GenAI Will Propel Growth in Devices and Associated Businesses

Generative AI (GenAI) will make devices, especially PCs and smartphones, more powerful and easier to use, and that will drive business among device, platform, silicon and software vendors but will not change the structure of the ecosystem. New opportunities in software and services will present themselves, new companies will enter the market, and most new companies will ultimately be acquired.

 

GenAI has not yet greatly affected the devices market and is not expected to begin to change device usage and requirements until CY2025, with the real impact beginning in CY2026. Right now, devices essentially serve as thin clients for cloud-based GenAI applications. Some PCs run machine learning applications that are helpful but inessential. Both iOS and Android smartphones use neural processing units (NPUs) for computational photography, but so far there are no significant large language model (LLM) applications running on devices.

 

Vendors and enterprises will spend the next two years evolving LLMs to run efficiently on local devices, expanding the devices to run LLMs, and developing the software to help users be more effective and insightful while making their jobs and lives easier.

Local GenAI Presents the Greatest Opportunity

Devices’ user interfaces (UIs) are the gateways the gateway to all computing; when you improve a device and the device’s software, you improve efficiency and the user experience across the board and you have the greatest possible impact on productivity, leading to optimal business results.

 

The user interface is not an afterthought or a sidelight; it governs what the user can do with the device and the underlying network. The UI both limits and empowers the user; a UI with GenAI greatly expands what the user can do.

 

Users spend many hours finding, arranging, organizing, sorting and transforming documents, messages, images, appointments and commitments. GenAI will help enormously in setting up and performing analyses, charting results, and laying out documents and presentations. With GenAI, it will be easier to automate the many tasks that are repeated with minor variations, with obvious benefits.

 

Device-based GenAI helps users do everything better and more easily; cloud-based GenAI makes individual applications more powerful and easier to use. Local GenAI will have a greater impact, contributing revenue and profit to winning software development companies, to the platform vendors and to the device vendors.

TBR Senior Analyst Ben Carbonneau Discusses Key Predictions for the Devices Market in 2024

The Steps to Local GenAI

It will be challenging to redesign GenAI software, along with PCs and smartphones, to make it possible to run effective and powerful local GenAI applications, but it is necessary because the devices must remain as responsive as they currently are. Users engage with the UI constantly, and delays would completely negate the benefits of an enhanced UI. The round trip to the cloud is unacceptable. Privacy concerns will also require local storage for private business and personal data.

 

Large language models are, of course, large. While PC memory and fast storage requirements will probably increase, a new architecture of multiple models will be required and is widely under development. The local model “knows” about the user’s data and activities, but it may consult with a company model for broader information and finally with cloud-based models for “knowledge” about the world.

We Still Need Software Development

Vendors will develop and adapt software to leverage GenAI. The conversational chat interface will be available to specify complex tasks, but PC and smartphone applications must have the faster and more conventional UI tools. Underlying the buttons and sliders will be more capable commands, adapted to the user’s needs and preferences.

 

The platform vendors — Apple, Google and Microsoft — have the advantage here, especially Microsoft, which owns its platform and its primarily horizontal applications. The platform vendors will provide APIs to GenAI resources and services to allow third-party software vendors to take advantage of their platforms. Third-party software vendors include established leaders like Adobe, but there are opportunities for new applications and vendors. Some SaaS vendors will build clients to take advantage of the local AI platform.

 

One new opportunity for both platform and software vendors is personal GenAI, which consists of private applications for individuals that assist in every aspect of their lives including work, home, family and health. The personal GenAI assistant is a smartphone automated personal assistant. It can shop, make appointments and even answer emails. Apple and Google have the inside track on this important business, and they will use their current voice interfaces, Siri and Google Assistant, respectively, as a starting point. Apple’s high-touch relationships with its customers and corporate emphasis on privacy will help the company’s effort.

 

The device vendors will benefit from the need for more capable hardware, and the new hardware should evolve more quickly than before, driving faster refreshes. They have few new software and service opportunities, however, as they need to provide standard platforms.

The Devices and Platforms Business Will be Bigger but not Different

The GenAI revolution will not greatly change the relationships that govern the production of devices. There is intense competition among the silicon vendors, but they face the usual array of customers. OEM vendors still face the challenge of differentiating products that must be standardized. Of the three platform vendors, only Microsoft plays well with others, and this situation is unchanged.

 

With respect to devices, the opportunities are larger but not very different. The invention of applications, leveraging the uniquely novel devices and platforms, is the only new type of opportunity.

What is competitive intelligence, and why is it important. In this blog, we highlight three reasons why CI is crucial to business success and how best to leverage CI I your strategy.

Understanding Competitive Intelligence for Business Success

Competitive intelligence is a broad concept: Think of it as any intelligence that improves your business’s performance in the market. Insight on what, how and where competitors are operating is one aspect of competitive intelligence, but it is also important to include the role of partners and the perspective of end customers to establish an all-encompassing view of the overall market.

 

Most markets are imperfect, with complexity across regions and verticals as well as the need for a myriad of vendors to work together to create solutions. Due to that market complexity, information on what is occurring in the space and why can be difficult to ascertain. Competitive intelligence is one method to extract points of clarity that can serve as guideposts as you set objectives for your business.
 

Click the image below to hear more about competitive intelligence for business success from TBR Principal Analyst Allan Krans

Why Is Competitive Intelligence Important?

Competitive intelligence can be the best proxy for your own business decisions. Gaining a deeper understanding of individual vendors and the broader set of competitors in the market landscape can inform your decision making in a powerful way.

 

1. Competitors as a proxy

Anticipating where the market opportunity is moving and how to capitalize on that is a challenging proposition, especially in dynamic, quickly evolving markets like IT. It is difficult to make complicated and/or significant investments, and the risks are always high. In quickly evolving markets, one of the best ways to reduce risk and increase the confidence of the overall organization in making business decisions is to look at how your competitors are handling the same situations. Understanding how and in which markets your peers and competitors are investing can provide a number of benefits.

First, this information validates strategic directions your own business is considering. It may not guarantee the success of an investment but at least it can provide reassurance that competitors are weighing the risk-reward ratio in a similar manner. Second, understanding the intent and strategy behind different decisions can be even more important for competitive intelligence. No two businesses are the same, so this context can allow your business to translate the intent of different competitor strategies into something that works for your business. The third benefit is gaining information about the outcomes of competitor strategies in real financial terms — one of TBR’s specialties. Revenue, expenses and profit margins are concrete metrics that can help you gauge the effectiveness of competitor strategies and understand whether the outcomes align with your business’s overall financial goals.
 

2. Markets inform opportunity

Looking holistically at markets and how different peers and competitors operate within them can provide value competitive intelligence. This broad view can help you gain insights into where and how a group of key competitors operate within a market and with what results. TBR’s benchmark and market forecast reports are examples of this type of competitive analysis, illustrating the size, growth and strategies of a given group of peers within a market segment.
 

3. Competitive intelligence can guide business strategies

A combination of competitive intelligence activities, including deep dives into segment leader strategies, broad coverage of other peers in the space and an analysis of the different objectives for those peers, can be used as a powerful tool for business strategy road mapping. These combined activities can illustrate the objectives, investments, outcomes and landscape against which your business will be competing across different endeavors. Just because your peers are going in a certain direction does not mean that is the best path for your business. Likewise, just because competitors are not making certain decisions does not mean your business should not consider them. However, an awareness of what is occurring can be an important source of intelligence.

Conclusion

There is no perfect customer, no perfectly aligned competitor, and no clear market opportunity, especially in IT. In a world where no perfect decision exists, competitive intelligence can be an informative window into how businesses in similar markets are operating their businesses.

 

Having market perspectives to consider, strategies to evaluate, and approaches to both emulate and avoid can be valuable. Competitive intelligence can provide these benefits and more, helping organizations plan future investments and reduce overall risk.

 

 

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Current State of 6G

As the development cycle of the 5G era reaches the halfway mark (Check out this infographic!), the telecom industry has begun positioning for the commencement of the 6G era. The first set of 6G specifications is expected to be established in 2028 as part of the 3GPP (3rd Generation Partnership Project) Release 21 and initial commercial 6G network deployments are expected by 2030.

 

The telecom industry and global government entities have begun preparing for the 6G era via initiatives including determining criteria for standards development, establishing research consortiums and other strategic partnerships, identifying probable spectrum bands to support 6G, and exploring potential 6G use cases.

Telecom Industry and Government Entities Have Begun Preparing for 6G

Government Initiatives

Numerous countries and regions have begun pursuing initiatives to be at the forefront of 6G development. For example, in the U.S. the Federal Communications Commission’s (FCC) Technology Advisory Council established a 6G Working Group to provide recommendations to the FCC for 6G development. The Biden administration also recently announced the National Spectrum Strategy, which identifies potential future spectrum to support 6G (and 5G).

 

Other examples include South Korea launching a $325 million 6G commercialization and standardization R&D strategy; India establishing its Bharat 6G Vision, which aims for the country to launch 6G services by the end of 2030; and the European Union funding the Hexa-X research consortium, which includes leading vendors and operators. China has also begun embarking on research initiatives and experimentations to launch 6G by its target of the end of 2030.

Identifying 6G Spectrum

The clearance of additional spectrum in global markets will be essential in supporting escalating data traffic long-term as 6G is projected to support a 10x increase in usage on networks. Spectrum in the upper midband range (7GHz-24GHz) is being targeted as prime spectrum to support 6G as it is expected to provide an ideal balance of speed, propagation, coverage range and capacity.

 

Additional spectrum being considered for 6G includes lower-band spectrum (below 7GHz) due to its more widespread coverage range as well as millimeter wave spectrum due to its high bandwidth and capacity and low latency. Sub-terahertz spectrum (90GHz-300GHz) is also being explored for 6G, which would be able to support extremely high data rates though deployments would likely be limited to specific localized use cases, such as supporting holographic communications in a hospital or factory.

Use Case Exploration

6G is expected to support various use cases in areas including holographic communications, digital twins, AR/VR and autonomous robotics. Many of these types of use cases will have initially released to market during the 5G era but will gain greater adoption during the 6G era due to evolved network capabilities as well as supporting players such as device vendors providing more advanced accompanying solutions.

 

Network as a sensor is also being targeted, which will enable 6G networks to sense their surroundings to support a variety of use cases including public safety, healthcare and security. 6G will also enable operators to more cost-effectively support escalating data traffic on their networks as 6G provides advanced AI/machine learning (ML) capabilities and is more energy efficient than 5G.
 

Watch the Video Below to Learn How to Navigate the Telecom Industry as a Whole in 2024

Primary Driver for CSPs to Deploy 6G

Members of the telecom industry are cautiously optimistic about 6G due to its expected network efficiencies, ability to support escalating data traffic and potential 6G use cases. However, they are also voicing uncertainty and reservations around 6G, which is largely due to the high investment costs and limited monetization opportunities communication service providers (CSPs) have experienced in the 5G era.

 

Though 6G technical specifications and expected use cases are still in the developmental stages, TBR believes operators will be more calculated and tactical in investing in 6G compared to 5G, with a deeper emphasis on ensuring a clear line of sight to ROI before significant spending occurs.

 

The telecom industry has begun exploring 6G use cases, though the time frame for commercial readiness and the willingness of customers to pay for these solutions remain unknown. AR/VR use cases are a targeted area for 6G, including the metaverse and real-world simulations to provide training for users such as military personnel and first responders. Use cases around autonomous vehicles, advanced robotics, drones and 8K video are also key solutions being explored.

 

TBR expects the most beneficial use cases for 6G will involve the provisioning of advanced technologies that will enable operators to more cost-efficiently support rising traffic on their networks. For instance, deeper implementation of AI and ML technologies will enable operators to enhance self-optimizing network (SON) capabilities to realize cost efficiencies.

 

6G is also expected to result in deeper implementation of digital twins, which will help operators better anticipate potential outcomes to their networks and optimize their operations in areas including site management and field operations. Additionally, 6G is expected to be significantly more energy efficient compared to 5G, which will enable operators to improve cost efficiencies while helping to support corporate sustainability goals.

Conclusion

The telecom industry is on the cusp of the 6G era, with the first set of specifications expected to be established in 2028 and initial commercial deployments projected by 2030. Governments and industry players are actively preparing for this transition, with initiatives ranging from spectrum identification to use case exploration.

 

While there is cautious optimism about the potential of 6G, there are also concerns about the high investment costs and limited monetization opportunities that characterized the 5G era. However, with advancements in AI/ML capabilities, energy efficiency and the promise of transformative use cases, 6G is expected to offer significant benefits, including cost efficiencies and improved network performance.

 

As the industry continues to evolve, it will be crucial for stakeholders to carefully assess the ROI and strategic value of 6G investments.

 

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Insights on IT Services Market Growth and Trends

IT Professional Services and Market Segmentation

Overall IT services revenue growth decelerated in 2023 as the market outlook remained uncertain, clients tightened budgets, and IT services vendors re-evaluated talent strategies in areas including hiring, composition and training. The majority of clients focused spending on run-the-business managed services as well as the integration of AI and digital solutions that provide more efficient ways of working, reducing overall expenses.

 

Additionally, cloud migrations and transformation-led activities helped clients reduce tech debt and consolidate cloud and application environments. According to TBR’s 3Q23 IT Services Vendor Benchmark, published on Jan. 16, “Enterprises are looking to establish strong and secure digital cores, paving the way for vendors to continue capitalizing on the need for cloud migration, applications modernization and data transformation services as well as cybersecurity opportunities. Vendors continue to experience profitability pressures due largely to rising labor and SG&A costs.”

In 2024, the needs emerging out of limited client budgets and centered on AI and efficiency will continue to guide IT services vendors’ portfolio expansion and talent development.

Using Competitive Intelligence for Market Success

To ensure business segments and portfolios are aligned with client needs, IT services vendors forge partnerships, such as with the hyperscalers, to create the ability to work within and across clients’ multicloud environments. For example, forging large-scale partnerships with Google Cloud, Amazon Web Services, Microsoft, Oracle and SAP equips vendors to deliver at scale across client needs and more easily support transformation projects even in a mature IT environment. With clients being more cost conscious, vendors that can seamlessly take over peer-driven transformations will be more successful in capturing new client engagements.

 

Acquisitions have proved to be a vital way for vendors to quickly add in-demand services and solutions as well as talent to better deliver on clients’ emerging needs. While overall acquisition activity slowed for most vendors during 2023, purchases that were finalized brought in specific capabilities that complemented existing strengths while also infusing new portfolio offerings. More specifically, vendors looked to deepen their capabilities and presence around cloud, security and AI, a trend we expect to continue — and possibly gain speed — in 2024.

 

Lastly, taking note of peers’ talent strategies and overall organizations enables vendors to effectively develop internal abilities and practices and strengthen client relationships. According to TBR’s special report IT services and consulting in 2024: Traversing GenAI pressures, talent challenges, and regulatory waves, “To battle employee attrition and take back control, employers ramped up training and other retention-enabling investments. While many tech companies made news by shedding headcount, most global systems integrators (SIs) and consultancies have sought to keep trained and experienced talent, minimize turnover, and prepare for renewed growth from late 2023 into 2024. … The 2023 focus on reskilling and training will pay off in accelerated revenues in 2024 as IT services vendors will have the trained and certified professionals to staff what TBR expects will be growing IT services demand.”

 

While most vendors look to certify employees on partner technologies, keeping pace with peers’ skills and certifications will enable vendors to better pursue software-driven projects. Additionally, efforts to reduce turnover remain similar across vendors, with a focus on training, culture and workplace flexibility. Vendors with more aggressive workplace practices and return-to-office policies may experience higher turnover than their peers. Across the IT services market, talent remains the key asset — vendors must keep in mind their peers’ strategies, investments and composition to successfully deliver client projects.
 

The Outlook for Competitive Intelligence in the IT Services Market

As uncertainty remains the common thread across market conditions as well as client and ecosystem company activities, vendors need to re-evaluate client retention strategies to ensure service quality standards are met. A focus on client management and success will enable vendors to effectively preserve market share by matching or exceeding peers’ client relationship efforts.

 

Limited budgets require more than communication, pushing vendors to ensure they can deliver on technology-driven transformation that infuses AI and automation capabilities as well as digital workplace services to drive operational efficiency and cost reduction for clients. Ensuring the right talent is in place to support innovation activities and maintain client relationships will be vital for vendors to secure positioning and remain ahead of peers.

 

Internal transformation projects to align business segments more closely with emerging technologies and services, including restructuring talent and spinning out or separating business units, will help vendors reposition and better compete for new opportunities. Additionally, offshoring and nearshoring will support vendors’ ability to deliver more cost-competitive contracts while also improving vendors’ profitability.

Conclusion

Competitive intelligence provides ongoing and context-specific guidance in the face of changing client needs and peers’ strengths and strategies. Keeping track of peer investments continues to increase in strategic importance to help vendors retain market share and capture projects with new clients.. Ensuring talent, business composition and positioning, and partner ecosystems are competitive with peers’ will further improve vendors’ stability by adding services capabilities and expertise, which will facilitate discussions and improve market leverage.

 

Maintaining a broader portfolio of services that address a wider range of digital, AI and cloud needs while also having partner expertise across a variety of IT environments will dictate vendors’ ability to compete effectively, expand presence and preserve existing client relationships.

 

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Current Cloud Market Landscape

The cloud market has been on a more than 15-year growth trajectory that rewarded leaders for establishing scale above all else. Early-to-market vendors, such as Amazon Web Services in infrastructure and Salesforce in SaaS, capitalized on the consistent market expansion to establish themselves as not only some of the largest cloud providers but also the largest vendors in their market segments across all delivery methods.

 

However, those firms also experienced some of the most dramatic slowdowns in revenue growth as the market softened in 2023. Part of that slowdown is undoubtedly the “law of large numbers,” meaning growth slows as size increases, but it also reflects a broader market shift toward growth created by new features, capabilities, and go-to-market programs.

Watch 2024 Cloud Predictions session: GenAI and the Cloud Revolution of 2024

Strategies to Gain Cloud Market Share in 2024

In 2024 we expect vendors that successfully implement the following strategies will become growth leaders in the cloud market:

Effectively Monetize Next-gen Features for AI-led Growth

While the market for GenAI and AI solutions more broadly is still developing, the investments from end customers appear to be very real and meaningful. Despite the intent to invest and spend, there are many hurdles for vendors to clear before they can start recognizing the revenue opportunity.

 

These hurdles include identifying and articulating use cases, measuring benefits and returns, implementing pricing models that work for both vendors and customers, and developing an ecosystem to support all these tactics. Vendors that make progress tackling these challenges stand the best chance of realizing AI-led growth in 2024.

Expand Addressable Markets

The benefits of an ecosystem have been clear for decades, but for many IT and cloud vendors, the changes to their business models have been too significant to overcome. However, in an environment where cloud vendors are experiencing slower growth and still trying to control expense levels, the ecosystem model is even more impactful.

 

Proficiency in orchestrating service partners, ISVs, resellers, and joint solution alliances around core offerings will be another growth driver for vendors in 2024.

Orchestrate Multivendor Partnerships

Managing a customer base that spans traditional legacy solutions and cloud-delivered ones has been a challenging task. To date, it has been simpler and easier for born-on-the-cloud providers to use a disruptive model to sell a simplified set of offerings to establish their position in the market.

 

However, there is now an advantage for multimode providers in controlling the transition to new solutions and delivery methods in a slower-growth environment. In the clearest example of this advantage, SAP has been able to sustain growth in 2023 even as its more cloud-dependent peers have experienced the impacts of the market slowdown.

 

The maturation of AI opportunities will also play a role in this advantage, as customers may end up with data models stored in a variety of places within their IT landscape, based on performance and security requirements.

Conclusion

In 2024 the cloud landscape will become segmented between vendors that can sustain high rates of growth and expansion and those that cannot. Simply providing cloud services at scale is no longer enough for vendors to gain cloud market share. More complex strategies will define the cloud leaderboard in 2024. Additionally, delivering AI-enabled next-generation capabilities and nurturing ecosystems will garner investment despite the slower market growth and macroeconomic uncertainty.

 

To learn more about TBR’s predictions for the cloud market in 2024, download your free copy of Top Cloud Predictions for 2024, featuring a look at GenAI and cloud evolution in 2024 and beyond.