TBR Case Study: Price Benchmarking

Bridge the pricing gap with data-driven insights from TBR

Introduction

In the absence of validated data, many professional and IT services firms rely on pricing strategies of the past and anecdotal, and often biased, inputs from field sales and partners within their ecosystem. To optimize both margin and market share, a data-centric, live “state of the market” pricing analysis can solve many of the unanswered questions services leadership and pricing directors face.

Client’s background

The client for this price benchmarking project was a global Top 3 hardware OEM. The company provides a diverse range of hardware and related services globally across industries such as healthcare, financial services, education and other key industries.

Client’s challenge

The client needed to better understand the competitive pricing environment for consulting and residency services in the U.S. market, including the price points and pricing strategies utilized by key competitors for comparable roles and services. The client sought data and insights on competitive pricing, as well as recommendations on how to translate the insights into executable strategic actions that could be deployed to optimize its near-term and long-term services competitiveness in the U.S. market.
 

Preview a TBR Tailored Services custom competitive pricing engagement, showcasing a rate card assessment and managed services pricing outputs

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How TBR helped

Ongoing company coverage and years of dedicated pricing research have allowed TBR to refine and perfect our methodologies to deliver precise, data-driven insights such as street price, list price, deal size-to-discount ratios, staffing levels and levels of automation. Our expertise enables TBR to identify market trends, optimize pricing strategies and drive competitive advantage.
 
TBR’s unique price benchmarking capabilities include:

  • Primary research that ensures existing research is rooted in direct, current market perspective from competitors and customers
  • Fully customized research plan that ensures data captured is aligned to TBR’s client taxonomies and is directly comparable to internal pricing
  • Outputs that yield quantitative pricing comparisons AND qualitative contextual insights on pricing models, pricing structures, discounting and other commercial tactics

To capture apples-to-apples results, TBR typically fields pricing research by devising a set of hypothetical deal parameters to frame market insiders’ pricing inputs. Upon project launch, TBR collaborates with the client to generate services and deal configuration descriptions to best mirror real-world market conditions and ensure outputs will be representative of the client’s services business.

  • Services scope: Services covered in the engagement and anticipated services deliverables; also includes considerations such as type of services engagement (e.g., residency versus project-based)
  • Technology scope: As applicable, any specifics on the types of technologies encompassed by the engagement per the services deliverables as outlined in the previous bullet
  • Commercial scope: Contract length/term and anticipated deal value in dollar terms as applicable

Client’s results

TBR strives to bring contextual understanding of the multitude of professional services, from management consulting to managed services, security services to attached services.
 
This client was able to capitalize on the investment in pricing research by:

  • Better understand the necessary resource mix to support its deal pursuits and respective pricing schemes (staffing levels and automation mix)
  • Optimally calibrate pricing and go-to-market strategies tied to end-customer outcomes
  • Reframe the value of the partner ecosystem through data-centric lens (reset commercial deal structures and long-term partnership models)
  • Understand implications of new technologies such as GenAI and multicloud on its pricing and profitability (reduce costs from the equation)
  • Invest in hiring and training geared toward what’s next to support elastic pricing and commercial models

Learn more

TBR leverages a proprietary analytical approach to uncover list price vs. street price, delivery models, rate card breakdowns and discount frameworks, developed over 20 years of analyzing professional and IT services vendors and their pricing habits, strategies and discount structures. Each engagement utilizes multiple research tools, including vendor, partner and customer interviews and surveys, with key focus areas spanning competitive intelligence and benchmarking, customer intelligence, financial modeling, go-to-market enablement, and opportunity analysis.
 
Click here to download a free preview of a TBR Tailored Services custom competitive pricing engagement, showcasing a rate card assessment and managed services pricing outputs.

Saudi Arabia’s Message to Global Firms: Deliver Real Value or Step Aside

Moratorium on PwC business tells cautionary tale

My previous and current careers collided last week when the Kingdom of Saudi Arabia’s Public Investment Fund (PIF) announced a one-year moratorium on doing business with PwC (details continue to emerge even as I type this and the exact contours of the new Saudi PIF and PwC arrangement will likely shift, so I won’t try to evaluate a moving target). Having spent 13 years as a U.S. diplomat — including living in the Middle East for four years and taking at least a dozen trips to Saudi Arabia while working at the U.S. State Department, White House, and Department of the Treasury — I have some thoughts on how business and politics work in that region. I’ve also spent almost two decades trying to understand the Big Four firms, and I recently sat down in Washington, D.C., with some of PwC’s leadership to discuss the market, the firm’s ecosystem and what’s coming in 2025.
 
Bottom line upfront: Understand that this is a Saudi story, not a PwC story, although undoubtedly it doesn’t feel that way in PwC’s corridors right now. Saudi Arabia has an opportunity to send some critical messages to players in the country, in the region and globally, and the kingdom is taking advantage. If you’re among the many IT services companies and consultancies — and other multinational companies, although they’re less of a concern to me professionally right now — investing aggressively on growth in the Middle East and you’re misinterpreting this recent development as what PwC did wrong instead of listening to what the Saudis are trying to say, take a long pause and step forward only cautiously.
 

What are the Saudis saying?

First, the Saudis, through the PIF, have issued a warning — a shot across the bow — to management consultancies, IT services companies and others that have been enjoying a seemingly relentless flow of funds from the kingdom: Tighten up your accounts, sharpen your delivery, ensure your value proposition and the Saudis’ return on their investment in you will be abundantly clear. The McKinsey & Co., Boston Consulting Group and Deloitte partners may be enjoying some schadenfreude at the moment, but they understand the message coming from the Saudis: Bring tangible value, or don’t send us a bill.
 
Second, the Saudis have been feeling the positive heat of the world’s economic attention for a few years now, particularly as new leadership has pushed hard to invigorate the non-oil part of the kingdom’s economy. I wrote recently about what that has looked like in the United Arab Emirates — based on a webcast by PwC, coincidently — and for the Saudis, the initial success of those efforts and the increased global market and investor attention have been welcomed. What better time to send a message that Saudi Arabia has a transparent, high-functioning, rules-based economy, long since evolved from the souks of the old days and the opaqueness that characterized so much of the kingdom as late as the mid-2000s?
 
The Saudi Arabia and PwC story serves that purpose perfectly: We’re holding accountable a Big Four accounting and consulting firm and subjecting them to our high standards, just like every other advanced economy. The particulars of the kingdom’s regulatory environment and business culture can certainly be up for discussion, but the message, again, is clear: Everyone needs to play by the Saudis’ rules.
 
And maybe that’s the biggest takeaway as this story develops. Operating in the Middle East requires local knowledge, a regional presence, and an on-the-ground understanding that can only be sustained by being there. Yes, I am writing this 6,303 miles from Riyadh, but lessons learned hard are lessons long remembered, even over long distances. TBR has seen a surge in IT services companies’ and management consultancies’ investments in the Middle East and heard expectations around growth in the near term.
 
In my view, those investments and expectations are smart strategies and well founded. It’s the execution that matters, and a significant — perhaps the most significant — part of that execution comes from knowing the ground, reading the messages being sent, and understanding the story behind the story.

SaaS Vendors Bet on AI Agents to Unlock New Revenue Streams  

AI’s promise persists, but SaaS vendors await tangible revenue gains

While emerging technology AI and generative AI (GenAI) has been widely discussed, it has yet to translate into significant revenue growth for SaaS vendors. This is partly due to customers’ skepticism surrounding the technology and a persistent desire to limit IT spending. Despite this, vendors across all cloud segments have continued to invest heavily, through R&D and capital expenditures, showing a strong willingness to make substantial upfront investments for long-term gains. As a result, AI development strategies have progressed according to previously established road maps, a trend TBR expects to continue through 2025.
 
For SaaS vendors, the long-term opportunity lies in the ability to upsell GenAI solutions integrated directly into their existing workflows. While all major SaaS providers have made such solutions generally available, revenue from GenAI tools has not been enough to offset the slowing top-line growth many vendors are experiencing. Issues like cost, reliability, data governance and use-case validation remain obstacles to broader adoption, preventing the technology from becoming the growth driver vendors had hoped. Nevertheless, enterprise SaaS vendors continue to hold an optimistic long-term outlook, with many believing the technology will become a strategic necessary. This has prompted vendors to stay committed to their previously established AI road maps.
 

Learn how scale, innovation and even repatriation will moderate cloud market growth in 2025.
 
Download TBR’s 2025 Cloud Market Share Predictions special report today!


 

SaaS vendors will shrug off growing GenAI disillusionment, focusing on the long term by prioritizing GenAI agents within their development strategies

In the latter half of 2024, cutting-edge GenAI tools evolved from copilots that could perform a single task based on natural language prompts to agents capable of handling multiple tasks, paving the way for greater automation. This was a logical progression and an important step in vendors’ efforts to automate workflows.
 

Click the image below to watch this recent TBR Insights Live session, Cloud Market 2025: How GenAI Will Shape the Future

 
Now that agents are available, expanding their capabilities has become the next priority, with vendors allocating more internal resources to develop prebuilt agents specialized in specific tasks. To complement internal development, codevelopment around GenAI agents will become a common initiative in SaaS leaders’ partnership strategies, as they look externally to fill domain expertise gaps.
 
Whether through internal development or ecosystem collaboration, TBR expects a proliferation of GenAI agents in the coming year. However, we remain skeptical about whether this will be enough to make GenAI a significant growth driver. Barriers to adoption, particularly the need for data modernization within enterprises, will likely persist as key challenges to broader GenAI adoption. Nevertheless, vendors will continue to push their development pipelines to stay ahead of competitors in the GenAI arms race.

Learn more

Download 2025 Predictions special report: Cloud Market Share in 2025: GenAI Spurs Growth but Does Not Promise Vendors Long-term Gains
 
Watch TBR Insights Live session on demand: Cloud Market 2025: How GenAI Will Shape the Future

 

Who Is the Market Leader in IT Services?

IT services leaders navigate choppy macroeconomic waters as discretionary spending tightens

Increased managed services activities around cost optimization and streamlined business processes and the recovering BFSI segment will help vendors alleviate revenue growth pressures in 2025

Due to tightened discretionary spending, the top 10 IT services revenue leaders continued to experience decelerating or declining trailing 12-month (TTM) revenue growth year-to-year in U.S. dollars during 3Q24. Accenture’s revenue landed above the midpoint of the company’s guided range, as Accenture leveraged its scale and broad-based functional and technology expertise across service lines to drive sales around helping clients build and manage secure foundations. Accenture’s FY24 total revenue growth of only 1.2% year-to-year — compared to 4.1% in FY23 and 21.9% in FY22 — reflects the choppy macroeconomic environment Accenture has been navigating, particularly in Accenture Strategy & Consulting, as buyers continue to limit discretionary spending.
 
At the same time, managed services enabled through Accenture Technology and Accenture Operations remains a strategic priority for clients seeking to drive cost optimization and streamline business processes, evidenced by Managed Services growth of 4.6% year-to-year in 3Q24 and 3.9% year-to-year in FY24.
 

Learn how the energy problem is likely to slow the pace of AI market development significantly.
 
Download TBR’s 2025 GenAI Predictions special report today!


 
Tata Consultancy Services (TCS), which currently ranks No. 2 in revenue in TBR’s IT Services Vendor Benchmark, has noted that clients remain cautious about spending, but the company’s solid internal execution has led to deal momentum across markets. Banking, financial services and insurance (BFSI), TCS’ largest revenue-contributing segment, is rebounding, which indicates a positive trajectory for the company heading into 2025.

IT services operating margins are stabilizing

Average TTM operating margin contracted for 4 of the top 10 category leaders

Operating margin performance is stabilizing in IT services, as just four of the top 10 margin leaders experienced year-to-year TTM operating margin contractions in 3Q24, compared to eight of the top 10 margin leaders experiencing margin contractions in 3Q23.
 
Infosys’ TTM operating margin declined 40 basis points year-to-year in 3Q24, landing within the guided range of between 20% and 22%. The use of generative AI (GenAI)-enabled sales automation tools, such as the Navi sales assistant, which accelerates time to insight, will help Infosys further improve utilization and decrease its reliance on sales support personnel. This will bolster the company’s margin, provided Infosys can withstand potential clients’ requests to lower pricing related to the use of automation.
 
TCS’ TTM operating margin improved 40 basis points year-to-year in 3Q24 as wage inflation appears to have leveled off and overall headcount remains stable. We expect TCS’ operating margin to remain in a similar range for the foreseeable future, as the company’s pricing flexibility, supported by its lower-cost resources, can help offset cost increases.
 
Wipro IT Services’ (ITS) TTM operating margin increased 10 basis points year-to-year in 3Q24 as the company benefits from operational improvements. While Wipro ITS faces pressures from furloughs and salary increases, it benefits from streamlined operations and a successful sales strategy to drive margin improvements. However, Wipro ITS’ margin performance might worsen as the company executes on training programs to build industry and technology capabilities in an effort to better work with clients, as well as expands its pool of AI experts, which currently consists of 44,000 employees.

IT services market outlook

Average revenue growth for benchmarked vendors will accelerate but also remain pressured due to macroeconomic challenges

TBR estimates IT services TTM revenue will increase slightly in 4Q24 compared to revenue growth of 0.1% in 3Q24 and a deceleration from revenue growth of 3.5% in 4Q23. Demand for greater productivity and lower costs continues to create digital transformation opportunities around finance and supply chain improvement, cloud modernization, and application development. Lingering pressures in discretionary spending negatively affected consulting activities and backlog realization in 3Q24, and this trend will continue in 4Q24. However, managed services activities are picking up speed as clients strive to optimize costs and streamline business processes.

TBR vendor spotlights

Accenture added $785 million in net-new revenue in FY24, the lowest amount since FY09 and FY10, following the financial crisis. We expect Accenture to improve performance and add over $3 billion in net-new sales in FY25. Maintaining a strong household name among IT buyers often comes at a price, with the company accelerating its acquisition activity to protect its turf. While Accenture has added new skills and IP that can help drive long-term organic revenue, the company’s acquisitions have also helped to buy short-term revenue growth as half of the projected expansion in FY25 will be due to inorganic contribution. Additionally, Accenture’s aggressive investment activity within the GenAI space has left partners and rivals wondering why Accenture is making so many acquisitions now when all vendors face similar challenges when it comes to securing the data quality needed to explore the full potential of the technology.
 
TCS’ core capabilities in integration, application and outsourcing services engagements sustain its healthy revenue growth levels. To reach the upper range of its revenue growth targets, TCS is strategically investing in GenAI capabilities. By initially focusing on lower-risk, high-volume applications like chatbots and virtual assistants, TCS is building a strong foundation of AI expertise. As GenAI matures in the market, the company aims to expand its offerings, positioning TCS to capitalize on the GenAI-related market opportunity and deliver enhanced value to clients. The company’s continued development of proprietary software and platforms aims to attract clients and support engagements as a foundational framework.

 

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The Middle East’s Economic Transformation: A Real Decoupling or Persistent Uncertainty?

Recap: PwC Middle East’s ‘Transforming the Region’ presentation

PwC Middle East’s Feb. 18, 2025, webcast, “Transforming the Region: Future Insights – Economy and IPO Watch,” included a detailed presentation from Richard Boxshall, PwC Middle East’s chief economist, who highlighted the dichotomy between the region’s oil and non-oil economies, at least in Saudi Arabia and the United Arab Emirates (UAE). How does that all relate to TBR’s coverage of technology companies, including the IT services companies and consultancies I keep a close eye on?
 
In short, energy is stagnant, in terms of both oil price and overall sector growth. In contrast, the non-oil economy is booming, particularly in financial services and transportation. According to Boxshall, around 5,000 projects valued at over $5 trillion are in play in Saudi Arabia alone, reflecting a transformative investment in the country’s economy.
 
But before you set sail for Riyadh, remember that around half of the Saudi and UAE economies are, as Boxshall put it, “driven by oil,” and those governments depend on oil receipts to fund much of their spending. Uncertainty around oil price puts pressure on the countries’ fiscal positions and budgets, as Boxshall noted. If those prices went higher, for all the benefit that would bring to the government coffers, the economies would also face inflation, rising rents and potentially a drag on the non-oil economy. All that interdependency considered, Boxshall still described the split between the oil and non-oil economies as a “real decoupling.”
 
So, good news, right? The long-sought-after growth of strong non-oil economies, the eventual weaning of these pivotal Middle East countries from subservience to the price of oil is happening now and happening quickly. And should a trade war break out between the U.S. and the European Union (EU) or the U.S. and China, Saudi Arabia and the UAE — and the rest of the Middle East economies — will suffer. A production surge by the world’s largest oil producer — the U.S. — would further dampen oil prices, constraining Middle East governments’ budgets. Not everything is perfect, but certainly the big picture looks promising: Non-oil economies in oil-led countries have shown persistent, seemingly lasting growth.

Watch on Demand: $130+ Billion Emerging India Opportunity

Why TBR cares: A long history and a fast-changing present

Why does TBR care? Two reasons, one recent and one that goes back decades. First, the latest developments: Nearly every company we cover in the professional services, IT services, and digital transformation services spaces has increased its presence and investment in the Middle East in recent years. We’d like to take some credit for trumpeting the region’s IT possibilities back in 2020 (Egypt and IT and the center of the world), but no matter when or why the most recent surge into the Middle East started, it’s unquestionably become a hot spot (see Figure 1).
 
Sovereign wealth funds, newly arrived Western venture capital, and the payoffs from a couple decades of vastly improved schools and universities all converged in recent years with well-timed investments in technology and necessary changes to regulatory environments. The steady economic diversification efforts, coupled with new leadership in much of the region and all the factors above, have made the region exceptionally attractive to capital and talent. As one Big Four partner said to me recently, “If I was in my 20s right now, I’d move to Riyadh.”
 

CompanyCoverageInvestment/Growth
DeloitteEgyptInnovation Hub and investment of $30 million over five years
KPMGSaudi Arabia, Jordan, Iraq, UAE, Oman Merged member firms into one entity to improve operations
AccentureKuwait National Security Operations Center (cybersecurity services)
PwCSaudi Arabia Acquired Emkan Education (boutique education consultancy)

 

That leads to the decades-old reason why I’m interested in what’s happening in the Middle East and how those economies are changing. When I was in my 20s, I lived in the region, spending two years in Cairo followed by two in Dubai, UAE. Working for the U.S. government gave me access to regional economic conferences, multinational oil companies, local government ministries and even oil smugglers, all of which shaped my understandings of the energy industry and the region’s economies.
 
One would be foolish to doubt the Emiratis’ innovativeness, the Saudis’ limitless financial resources or the Egyptians’ belief in their centricity to the entire world. But 25 years ago, the obstacles to thriving non-oil economies, particularly in Saudi Arabia, seemed insurmountable. Looking at the region now through Boxshall’s eyes (and those of my friends still living and working there), it’s too easy to view the transformation as inevitable. Combine diligent reforms, steady investment, smart leadership and a growing population base, underpinned by all that relentless oil money, and, of course, these are thriving economies attracting top talent.
 
I can’t argue against that. Nor do I have a cautionary note to sound about previous financial crashes in Dubai or charming Saudi leaders or French emperors conquering Egypt. Very simply, when asked decades ago what success would look like, government and business leaders in the region described economic conditions very similar to what we’re seeing today.

New IT Services Vertical Revenue Data Shows TCS’ Public Sector Surge and Market Shifts

TBR has been tracking performance of IT services companies for decades. As go-to-market strategies increasingly focus on industry-centric solutions, TBR determined to build trailing 12-month revenue based on a standardized breakout of key industry verticals.
 
In 2018 we expanded our IT services coverage to include estimates for seven industry vertical splits (full list below), leading to the recent launch of the IT Services Industry Vertical Data Excel file. This extensive data file includes revenue estimates for 17 IT services companies, including Accenture, Capgemini, DXC Technology, IBM and Tech Mahindra (full list below). Quarterly estimates, year-to-year growth, and percentage of IT services totals date back to 1Q21.
 
This proprietary data stream, in conjunction with our qualitative analysis of these firms, including their partners and how they operate, offers unprecedented intelligence on which companies are growing or maintaining their revenue or experiencing declines within industry verticals and allows for partner adjustments and competitive maneuvering.

TBR’s vertical-specific IT services data reveals notable industry trends

In the most recently published data file, several key insights stand out, including highlights from TBR’s research on Tata Consultancy Services (TCS), Capgemini and Wipro.

Most notable: TCS’ public sector success in India

Tata Consultancy Services’ (TCS) public sector revenues jumped 52.2% year-to-year in 3Q24, extending — and accelerating — five straight quarters of double-digit growth. Curiously, however, TBR’s data shows a deviation from the norm in geo data. Reported India revenues by TCS (as a percentage of revenue) have been growing at a mid-double-digit range for over a year. In fact, reported revenue has grown so rapidly that India generated more revenue for TCS than the rest of the Asia Pacific region combined for the first time in 3Q24, and that gap expanded in 4Q24.
 
While it is unquestionably an impressive growth story, public sector revenue accounts for less than 5% of TCS’ overall IT services revenue, making it strong growth from a relatively small base. Still, 52.2% is impressive relative to the market, and analysis in TBR’s quarterly reports on TCS can help us understand this success. In short: It’s India.

  • “India was again a bright spot for TCS, nearly doubling its revenue composition from the previous year, now accounting for 8.9% of total TCS revenue. We attribute the growth in India to strong brand reputation and favorable government policies to incentivize companies to digitize their IT operations.” — TBR’s 3Q24 Tata Consultancy Services report
  • “Although India has historically only accounted for 5% to 6% of TCS’ total revenue, we anticipate this share will rise over the next few years, reaching double-digit figures before peaking and stabilizing. IT spending in India continues to increase, indicating there is plenty of opportunity, particularly for locally based IT services firms such as TCS. For example, during 2Q24 TCS and Indian state-owned telco Bharat Sanchar Nigam Limited announced plans to build four data centers across India to meet rising demand.” — TBR’s 2Q24 Tata Consultancy Services report

Tata Consultancy Services IT Services Vertical Revenue Data
 
According to TBR’s lead analyst on TCS, Senior Analyst Kevin Collupy, “They are killing it with local Indian enterprises and government organizations. And last year we reported on an uptick in consultancies and IT services companies investing in their India-for-India capabilities, offerings and scale. So, 52.2% growth in public sector, even as TCS itself only grew 6.4%, tracks with the overall India growth story while illustrating just how well TCS has been doing.” ​

Additional insights from 3Q24 data

Capgemini’s revenue declined 1% year-to-year in U.S. dollars (USD) in 3Q24, but the company’s public sector revenue increased by more than 4% in the same period. At 15.1% of the company’s total IT services revenue, public sector revenue significantly buoyed what would have been an even rougher quarter. Retail, CPG, Travel & Transportation declined 4% year-to-year in USD in 3Q24 and accounted for 15.1% of Capgemini’s IT services.
 
Wipro’s 19.1% drop in public sector revenue in 3Q24 looks terrible, particularly in the context of an overall IT services decline of just over 2%. The vertical did not pull down Wipro as a whole though, as it represents just 0.5% of total revenue. The real culprits were Financial Services (down 1.3%, while accounting for 33.9% of revenue) and High Tech, Communications & Media (down 8.1%, at 15.4% of revenue).

Access all IT services vertical-specific data

While a single quarter is only a snapshot of the market narrative, the numbers in TBR’s vertical-specific IT services data starts to paint the picture while company reports fill out the story. An updated IT Services Industry Vertical Data Excel file will be released quarterly in TBR’s digital platform, Insight Center™.
 
If you are a current TBR user with access to the IT Services Vendor Benchmark, you can download the IT Services Industry Vertical Data Excel file today.  If you’re interested in gaining access to the data, as well as TBR’s entire IT services research stream, start your free trial to Insight Center™.
 
Vendors covered in TBR’s IT Services Vendor Benchmark Data:

  • Accenture
  • Atos
  • Capgemini
  • CGI
  • Cisco Customer Experience
  • Cognizant
  • DXC Technology
  • Fujitsu
  • HCLTech
  • Hewlett Packard Enterprise Services
  • IBM
  • Infosys
  • Kyndryl
  • Tata Consultancy Services
  • Tech Mahindra
  • T-Systems
  • Wipro IT Services

Industry coverage in TBR’s IT Services Vendor Benchmark Data:

  • Financial Services
  • Healthcare & Life Sciences
  • High Tech, Communications & Media
  • Industrial Solutions, Manufacturing, Automotive, Energy, Utilities & Chemicals
  • Other Industry
  • Public Sector
  • Retail, Consumer Packaged Goods (CPG), Travel & Transportation

Fujitsu Expands Kozuchi AI Platform and Strengthens Partnerships to Drive Digital Transformation

Fujitsu Kozuchi’s wider understanding of business operations provides Fujitsu with an advantage around AI

Fujitsu launched Fujitsu Kozuchi, its AI platform that provides cloud-based AI services including generative AI (GenAI), predictive analytics, text, AI trust, experience AI, vision and automated machine learning (ML). These seven areas enable Fujitsu to address a wide range of business process needs. Since the launch of Fujitsu Kozuchi in August 2023, Fujitsu has continued to invest in the platform to add new services. For example, during 3Q24 Fujitsu expanded Fujitsu Kozuchi AI to include an AI agent that supports high-level tasks. As a result, Fujitsu is better equipped to provide advice and support related to users’ profitability challenges. In December Fujitsu added multi-AI agent security technology to protect digital and AI environments.
 
According to TBR’s November 2024 Digital Transformation: Voice of the Customer Research, “Buyers have become more tech savvy in recent years due in part to cloud adoption, and there is widespread understanding that they need GenAI. It is up to the vendors to make sure the technology lives up to the hype. Vendors have some time to iron out how to best demonstrate ROI, as only one-quarter of respondents quantitatively measure the effectiveness of the technology and 60% still apply only soft KPIs.”
 
Fujitsu’s investments in Fujitsu Kozuchi have equipped the company well to appeal to clients’ needs around the technology, providing opportunities to supply analytics with associated text, vision and trust in support of business operations. While AI technology evolves rapidly to include new capabilities, Fujitsu’s approach to developing the platform and leveraging partners and internal capabilities gives it an advantage in offering a wider set of services. Fujitsu’s industry expertise drives additional value for clients, helping them address key pain points and extract insights from their business operations. Despite the company’s geographical challenges, the development of Fujitsu Kozuchi and use of partners for portfolio development will enable Fujitsu to compete with peers and capture new clients in Europe and APAC.
 

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!


 

Partnerships enhance Fujitsu’s positioning around operational transformation projects

Revenue in Fujitsu’s services business fell an estimated 0.2% in local currency (down 3.2% in USD) to ¥713 billion ($4.7 billion). Continued demand for digital transformation projects and IT modernization services, particularly in Japan, was offset by offloading underperforming businesses. Fujitsu’s investments around Fujitsu Uvance, which is underpinning transformation projects, will help improve the company’s trajectory. Grounding its transformation projects in sustainable solutions that aim to address societal challenges aligns with clients’ needs and advanced technologies. The company’s enhanced delivery network improves operations outside of Japan, enabling Fujitsu to engage with new regional clients. Moving through 2025, Fujitsu will continue to accelerate Fujitsu Uvance, bringing in new capabilities to strengthen its value for clients and regional connections.
 
According to TBR’s 3Q24 IT Services Vendor Benchmark, “IT services vendors are working with partners to provide smoother, less disruptive adoption of new technology, enabling clients to improve their cost structures and benefit from operational efficiencies during ongoing macroeconomic uncertainty. Vendors and their partners are combining professional services, technology and industry expertise with new capabilities to meet client needs and create new revenue streams.”
 
Fujitsu continued to leverage its partner ecosystem, extending its existing relationships with key partners such as Microsoft, SAP and Amazon Web Services (AWS). Through the partnerships, Fujitsu enhances its position to deliver on vendor needs around cost structure and operational efficiencies. For example, with AWS, Fujitsu incorporated Fujitsu Uvance offerings with AWS’ cloud services and architecture to help integrate sustainability and address societal issues within digital transformation projects.
 
Under the partnership expansion, Fujitsu will train an additional 5,000 engineers to further accelerate digital transformation with new offerings and provide tailored services within cloud migrations. Fujitsu also renewed its partnership with SAP Fioneer following similar initiatives with an insurance industry focus. For instance, the two will collaborate on a cloud platform that supports core insurance services and business practices.
 
TBR will continue to report on Fujitsu’s increasing roles in the AI and consulting space. For access to upcoming data and analysis on Fujitsu’s strategy and performance, start your Insight Center™ free trial today.

New Solutions Drive New Revenue Streams for Atos’ Manufacturing Clients

Atos showcases strength in manufacturing industry specialization

Although it is an understatement to say Atos has struggled with its financial performance in recent years, the new year gives TBR analysts a chance to look for signs of change or markers indicating that Atos’ strategic decisions, investments and leadership adjustments have put the company on the path to sustained and profitable revenue growth in the coming years. We are paying close attention to Atos’ enhanced and deepened partnerships with technology companies, its major multiyear deal signings, and the use cases Atos’ two business lines — Eviden and Tech Foundations — tout as indications of what is working well and where they are gaining additional traction (and traction equals growth).
 
Along with the usual digital security solutions, cloud migrations, platforms and advanced computing implementations, one recent use case stood out, surprisingly not only for what Eviden did but also for what the organization positioned its client to do in the future. As part of a five-year engagement, Eviden helped Spanish train manufacturer Talgo develop what Eviden called a “state-of-the-art fleet monitoring system” that can ingest and process massive volumes of data, bring information and insights to train maintenance engineers, and “achieve architectural flexibility and scalability to incorporate modern train series without additional development efforts.” While the first few elements should be considered core capabilities of any modern, AI-enabled, and purpose-built system, the last one addresses a customer sentiment we have been hearing relentlessly for the last 18 months: Make my current technology work better without additional investment in even more new technology.
 
But that is not what jumped out at TBR as something special and a marker of potentially good things to come.

Reselling the TSMART solution creates new revenue streams for Talgo

Eviden’s work with Talgo produced the fleet monitoring system Talgo SMART Maintenance (TSMART). In recent years TSMART has been improved with capabilities such as predictive maintenance and visualizations. So far, so good, and so much like most others.
 
There is a significant difference, though, as Eviden noted in the press release: “Long an aspiration of smart manufacturing, the ability to create value-adding services from products is now Talgo’s reality. TSMART can be enhanced with product packaging/branding to be offered as a service to third parties. Talgo can easily extend the TSMART system to new train series or offer it to customers as a service. Its customizable interfaces include options for company branding and user personalization as well as new train configurations.”
 
Eviden helped create more than just an asset for Talgo to use internally and benefit from increased productivity, operational safety and fleet reliability. Now Talgo can expand its offerings with its own clients, develop a new business model, create new revenue streams, and, likely, greatly enhance its stickiness and position across its ecosystem. Not every IT services engagement leads to a client creating a new business opportunity, but this one did.

Now, can Eviden recreate the success of TSMART with other clients? Can this become a calling card for Eviden, an example of what can separate the organization from peers?

Certainly not with every client and every engagement — routine designing and building of systems are just that, routine — but if Eviden brings the mindset behind TSMART into opportunities, particularly with long-standing clients in the manufacturing and energy industries, TBR anticipates a quicker return to revenue growth for Eviden, which will support Atos’ overall financial performance.
 
Atos has established expertise around delivering predictive maintenance solutions and is applying its skills across industries. The company is working with multiple clients in the theme park and attractions industry, utilizing data and AI as well as edge server technologies to reduce the downtime of rides and improve customer satisfaction. For example, in 2020 Atos won a deal with the Triple Five Group’s American Dream entertainment complex to provide predictive maintenance utilizing data analytics and AI solutions as well as BullSequana Edge servers to collect and store data from ride sensors and detect issues through real-time analytics at the edge.
 
In covering Atos and its two business lines, Eviden and Tech Foundations, TBR publishes a quarterly Atos report and a semiannual Atos Cloud report. TBR also includes the company in our quarterly IT Services Vendor Benchmark, AI and GenAI Market Landscape, and various ecosystem intelligence and digital transformation reports, as warranted by Atos’ investments and activities in those areas. Access all of this research and more with your Insight Center™ free trial. Sign up today!

Federal IT Spending Poised for Another Strong Year in Fiscal 2025

Federal IT spending remained robust throughout FFY24, and the market appears poised for another strong year in FFY25, even as CY25 begins with yet another continuing resolution

TBR projects weighted average year-to-year federal IT services revenue growth for the 11 companies featured in our Federal IT Services Benchmark will decelerate to between 8% and 8.5% in 4Q24, down from 9.3% in 3Q24. Additionally, we anticipate weighted average year-to-year revenue growth in the defense sector will fall to between 6.8% and 7.3% in 4Q24, while civilian revenue growth will remain between 10% and 10.5% in 4Q24.
 
Four leading federal systems integrators — Booz Allen Hamilton (BAH), CACI, Leidos and SAIC — as well as smaller federal IT peer KBRWyle elevated their respective revenue growth forecasts for their current fiscal year when tendering 3Q24 fiscal results; these results indicate the federal IT macro environment will remain mostly growth-friendly through FFY25.
 
The new federal fiscal year began with a continuing resolution (CR) that extended government funding until Dec. 20, when a subsequent CR was enacted to fund federal operations until March 14, 2025. Further CR extensions in federal fiscal year 2025 (FFY2025) would cause budget delays that could impede the ability of federal IT contractors to convert backlog into revenue, but most vendors expect revenue growth to remain on a solidly upward growth trajectory in FFY25.
 
The Fiscal Responsibility Act of 2023 (FRA) remains in effect, and the Biden administration’s FFY25 budget request aligns with the FRA’s spending caps. Federal IT spending priorities will remain largely unchanged in FFY25, with IT investment focused on enhancing national security (especially in the APAC region and to deter future Russian aggression in Ukraine), promoting the adoption of AI and generative AI (GenAI) technologies, modernizing and enhancing the security of federal technology infrastructures, and IT-enabling public health systems.
 
The Department of Defense (DOD) will be integrating six new naval vessels into its global IT networks while spending nearly $34 billion to enhance space-based capabilities and another $10 billion to enhance the security and interoperability of IT and weapons systems operating in the Indo-Pacific theater. The Pentagon will spend another $14.5 billion for overall cybersecurity activities in FFY25 while expanding outlays on analytics and AI and increasing investment in the ongoing Replicator initiative to deploy thousands of autonomous systems across multiple domains by FFY26 to counter the ever-growing threat from China.
 
Civilian agencies will continue increasing their cybersecurity spending in FFY25, with an additional $13 billion requested in FFY25 to fund new zero-trust and access management programs as well as initiatives to secure critical infrastructure and federal civilian supply chains. The budget of the Cybersecurity and Infrastructure Security Agency (CISA), the division of the Department of Homeland Security (DHS) charged with leading cybersecurity efforts across the federal market, will expand by over $100 million from FFY24 to FFY25 to reach $3 billion. Civilian agencies are also increasing AI-related investments to fund the development, testing, purchase and deployment of new AI and GenAI technologies, as well as to expand their AI workforces.
 

Federal agencies must master AI from both a technological and a responsible use standpoint, prior to the inevitable adoption of GenAI. The most basic, fundamental distinction between AI and GenAI is that AI is good at analyzing existing content while GenAI generates new content. Much foundational modernization work is still needed across the federal IT environment to accommodate digital technologies like cloud, AI and GenAI, ensuring continued (albeit slower) federal IT growth in FFY25 and beyond.


 

Expansion accelerated in the federal IT market in 3Q24 as renewed M&A activity by several federal IT vendors augmented strong, stable demand for digitally based IT modernization

Statutory year-to-year revenue growth for the 11 TBR-benchmarked vendors in the U.S. federal market on a weighted average basis rose 100 basis points sequentially, increasing from 8.3% in 2Q24 to 9.3% in 3Q24. Acquisitions by Accenture Federal Services (Cognosante), BAH (PAR Government Systems Corporation [PGSC]), CACI (Quadrint in 1Q24 and Azure Summit Technologies [AST] in 3Q24), CGI Federal (Aeyon), General Dynamics Technologies (Iron EagleX) and KBRWyle (LinQuest) generated an inorganic tailwind to overall market growth of roughly 180 basis points in 3Q24.
 
Federal IT executives (e.g., CACI CEO John Mengucci) have indicated that the M&A market became more buyer-friendly during 2024, prompting several benchmarked vendors to leverage acquisitions to address portfolio gaps in multiple areas, including digital transformation (DT) and emerging technologies for classified defense and intelligence operations.
 
Vendors have been acquiring, and will continue to hunt for, smaller peers with scalable cloud and digital modernization capabilities as well as deep existing (and likely cloud-related) relationships with federal agencies. Underpinning inorganic market growth is enduring robust demand for digitally transformative technologies in AI, cloud, analytics and data science, as well as the continued need to upgrade baseline IT infrastructures across the federal sector to accommodate digital modernization.

Graph: 3Q24 Federal Revenue, Profitability and Year-to-year Revenue Growth

KBRWyle’s federal revenue rose 10.2% year-to-year in 3Q24 as LinQuest was acquired and demand mounted for all the offerings within Government Solutions business units. KBR’s leadership team increased its guidance for the company’s revenue, adjusted EBITDA and adjusted earnings per share (EPS) during the 3Q24 earnings call due in part to Government Solutions’ strong performance and the purchase of LinQuest creating more opportunities with DOD agencies.
 
Inorganic growth is again boosting CACI’s top-line growth after the company made three acquisitions between 2Q24 and early 4Q24. CACI’s acquisition of AST in 3Q24 contributed between 70 and 80 basis points of inorganic growth during the quarter and is expected to add between $440 million and $450 million to the company’s sales in its FY25.
 
BAH’s revenue rose 18% year-to-year in 3Q24, driving the firm’s total sales past $3 billion for the first time. BAH’s June acquisition of PGSC began to contribute inorganic revenue in 3Q24, and we estimate BAH’s organic year-to-year growth was 17.7% in 3Q24, with PGSC contributing between 20 and 30 basis points of inorganic growth.

Civil and defense agencies drive double-digit IT growth through cybersecurity, health IT and AI investments

Civil agencies continue to aggressively invest in cybersecurity, health IT and Agile-based software systems, leading to sustained double-digit civil sector IT spending growth

Weighted average growth in the civilian sector accelerated 80 basis points sequentially, rising from 9.6% in 2Q24 to 10.4% in 3Q24. Vendors including BAH and Leidos have posted multiple quarters of double-digit growth in their respective civil units as of 3Q24, with robust rates of growth expected to persist well into 2025. Sector growth was sustained at or near 10% throughout FFY24 as demand among civil agencies remains robust for comprehensive zero-trust and cyber incident support solutions, particularly by DHS, the Department of Health and Human Services (HHS), the IRS and NASA.
 
Attracting and retaining cybersecurity talent also remain top priorities for nearly all civilian agencies, which are tapping vendors like Accenture Federal Services (AFS), BAH and Deloitte Federal for human resource advisory services. NASA launched an eight-year, $2 billion program, NASA Consolidated Applications and Platform Services (NCAPS), during 3Q24 to develop and deploy Agile-based software for over 200 IT systems, with vendors including CACI among the primary awardees. Health IT is generating new revenue and profit streams for the benchmarked vendors, and agencies including the HHS (and its subagencies, the Centers for Medicare & Medicaid Services, the Center for Disease Control and Prevention, and the National Institutes of Health) are seeking agencywide AI and analytics adoption services. The top five benchmarked vendors in year-to-year civilian sector revenue growth in 3Q24 were AFS (25%), BAH (16.1%), SAIC (10.8%), Maximus (9.3%) and CACI (7.9%).

Defense and intelligence agencies expanded spending on IT modernization, global integration of defense networks, and AI-enabling intelligence collection and analysis solutions in 3Q24

Weighted average expansion in the defense sector rose 110 basis points sequentially, from 7.5% in 2Q24 to 8.6% in 3Q24. BAH and CACI maintained double-digit expansion in their respective defense sales in 3Q24, while Leidos and GDT posted midsingle-digit top-line defense growth in the quarter. The DOD awarded billions of dollars in net-new programs while several benchmarked competitors also secured key recompetes with defense agencies. The DOD’s European Command has aggressively expanded its activities (particularly with BAH) as the war in Ukraine grinds on, while globally, the Pentagon continues prioritizing the adoption of AI, analytics, big data and cloud technologies to facilitate and accelerate real-time decision making for military commands.
 
The DOD is also expanding activities in APAC, investing in advanced intelligence and combat-related technologies to deter Chinese aggression. The U.S. Air Force is accelerating spend on the Collaborative Combat Aircraft program while the DOD’s Combined Joint All Domain Command and Control (CJADC2) initiative to achieve IT infrastructure interoperability across all military branches and with defense agencies of U.S. allies continues to spool up. Project volumes also expanded on several marquee defense IT programs, including Sentinel (modernizing C5ISR [Command, Control, Communications, Computers, Cyber, Intelligence, Surveillance and Reconnaissance] systems across the DOD) and the $11 billion Defense Enclave Services program.
 
IT investment patterns in the intelligence community continue slowly stabilizing as intelligence agencies invest in intelligence analysis services and solutions and AI-based technologies to collate and ingest intelligence data. The top five benchmarked vendors in year-to-year defense sector revenue growth in 3Q24 were BAH (19.1%), CACI (13.5%), KBRWyle (12.4%), Leidos (4.4%) and AFS (3.9%).

 

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Robots Protecting Themselves From Robots: The Future of AI Security and Vendor Differentiation

Demand for analytics services has reached an inflection point, with new opportunities around the development and implementation of secure, industry-aligned agentic AI solutions refueling growth

From shadow AI to the advent of AI agents, generative AI (GenAI) has increased IT complexities and the need for greater enterprise resiliency, compelling vendors to enhance their cybersecurity portfolios. This is not surprising, given that according to TBR’s November 2024 Digital Transformation: Voice of the Customer Research, buyers ranked cybersecurity as the No. 1 technology supporting their digital transformation (DT) programs. Using AI to automate cyber threat detection will create opportunities to establish guardrails around AI identity in the world of multiagent ecosystems. Vendors’ ability to manage liability and accountability around AI cybersecurity will remain a key question as reports of bad AI continue to surface.

Analytics and insights services revenue expanded 5.9% year-to-year, on average, in 4Q24 for the 20 vendors included in TBR’s 1Q25 Digital Transformation: Analytics Professional Services Benchmark

While revenue growth remains lower than two years ago, when analytics and insights (A&I) services revenue expanded 14.3% year-to-year in 4Q22, there was a slight improvement in 4Q24 compared to six months ago when sales grew 5.6% on an annual basis. We believe the A&I services market has bottomed out and will start to improve as vendors capitalize on the dual opportunity to embed analytics tools within their IT modernization frameworks and develop and implement agentic AI solutions that address specific industry and functional pain points. We believe these two trends will also expand the addressable market opportunities for vendors as the need for greater AI security and a right-skilled bench will allow them to demonstrate value while they pivot their commercial models toward outcomes.

Security-related risks is among the top GenAI adoption barriers, presenting vendors with an opportunity to position cyber and AI as complementary solutions to help scale adoption

As TBR wrote in our 1H24 Cloud Infrastructure & Platforms Customer Research: “Most respondents cited security as the biggest GenAI adoption barrier, which makes sense as customers also referenced security as the biggest pain point associated with cloud technology.
 
That said, data-related challenges, such as governance and control of the data, are moving up the ranks and only reinforce the role that data architecture and data strategy play in GenAI adoption. It is a strong indication of where the hyperscalers and their partners, including the data ISV platforms they integrate with as well as the GSIs [global systems integrators], should be focused to help customers overcome these barriers. When asked about the role GSI partners play in data strategy, one-third of respondents said that the GSIs were instrumental in putting the right policies, tools and best practices in place around areas like data governance, quality and access.”
 
These findings are closely aligned with data from TBR’s November 2024 Digital Transformation: Voice of the Customer Research report where enterprise buyers ranked cybersecurity as the No. 1 technology supporting their DT programs. While investing in cyber-related capabilities is not a new trend, we believe the technology is experiencing a boom in terms of investment especially as chief information security officers try to balance the management of shadow AI with the increased use of GenAI tools for software development, content production and sales automation, among other functions.
 
While in the past cyber and cloud have gone hand in hand in terms of the buyer purchasing cycle, we see an opportunity for vendors to position AI and analytics and the attached cyber services as a more appealing value proposition especially as all parties face a new reality where robots (GenAI) are protecting themselves from other robots (cyberattacks).
 
Graph: GenAI Adoption Barriers, TBR 1H24

The rise of robots guarding robots presents an opportunity for vendors to demonstrate value through accountability and cyber liability management, backed by domain and partner knowledge

Balancing the development of AI security models with enabling workforce productivity through the use of AI will help vendors create strong use cases for how to navigate the complexities that have arisen from the advent of the greater need for AI security. Vendors can then bring these experiences into client discussions as they often face similar struggles as shadow AI becomes mainstream.

Examples of vendors’ recent activities

  • Accenture launched a suite of GenAI-enabled cyber resilience services and capabilities addressing issues such as deepfakes and helping prevent customer disruptions from across IT operations through supply chain management. Some of the services include Secure AI Solutions, which address enterprises’ AI program life cycle; Deepfake Protection; and Business Cyber Crisis Recovery.
  • In October Eviden inaugurated an AI supercomputer in Denmark called Gefion as part of a deal from March with the Danish Centre for AI Innovation, which is owned by the Novo Nordisk Foundation and the Export and Investment Fund of Denmark. The supercomputer will enable large-scale AI projects and high levels of security for Danish data sovereignty, and support research and innovation in healthcare, life sciences and green transition.
  • Cognizant expanded its Neuro suite to include cybersecurity offerings. The additional capabilities support a variety of devices across IoT networks and provide an AI-derived interface that showcases internal insights.
  • The alliance with Clearspeed will leverage Deloitte’s IndustryAdvantage framework and Clearspeed’s AI-enabled risk identification platform to provide risk data and management capabilities supporting U.S. federal clients.
  • DXC Technology has partnered with Checkmarx, a cloud-native application security specialist, to deliver comprehensive application security solutions globally. By offering Checkmarx One to its customers, DXC Technology aims to accelerate vulnerability detection and remediation throughout the software development life cycle.
  • In August IBM announced it is adding GenAI capabilities to its managed Threat Detection and Response Services. The company launched IBM Consulting Cybersecurity Assistant to help clients better identify, investigate and respond to security threats. The Cybersecurity Assistant will be part of IBM Consulting’s threat detection and response practice and IBM Consulting Advantage.
  • In September Tata Consultancy Services (TCS) announced an expansion of its partnership with Google Cloud with the release of two solutions: TCS Managed Detection and Response and TCS Secure Cloud Foundation.