billion, seven-plus-year recompete on CBOSS 2.0 in January 2025 to continue providing IT support solutions and technology and advisory services around security strategy, operations and environmental management. After AFS won this recompete, Booz Allen Hamilton (BAH) and Leidos protested, prompting the DOE to reconsider the award and review AFS’ winning bid and subsequently leaving a major deal win on AFS’ books in protest limbo. However, we do not believe the challenge by BAH and Leidos was related in any way to the 10 canceled task orders or to DOGE.
 
The full impact of the 10 canceled task orders on AFS remains unclear, but TBR’s secondary research indicates the terminated work has a total contract value (TCV) of nearly $93 million, including a $35 million order from DOE’s CIO office and a $2 million order for geospatial services. If we assume all $93 million worth of orders was booked by AFS as the prime awardee, that sum would represent just under 2% of AFS’ estimated FY24 revenue of $5.4 billion.
 
According to TBR’s 1H25 Accenture Federal Services Vendor Profile, “We estimate Cognosante will add up to $400 million in annualized, acquired revenue to AFS’ top line after the acquisition is fully integrated in 1Q25.” Cognosante vastly enhanced AFS’ cloud migration, program management and platforms for federal IT health agencies. Acquiring Cognosante also expanded AFS’ footprint within the Centers for Medicare and Medicaid Services (CMS) and the Department of Veterans Affairs (VA). With Cognosante fully integrated as of 2Q25, and with no additional acquisitions assumed or expected in the company’s FY25 (though we believe M&A is under consideration by AFS and the other leading FSIs to offset near-term DOGE-related growth headwinds), TBR had projected AFS’ FY25 revenue would be between $5.76 billion and $5.87 billion, up between 6% and 8% on both a statutory and organic basis, at least prior to any DOGE-related impact.
 
If all $93 million in TCV for the 10 canceled CBOSS 2.0 task orders were erased from AFS’ order book, it would reduce AFS’ projected growth to between 4% and 5.5% in FY25 (assuming no other exogenous DOGE-related impacts or unexpected internal impediments to FY25 top-line growth). For context, we estimate that AFS realized double-digit year-to-year organic growth in nine of the 17 quarters between 1Q21 and 1Q25, with estimated organic growth of at least 5% in the other eight quarters.

AFS faces $75 million in additional cuts outside CBOSS 2.0

The General Service Administration (GSA) will continue to review the contracts held by AFS and nine other companies* the Trump administration instructed DOGE to initially target in an effort to cut $65 billion in consulting fees the federal government is set to pay in FFY25 and future years. According to the “DOGE-Terminated Contracts Tracker” on the GX2 website, which tracks developments in federal contracting, AFS has had a total of $75 million in contracts terminated by DOGE as of the publishing of this blog (the CBOSS 2.0 program was not among the listed cancellations).
 
Cancelled awards were with the Department of Agriculture, Department of the Interior, Social Security Administration (SSA), Department of the Treasury, Department of Homeland Security (DHS), Department of Education, and Department of Health & Human Services (HHS, which houses CMS).
 
Of the more than $16.2 billion in TCV (8,373 contracts) listed as canceled on GX2’s DOGE-Terminated Contracts Tracker, over $2.8 billion (624 individual contracts) was awarded by HHS and $1.75 billion (420 individual contracts) was awarded by the VA. If DOGE’s contract terminations continue to fall disproportionately on federal healthcare agencies, AFS may not realize the full expected value of the Cognosante acquisition and top-line growth at one of the perennial growth leaders in TBR’s Federal IT Services Benchmark since the COVID-19 pandemic will be stunted in FY25.
 
Sweet reemphasized in the company’s 1Q25 earnings call that Accenture believes its “work for federal clients is mission-critical,” but TBR is unsure if this will be sufficient to protect AFS’ revenue base from a major disruption in FY25 and FY26. Conversely, Sweet also mentioned, “We see major opportunities over time for us to help consolidate, modernize and reinvent the federal government to drive a whole new level of efficiency.”

AFS pivots to emphasize mission-critical offerings and efficiencies

We believe AFS will pursue new, longer-term opportunities in this shifting federal IT environment by emphasizing its ability to scale cloud, data and generative AI (GenAI)-based solutions agencywide to generate efficiencies, as demanded by DOGE and the Trump administration. AFS will focus on maximizing speed to solution and clearly demonstrating program ROI to prove its offerings are, in fact, mission-critical.
 
We also expect AFS to double down on advisory services related to resource management, cultural and operational change management, and risk management — critical precursors to federal digital transformations. AFS’ previous investments in AI-enhanced service delivery will be a significant advantage compared to its peers with less mature internal AI capabilities, enabling AFS to showcase how its internal application of AI technologies has optimized operations. AFS’ AI-enhanced service delivery will also enable the company to generate more cost-competitive bids and meet increasingly aggressive IT project timelines for federal digital IT modernization programs.

*BAH, CGI Federal, Deloitte Consulting, General Dynamics IT (GDIT), Guidehouse, HII Mission Technologies, IBM, Leidos and SAIC

 

TBR’s DOGE Federal IT Impact Series will include analysis of Accenture Federal Services, General Dynamics Technologies, CACI, IBM, CGI, Leidos, IFC International, Maximus, Booz Allen Hamilton and SAIC. Click here to download a preview of our federal IT research and receive upcoming series blogs in your inbox as soon as they’ve published.

 

DOGE Federal IT Vendor Impact Series: SAIC

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The Trump administration and its Department of Government Efficiency (DOGE) have generated massive upheaval across the board in federal operations, including in the federal IT segment. As of March 2025, thousands of contracts described by DOGE as “non-mission critical” have been canceled, including some across the federal IT and professional services landscape. TBR’s DOGE Federal IT Vendor Impact Series explores vendor-specific DOGE-related developments and impacts on earnings performance. Click here to receive upcoming series blogs in your inbox as soon as they’ve published.

 

Content Updated: June 11, 2025

DOGE notwithstanding, SAIC’s 1Q25 fiscal performance was on target with expectations and historical patterns

SAIC reported its CY1Q25 (FY1Q26) fiscal results on June 2, and as in CY4Q24, the impact of DOGE was minimal on the company’s P&L, backlog or other fiscal markers. During SAIC’s 1Q25 earnings call, CEO Toni Townes-Whitley indicated that the annualized impact of DOGE on SAIC’s top-line revenue remained less than 1%, which TBR assumes refers to the proportion of total company annual revenue, or less than $75 million (based on FY25 sales of $7.59 billion).

 

SAIC posted quarterly revenue of $1.88 billion in 1Q25, up 1.6% year-to-year. Quarterly sales and year-to-year growth in 1Q25 were below TBR’s projections for revenue of $2 billion, or 8.3% year-to-year growth, but still in line with overall company guidance for FY26. SAIC’s 1Q25 gross margin of 11.1% was slightly weaker than TBR had expected, but operating margin of 6.4% came in stronger than TBR projections.

 

Company backlog of $22.3 billion was up 1.8% sequentially from $21.9 billion in 4Q24, with the sequential increase consistent with historical patterns. Bookings of $2.4 billion in 1Q25 were on par with the year-ago quarter ($2.6 billion in 1Q24) and were up sequentially from $1.3 billion in 4Q24, consistent with seasonal bookings patterns. SAIC’s quarterly book-to-bill ratio of 1.3 in 1Q25 was on par with its year-ago book-to-bill ratio of 1.4, though on a trailing 12-month (TTM) basis, book-to-bill of 0.8 in 1Q25 was down from 1.0 a year ago in 1Q24.

SAIC remains on track to reach its FY26 fiscal targets, at least as of 1Q25

SAIC does not expect erosion to its top-line growth, margins, earnings, adjusted EBITDA or cash flow from DOGE in the company’s FY26. SAIC also maintained its outlook for downward adjusted EBITDA guidance later in FY26. The federal procurement environment remains unstable, the federal fiscal 2026 (FFY26) budget negotiations must still take place, and the full scope of the Trump administration’s IT spending and other budget priorities is still in development.

 

For example, SAIC’s business development teams have experienced delays in procurement patterns with increasingly elongated decision cycles that could delay awards expected during FY26 until FY27. SAIC also reported high, post-inauguration turnover of procurement personnel at federal agencies in 1Q25 that has impeded business development and program funding, particularly on larger strategic awards, while procurement processes at some agencies are currently being revamped.

After the near-term disruption subsides in federal IT, the Trump administration’s IT investment plans will generate long-term opportunities

SAIC believes its portfolio of mission-centric solutions, its emphasis on speed-to-market in deploying its offerings, and its focus on embedding commercially developed digital technologies into its solutions align well with the Trump administration’s technology priorities and DOGE’s efficiency optimization goals.

 

In the Department of Defense (DOD) and Intelligence Community (IC), where SAIC generates 75% of its revenue, overall budget growth is expected in FFY26 prioritizing national security and force readiness, particularly in the U.S. Navy, U.S. Air Force and U.S. Space Force. Conversely, SAIC anticipates some funding challenges in its U.S. Army account during the remainder of FFY25 and into FFY26. Since FY24, SAIC has aggressively expanded its bidding activity across the federal space.

 

In 1Q25 alone, the company tendered proposals with a total contract value (TCV) of more than $7 billion with a FY26 goal to submit between $28 billion and $30 billion in bids. The company has nearly $20 billion in awards awaiting client adjudication as of 1Q25.

 

TBR expects the competition for net-new work and recompetes will intensify during the latter half of FFY25 (2Q25 and 3Q25), particularly in the civilian market. More than half of the $2.4 billion in new bookings SAIC landed in 1Q25 were for net-new programs, which the company hopes is an early sign of accelerating IT procurement activity across the space.

 

On-contract growth will also remain one of the chief objectives of SAIC’s business development strategy for the remainder of FY26, particularly with new programs being delayed by staffing shortages within agency-based procurement teams. Standing by its FY26 guidance also implies to TBR that SAIC expects the pace of on-contract growth will remain strong enough to sustain momentum toward its FY26 fiscal objectives, and sufficient to offset any deceleration in net-new award activity.

SAIC’s Civil business posted strong results in 1Q25; the company appears better positioned than some peers to ride out the DOGE-based disruption

By market, growth was led by SAIC’s Federal Civilian business group with 8% year-to-year sales growth in 1Q25 up from a year-to-year revenue contraction of 0.2% in the DOD & IC unit. In comparison, Leidos’ Health & Civil group expanded sales 7.7% in 1Q25 while CACI’s Federal Civilian Agencies unit grew revenue 13.2%.

 

In stark contrast, Booz Allen Hamilton (BAH) suffered a very sudden stoppage in growth in its Civil group in 1Q25. Year-to-year top-line expansion in BAH’s Civil unit decelerated after the segment posted 13 straight quarters of double-digit growth from 3Q21 through 3Q24. Civil growth was 7.8% in 4Q24 and -0.1% in 1Q25.

 

According to TBR’s 1Q25 Booz Allen Hamilton Earnings Response, “The volume of disclosed deal activity plummeted in 4Q24 and 1Q25, a harbinger of tough times ahead for federal IT’s most venerable advisory-led firm.” BAH also expects a low-double-digit decline in Civil revenue in FY26, with the bulk of the contraction transpiring in FY1H26 (2Q25 and 3Q25). BAH’s Civil unit posted FY25 sales of $4.17 billion, up 5.7% year-to-year from $3.83 billion in FY24. A year-to-year decline between 10% and 12% in FY26 implies Civil sales of between $3.57 billion and $3.67 billion, or down between $400 million and $500 million.

 

Conversely, SAIC expects favorable IT spending patterns in FFY26 in the company’s five largest civilian accounts, which account for over 70% of the company’s Civil revenue (or about $1.23 billion based on FY25 civilian sales of $1.75 billion). The Department of Transportation is expected to receive $1 billion in the federal budget to support modernization at the Federal Aviation Administration, while the Department of Homeland Security (DHS) will be allocated over $40 billion to develop and install new border security technologies.

 

IT spending at the U.S. Department of State is expected to remain stable, and SAIC recently won a two-year extension on the department’s strategic Vanguard program. SAIC also anticipates higher IT budget outlays for modernization initiatives at the Department of Treasury and the Department of Veterans Affairs (VA). In the past, SAIC has struggled to win some big-ticket recompetes and typically factored renewal risk into its guidance, but as of 1Q25, the only recompete headwinds on its books are the loss of a NASA program in FY25 and the company’s decision to forgo bidding on lower-margin portions of the recent Cloud One recompete.

 

SAIC is instead focusing on the higher-value aspects of Cloud One where the company can showcase its expanding cloud capabilities (another area of SAIC’s portfolio that lines up well with the IT spending priorities of Trump 2.0).

 

TBR’s DOGE Federal IT Impact Series will include analysis of Accenture Federal Services, General Dynamics Technologies, CACI, IBM, CGI, Leidos, IFC International, Maximus, Booz Allen Hamilton and SAIC. Click here to receive upcoming series blogs in your inbox as soon as they’ve published.

 

Infosys Readies to Deliver Outcomes at Scale Through Enterprise AI

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U.S. Analyst and Advisor Meet 2025, New York City, March 4, 2025 — Infosys hosted industry analysts and advisors for a packed afternoon in the company’s offices at One World Trade Center. Using client stories amplified through technology partner support to reinforce Infosys’ role in the IT services, cloud and enterprise AI market, company executives consistently returned to a few main themes, including delivering business outcomes, maintaining trusted relationships, and focusing on speed, agility and simplification.  

 

Infosys’ hub-first strategy in the Americas demonstrates the company’s success with coinnovation and pursuit of large deals

Similar to previous events, Infosys kicked off the event with an update on the company’s strategy and performance in the Americas region. Anant Adya, Infosys EVP and head of Americas Delivery, led the presentation, highlighting key elements of the company’s success in the region, including its hub-first strategy; investments in and expansion of local talent pools, including in the U.S., Canada, Mexico, Brazil and the rest of LATAM; and strategic bets that are centered on delivering business outcomes and enabled through portfolio offerings such as Infosys Cobalt, Infosys Topaz and Infosys Aster..
Infosys’ six Tech Hubs across the U.S. remain the backbone of the company’s hub-first strategy. Located in Phoenix; Richardson, Texas; Raleigh, N.C.; Indianapolis; Providence, R.I.; and Hartford, Conn., and collectively staffed with thousands of local hires, these centers are increasingly allowing Infosys to drive coinnovation with clients and partners and pursue new opportunities with a key focus on large deals (defined by Infosys as deals over $50 million in value) in areas including cloud, AI, data, the edge and cybersecurity. Infosys has been rebalancing its onshore-offshore effort over the last five years.
 
For example, onshore effort was 24% in 4Q24, down from 27.7% in 4Q19. Offshore effort was 76% and 72.3% in 4Q24 and 4Q19, respectively. The recalibration began during the pandemic, as Infosys began capitalizing on the increase in remote working. The current ratio is also helping the company demonstrate pricing agility when competing for service delivery transformation projects. At the same time, maintaining a steady flow of local hires could help Infosys weather any pushback from the Trump administration on its America First Investment Policy requirements. Although the administration has yet to impose tariffs on companies utilizing services from overseas, it would not be surprising for this to happen in the future. Investing in training programs and collaborating with local universities through the Infosys Foundation would not only create a strong PR framework but also help Infosys increase its recruiting opportunities. Meanwhile, expanding across Canada and key LATAM countries, including Mexico and Brazil, to support both nearshore and locally sourced deals allows Infosys to diversify its revenue stream while enhancing the value of its brand beyond the U.S.
 
As Infosys continues to execute on its well-oiled strategy, investing and expanding in the next growth areas across the company’s cloud and enterprise AI portfolio will largely be centered on calibrating its commercial model as client discussions evolve from transactions to outcomes. For example, to support these expansion efforts, Infosys’ work within the Infosys Cobalt portfolio has evolved from tech optimization and data center migration to developing and applying industry solutions, and now includes accounting for the role of AI.
 
Building out a fluid enterprise to derive greater value from AI has compelled Infosys to develop solutions with an eye toward being more digital, more composable and more autonomous. This solution framing is also helping the company drive next-gen conversations with its technology partners and with clients that are seeking to develop an intelligent enterprise enabled by AI.

Infosys’ pivot toward Outcome as a Service will test the company’s ability to drive change management at scale, starting with its own operations

Expanding on Infosys’ evolving go-to-market strategy, portfolio, talent and collaboration with partners, Infosys Chief Delivery Officer Dinesh Rao, along with a series of client and partner panels throughout the afternoon, not only brought to light the company’s aspirations around driving outcome services opportunities but also discussed at length the challenges stakeholders face, often revolving around change management. Rao’s presentations spanned client use cases, AI evolution, and Infosys’ portfolio adjustment as well as resource pyramid calibration to balance support opportunities in foundational and emerging areas. Three key areas stood out:

  • Client examples: Amplifying value through innovation has helped Infosys capture and deliver services for global clients across manufacturing, retail and consumer packaged goods (CPG), among other verticals, while also positioning the company to test new commercial models. For example, in a multiyear, multibillion-dollar deal supporting a multinational communications provider, Infosys is deploying its Outcome as Service commercial framework, bundling software, hardware and third-party services on a single platform.
  • AI: Infosys launched NVIDIA-enabled small language models (SLMs) for Infosys Topaz BankingSLM and Infosys Topaz ITOpsSLM, targeting clients through core industry and horizontal offerings and allowing them to use their own data on top of the prebuilt SLMs. Additionally, Infosys released the Finacle Data and AI Suite of solutions to support banking clients seeking to enhance IT systems and customer experience using AI. The solutions include Finacle Data Platform, Finacle AI Platform and Finacle Generative AI. Infosys’ investments in industry-centric SLMs, which the company positions with clients as either accelerators or platforms to drive targeted conversations using industry and/or functional enterprise data, closely align with the company’s playbook from a few years ago, when it began developing industry cloud solutions, both proprietary and partner enabled. Embedding generative AI (GenAI) as part of a deal, rather than using it as a lead-in, is a smart strategy as it allows Infosys to better appeal to price-conscious clients and steer conversations toward outcomes and the benefits of the engagement, rather than trying to convince clients to spend a premium on a technology that has yet to prove ROI at scale. We believe Infosys’ investment in agentic AI capabilities for Infosys Topaz, along with the ITOpsSLM, can also position the company to drive nonlinear, profitable engagements, especially with clients that are seeking to migrate and modernize their existing mainframe infrastructure but lack the necessary COBOL skills and understanding of the environment.
  • Resource pyramid: Infosys’ three talent categories — traditional software engineers, digital specialists focused on digital transformation and ongoing support, and Power Programmers — allow the company to balance innovation and growth while calibrating its business and commercial models. The Power Programmers group consists of highly skilled professionals who are responsible for developing products and ensuring that the intellectual property they create and use meets the cost-saving requirements Infosys pitches to clients. Although the other two groups follow a traditional employee pyramid structure, the Power Programmers group is much leaner and resembles the business models that many vendors, including Infosys, may aspire to adopt in the future.

Rao also discussed Infosys’ approach to innovation. The company’s business incubator framework, backed by Infosys’ $500 million innovation fund and enabled through its network of Living Labs, has empowered the company’s employees to think creatively, thus helping Infosys solidify its culture of learning and collaboration. Gaining employee buy-in is a must, especially at a time when the company is pivoting its own operations toward outcome-based service delivery.

AI- and partner-led discussions will continue to guide Infosys’ efforts to solidify its position as a trusted solution broker

Sunil Senan, Infosys’ global head of Data and AI, provided an update on Infosys’ AI-first strategy and portfolio, which have allowed Infosys to stay competitive in a rapidly evolving AI market. Senan noted that the opportunities around agentic AI require a rigorous data and governance strategy — an acknowledgment that is not surprising given the company’s typically humble yet pragmatic approach to emerging growth opportunities.
 
Scaling AI adoption comes with implications and responsibilities, which Infosys is trying to address one use case at a time. For example, in October 2023 Infosys launched the Responsible AI Suite, which includes accelerators across three main areas: Scan (identifying AI risk), Shield (building technical guardrails) and Steer (providing AI governance consulting). These capabilities will help Infosys strengthen ecosystem trust via the Responsible AI Coalition.
 
Infosys also claimed it was the first IT services company globally to achieve the ISO 42001:2023 certification for the ethical and responsible use of AI. Infosys recognizes that AI adoption will come in waves. The first wave, which started in November 2022 and continued for the next 18 to 24 months, was dominated by pilot projects focused on productivity and software development. In the current second wave, clients are starting to pivot conversations toward improving IT operations, business processes, marketing and sales.
 
The real business value will come from the third wave, which will focus on improving processes and experiences and capitalizing on opportunities around design and implementation. Infosys believes the third wave will start in the next six to 12 months. Although this time frame might suit cloud- and data-mature clients, only a small percentage of the enterprise is AI ready across all components including data, governance, strategy, technology and talent. Thus, it might take a bit longer for AI adoption to scale.
 
But as Infosys continues to execute its pragmatic strategy, the company relies on customer success stories that will help it build momentum. And there was no shortage of examples throughout the afternoon, with Infosys clients across the spectrum — from just getting started to scaling hundreds of AI deployments — sharing their experiences with Infosys and within the broader ecosystem.
 
We believe as Infosys pivots toward an Outcome as a Service commercial model, opportunities to scale AI will stem from the company’s ability to demonstrate value. In a traditional transformation project, the company often deployed professionals to perform typical implementation work and then transferred them to another project; during an AI project, staff would need to stay at a client’s site for a longer period to ensure the technology delivers the value promised. Approaching AI opportunities with a similar focus will help Infosys justify its rates but also help the company calibrate its staffing pyramid.
 
Infosys’ long-term success also depends on the company’s relationship with technology partners. During previous iterations of the summit, Infosys has had separate alliance-led presentations, but this time around the company included the partner presentations, specifically SAP, in a client panel. SAP’s presentation discussed a successful, three-year SAP S/4HANA migration for a global manufacturing client. Although the three-year turnaround was impressive, what stood out was how much the SAP executive was part of the conversation with the client. Speaking with the client on behalf of Infosys demonstrated trust and the depth of the relationship between SAP and Infosys.
 
Throughout TBR’s Ecosystem Intelligence research, we have written extensively that partners speaking on behalf of partners is often the last mile and the biggest challenge for vendors to overcome when they try to differentiate. We understand that vendors, especially IT services vendors, try to maintain tech agnosticism during consulting workshops, but when it comes to the implementation part of the engagement, developing more exclusive messaging resonates with clients much better as it shows knowledge, accountability and trust between parties.

Product Engineering and Quality Engineering present a tale of two cities that can help Infosys deliver value with minimal disruption to its financial profile

As Infosys continues to balance foundational growth with pursuing opportunities in new areas, the company’s evolving portfolio allows it to deliver steady financial results. Executives from Infosys’ Engineering Services and Quality Engineering lines of business, along with clients, highlighted how these two areas are helping Infosys achieve just that. Ben Ko, CEO of Kaleidoscope, a company Infosys acquired in 2020, explained how his company and its portfolio of solutions and products allow Infosys to capture manufacturing and R&D budgets, a slice of the overall enterprise spend that was somewhat untapped prior to expanding in the product engineering space. Infosys Engineering Services remains among the fastest-growing units within the company as Infosys strives to get closer to product development and minimize GenAI-related disruption on its content distribution and support position..
 
Since the 2020 purchase of Kaleidoscope, which provided a much-needed boost for the company to infuse new skills and the IP needed to appeal to the OT buyer, Infosys has enhanced its value proposition to meet GenAI-infused demand. For example, Infosys has purchased India-based, 900-person semiconductor design services vendor InSemi, and Germany-headquartered engineering R&D services firm in-tech, which presents a use case where the company applied a measured risk approach to enhance its chip-to-cloud strategy.
 
The purchase of in-tech certainly accelerates these opportunities, bringing in strong relationships with OEM providers, which is a necessary stepping stone as Infosys tries to bridge IT and OT relationships.
 
Meanwhile, Venky Iyengar, Infosys VP and head of Quality Engineering, along with clients, discussed how the Infosys business is adjusting both its value proposition and staffing models to account for automation and AI and to continue to deliver value to clients with minimal disruption to Infosys’ financial profile.
 
While a degree of revenue cannibalization is inevitable in the long run, Infosys’ approach toward platform-enabled quality engineering services, along with its efforts to fold these offerings under broader transformation projects, will allow the company to pivot and develop its position as a solutions broker.

It is all about the margins, and Infosys has the right ingredients to keep shareholders happy

Infosys, like many of its peers, faces a new reality influenced heavily by AI and reshuffling in buyers’ IT spending priorities. With IT becoming a utility, we expect enterprises not to cut back on spending but rather to demand from third-party vendors such as Infosys to deliver more with less. AI- and automation-enabled service delivery presents Infosys with the right tool to execute on such expectations. And as long as Infosys allows buyers to see that the productivity improvements have driven greater volume, then Infosys will be able to maintain its operating margin. Otherwise, buyers might start pushing back and asking for savings on their contracts when Infosys pitches new work but uses fewer employees. It was evident from the sessions that Infosys, with its enterprise AI capabilities, is strongly positioned to help clients unlock business value and drive growth. This aligns with the broader industry trend of leveraging AI to meet evolving client demands.
 
We understand that Outcome as a Service is a long-term play that will test Infosys’ culture and ability to manage trust within the ecosystem. The last five years of steady financial performance and the expansion of Infosys’ large and mega deals roster have provided the company with a strong foundation to make that pivot. Many of Infosys’ alliance partners, both technology and services ones, that TBR has spoken with view Infosys as a top delivery partner, thus providing the ecosystem support needed for the company to navigate the evolving IT services market.
 
TBR will continue to cover Infosys within the IT services, ecosystems, cloud and digital transformation spaces, including publishing quarterly reports with assessments of Infosys’ financial model, go-to-market, and alliances and acquisitions strategies.
 
For a comparison with Infosys’ peers and other IT services vendors, TBR includes Infosys in our quarterly IT Services Vendor Benchmark, our semiannual Global Delivery Benchmark and Cloud Ecosystem Report, and our annual Adobe and Salesforce Ecosystem Report; SAP, Oracle and Workday Ecosystem Report; and upcoming ServiceNow Ecosystem Report. Access the data and analysis in each of these reports with a TBR Insight Center™ free trial. Sign up today!