What Is an AI PC?

AI PCs have created significant buzz in an otherwise commoditized industry where demand has plunged since the accelerated pandemic buying cycle of 2020 and 2021. The definition of AI PC varies by PC OEM and silicon provider, but there is consensus that at its core AI PCs are purpose-built machines meant to enable accelerated AI workloads by leveraging specialized hardware that can include a neural processing unit (NPU).

 

However, in this current phase of AI PC, hardware is well ahead of software development. With Intel starting shipments of its Meteor Lake processors in December 2023, PCs with NPUs are beginning to come to market in volume albeit applications that require specialized AI PCs to run are few and far between.

 

Understanding that despite the bright future of AI PC, near-term commercial PC refreshes could potentially be delayed as organizations await the development of the first “killer application” that markedly differentiates performance between these new AI-optimized machines and PCs that are presently deployed.

Watch TBR Senior Analyst Ben Carbonneau Discuss Predictions for the AI PC, and the Devices Market as a Whole, in 2024

Predictions for the Devices Industry in 2024

Prediction: PC OEMs continue to await the ramping of the post-pandemic PC refresh cycle, anticipating low-single-digit market growth in 2024.

Prediction: The introduction of AI PCs will impact the rate of commercial PC refresh in 2024.

Prediction: Windows on ARM will gradually gain momentum in the near- to long-term as ARM-native Windows applications are developed and as Microsoft works to mitigate issues associated with backward compatibility.

 

TBR’s Devices market and competitive intelligence research covers the interrelated ecosystems of device vendors, platform providers, supplier and technology partners across consumer and commercial spaces. Each quarter we publish competitor and market benchmarking as well as market sizing, vendor positioning, strategies and customer adoption trends for the market as a whole. Additionally, we publish individual analysis on Apple, Dell Technologies, HP Inc. and Lenovo Group.

 

To learn more about TBR’s predictions for the devices industry in 2024, check out our recent interview with Senior Analyst Ben Carbonneau.

Vendors capable of playing nice in the GenAI sandbox and backing up their GenAI stories and promises with delivered results for clients will outpace peers in 2024. Vendors missing any of those components will still be able to benefit from the GenAI gold rush, but they will experience poorer results and diminishing relevance in the market. Download your free copy of TBR’s AI & GenAI Spotlight Report to read more on TBR’s GenAI market research.

What is GenAI?

Generative AI (GenAI) is a type of AI that allows users to create completely unique items, including text, images, video and audio, from written requests. The most critical difference between commonly used AI tools and GenAI is simply the difference between answering a question using available information verse creating a unique answer. AI is asking Alexa who won the Boston Celtics game last night. GenAI is asking Alexa to write a text to a friend to tell him he should have bet on the Celtics for last night’s game.

 

At TBR we’re continually examining the business models and financial, resource and go-to-market strategies of companies in the technology ecosystem, so we’re often looking beyond the marketing hype to the delivered value and financial results. The use of the word “stories” rather than “strategies” when it comes to GenAI highlights the critical need for use cases for this new technology. In the case of GenAI, what clearly mattered in 2023 and will continue to matter in 2024 is not nuanced strategic decisions or even fine-tuned market positioning but the need to tell a good story.

Top GenAI Uses Cases

Relentless GenAI hype has carried in its wake both credible examples of the technology deployed in pilot projects and wild speculation about use cases that could be scaled once the analytics, compute power, and change management approaches are acquired and aligned.

 

It is still too early to catalog credible, deployed-at-scale use cases or speculate on which vendors across the entire IT ecosystem have taken any kind of use case lead. Anticipating that kind of analysis in mid-to-late 2024, TBR instead has followed the leads provided by enterprise GenAI buyers who have noted that use cases have mostly been presented in tiers:

• Short term: Productivity improvements. Notably, these use cases can most credibly and quickly be attested to by IT services vendors and consultancies applying GenAI solutions to their own operations.
• Midterm: Standard enterprise applications, such as CRM, ERP, HCM and SCM. For these, while the IT services vendors and consultancies may play the role of data and ecosystem orchestrators, the heavy lifting will come from the software and cloud vendors, provided, of course, the infrastructure can support GenAI compute and storage needs.
• Long term: As one PwC leader put it, “You’re talking to your business, and it talks back.”

What Makes GenAI Different From Other Next-generation Technology?

How is GenAI technology, especially the popularized applications exemplified by ChatGPT, unique? Well, exactly that popularization, for starters. Enterprise technology buyers and employees influencing technology decision making don’t cower at technical complications; rather, these personas are enthused — possibly terrified, but that’s a short-term phenomenon — by what GenAI can do for them. Plus, most people respond to a story, not a strategy.

 

A good story around deploying GenAI will stand out in an overhyped market. In the countless discussions around GenAI that TBR has had with clients in the last 13 months, we’ve frequently been asked about use cases, which are, essentially, stories about a company finding a way to use this new magic. Without these use cases, there are no stories around GenAI and, therefore, no excitement. Use cases will remain necessary to GenAI strategy in 2024, but “playing nice in the GenAI sandbox” will increasingly become the clearest marker of a successful GenAI strategy.

 

While GenAI became the tech world’s darling in 2023, a pivot to ecosystems dominated how TBR began thinking about the changing technology market landscape. At the request of clients and built on decades of deep research around individual vendors, we launched dedicated analysis of how companies we cover interact, including interdependencies, revenues realized, and alignment challenges.

 

Among the constant themes: Companies that partner well outperform peers. The traditional boast of “end-to-end” makes no sense in today’s technology environment, particularly when one considers the implications of wider GenAI adoption, including challenges around talent, compute power, and compliance. “Playing nice in the GenAI sandbox” will be the difference between making money from GenAI and making a business out of GenAI.

 

Learn More About the GenAI Landscape

At TBR we’re covering GenAI from nearly every market angle. We publish a wide-ranging view of the GenAI sandbox, from management consultancies to cloud vendors and infrastructure providers to device and chip manufacturers.

 

Our analysis on how companies will interact around GenAI and, critically, what these companies will look for in alliance partners is just the tip of the iceberg for TBR’s research on the technology. Our recently published new research stream, AI & GenAI Market Landscape, covers GenAI from the perspective of TBR’s Telecom, Devices, Cloud, Infrastructure, IT Services and Consulting experts. Additional market-specific AI research will publish later in the year.

 

To learn more about TBR’s AI & GenAI Market Landscape, download your free Spotlight Report.

Update: For the latest developments in the U.S. federal IT market, check out our December 2024 blog Federal IT Spending Will Remain Robust in FFY25 Amid AI Prioritization, which highlights the proposed budget for FFY25 and its potential impact on federal systems integrators. Click here to read the full blog.

Current State of the Federal IT Services Market

The most intensive bull market in federal IT spending continues, and the federal IT services market will remain robust through federal fiscal year 2024 (FFY2024). Much IT modernization work has been done, but there is still more to do as federal agencies continue adopting digital technologies such as AI, analytics and machine learning, all while migrating their legacy workloads to advanced cloud infrastructures. Federal spending on technology and related services neared $120 billion in FFY2023, up over 25% from FFY2021 and on a trajectory to surpass $130 billion by FFY2025.

 

The below infographic contains the three key takeaways from TBR’s latest research on the U.S. federal IT services market and what these events mean for you.

Top 3 Takeaways for 2024

When Will Leading Federal Systems Integrators Resume a More Active M&A Posture?

Consolidation activity among midmarket federal IT firms remains very robust and will likely generate competitors with the scale and the depth of digital capabilities to challenge the leading federal IT services vendors on future strategic IT modernization programs.

Recent Budget Turmoil Has Not Impacted Federal IT Spending Patterns as Greatly as Expected

Overall growth in the federal IT sector in 3Q23 was the most aggressive TBR has observed since launching its coverage of the market in 2008. The debt ceiling agreement in June 2023 provided a much-needed respite for the federal IT market from the budget turmoil that had impeded growth through FFY2022 and early FFY2023. Latent demand for IT modernization and emerging technologies was set loose by the budget deal in 2Q23, accelerating in 3Q23 and augmenting the usual flurry of award activity in the final quarter of the federal fiscal year.

Federal IT Vendors Standing Up Dedicated Advisory Practices

General Dynamics Information Technology (GDIT) launched a digital transformation (DX) consulting practice in 2Q23, leveraging its network of Centers of Excellence and Emerge Labs, as well as the expertise gained from the more than 4,000 research initiatives that have provided its clients actionable market insights on emerging technologies like AI.

 

On the heels of GDIT’s announcement, ManTech acquired Definitive Logic Corp. to accelerate the development of its own digital transformation consultancy, adding 330 employees skilled in digital transformation services like data engineering.

What This Means for You

Leading federal integrators will keep a close eye on their midmarket IT services peers, perhaps ahead of renewed M&A activity by the top-of-the-market firms. There is still the threat of a government shutdown during FFY2024, and top-tier integrators have all factored that into their plans for 2024.

 

Expanding advisory capabilities points not only to the capabilities needs of the vendors that are launching consulting operations but also to the importance of advisory competencies in federal digital transformation.

Conclusion

Technology procurement by federal agencies in 2024 is likely to continue at a brisk pace, as evidenced by expanding outlays for IT initiatives in the Biden administration’s FFY2024 budget across the civilian, defense and intelligence sectors. Several federal systems integrators have also tendered projections for continued robust top-line growth in 2024, even if there is a government shutdown during FFY2024.

 

As such, TBR is confident there is headroom for growth for not only the legacy federal IT vendors but also their smaller, Tier 2 federal integration peers as well as commercially centric technology companies looking to make inroads into the federal space.

 

Subscribe to TBR’s Insights Flight to receive exclusive federal IT services content, including excerpts from our top research and invitations to upcoming TBR Insights Live sessions with our subject-matter experts.

In a recent deep dive for a consulting client, TBR contacted three of the client’s technology partners to get a sense of what they thought about our client and the client’s immediate peers. We spoke with people who were very familiar with the alliance with our client, and we asked:
 

• Who managed the alliance relationship?
• Who decided when to bring our client in on an engagement and under what criteria?
• What did these technology companies think about our client’s ability to innovate and drive new business?

Prior to these conversations, we examined use cases and thought leadership pieces and analyzed what we knew about the three tech companies’ financial performance. We even spoke with customers who engaged our client and the client’s technology partners. The findings reinforced the fundamental elements of a good alliance: know your partner, respect your roles, and make the customer’s needs the center of everything you do together.
 

That’s not to say that we didn’t hear some new and nuanced responses. Among the critical lessons learned: If your partner’s sales people cannot explain what makes you special, you’re losing opportunities. Partners are not obligated or incented to build that knowledge. If you want them to be able to articulate your value proposition, your alliance relationship needs to include training, training and additional training. You cannot believe anyone in your own organization when they say, “Yeah, those guys know us.” You need to ask your partners yourself, at the client-facing level.
 

The Key to Strategic Alliances Lies in a Comprehensive Grasp of Partner Capabilities, Priorities and Incentives

Let’s build on this idea of really knowing your role and your alliance partners’ capabilities. In this messy, evolving ecosystem, as you’re being smart and clearly defining roles among alliance partners engaged with strategic clients, you’re going to run into one of the most vexing challenges seemingly every company faces: understanding what someone else does.

 

Internally, most companies tackle this through knowledge management, an almost always underfunded effort to ensure that employees know what other employees do and that everyone can articulate the company’s mission, capabilities and offerings. The reasons why most knowledge management efforts underwhelm are vast, but the short version comes down to lack of leadership, funding, curating and consequences.

 

In today’s IT ecosystem, vendors absolutely must ensure their mission, capabilities and offerings are well understood by their ecosystem partners. Similar companies have developed stark differences, and every company is spreading into adjacent swim lanes. If you don’t know what your ecosystem partners do, you’re going to underwhelm them (and be forgotten) or realize too late that they’ve been taking your money off the table. It’s almost impossible to overstate how critical a comprehensive understanding of your ecosystem partners’ capabilities, priorities and even incentives is to fully leveraging alliances.

Educating for Success: Elevating Partnerships Through Comprehensive Knowledge Sharing and Strategic Alignment in the Dynamic Technology Ecosystem

They need to keep you up to speed on all their speeds and feeds. In our research, the vendors that are dedicating resources to educating their ecosystem partners on developing portfolios, new offerings and changes in market perceptions and opportunities outperform peers and the IT market as a whole. Your sales people can’t be the only ones who understand your capabilities because they aren’t always the people who are in front of your clients. When your partners’ sales people are selling you, how well do they sell?

 

Everyone gets wrapped up in their own world, and we’re often advising our clients to stay in their own lane and do what they do well. As the technology ecosystem evolves, that’s not enough. Now companies need to be absolutely certain an understanding of their business model and value proposition extends to their alliance partners. As they say, the more you know!

IT Infrastructure Vendors Move From Sustainability Basics to Multivendor Sustainability Tracking

IT infrastructure vendors are moving beyond table stakes sustainability services around asset recycling to more sophisticated offerings that help IT organizations achieve specific goals, such as allocating workloads to optimize emissions or electricity consumption.

 

These offerings will provide significant value to organizations that seek better control over their company’s carbon footprint; however, TBR believes the ability to track sustainability across multivendor tech stacks versus a single brand will ultimately provide greater value to users.

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HPE and Pure Storage Pioneer Sustainability Integration in IT Infrastructure Consumption Services

IT infrastructure-focused sustainability services are evolving to include consultative services on optimizing energy consumption and emissions and, perhaps more importantly, leveraging the management platforms built for “as a Service” solutions to enable new modules focused on analyzing and optimizing infrastructure usage. Hewlett Packard Enterprise (HPE) and Pure Storage were the first among their infrastructure peers to announce sustainability integrations into their management platforms.

 

Pure Storage is using the Energy Savings Visualizer and sustainability assessment tools in its Pure1 platform to offer an energy efficiency SLA for its Storage as a Service (STaaS) offering, Evergreen//One. This SLA provides service credits and remediation services if the watts per tebibyte exceed the guaranteed level.

 

HPE has released a preview of the HPE GreenLake sustainability dashboard, which monitors energy consumption, carbon emissions and electricity costs to generate analysis on infrastructure optimization. HPE also reported that it will leverage its OpsRamp acquisition to expand the sustainability dashboard to include the management of multivendor infrastructure, which TBR believes will be a significant value-add and make the sustainability tools more actionable by enabling them to track the energy consumption of non-HPE hardware.

 

Although Lenovo TruScale’s infrastructure metering was built on measuring power consumption, the company has yet to announce specific sustainability capabilities based on these features. Lenovo’s initial sustainability capabilities have been broader than those of TruScale in scope, such as purchasable carbon credits derived from Sustainable Aviation Fuel (SAF) utilization in the transport of its products. Similarly, Dell Technologies’ APEX console has yet to announce capabilities for optimizing infrastructure usage relative to emissions.