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Cloud leaders seeking to expand reach and limit internal resource investments prefer indirect sales channels

Revenue mix is quickly shifting toward indirect revenue

Across nearly all covered vendors, indirect revenue as a percentage of total revenue is growing faster than any other go-to-market metric. Vendors like Microsoft and Google Cloud even have public targets for 100% partner-attach on every cloud transaction, turning the ecosystem into the primary growth engine rather than a complementary route. At the same time, Amazon Web Services (AWS), Salesforce and ServiceNow let field sellers meet their quotas with partner-sourced or partner-transacted deals, a change that removes the historical tension between direct and channel teams. These developments underscore a consensus among cloud leaders that scale, reach and solution depth increasingly reside outside the walls of the vendor’s own organization.

Several forces explain the shift. First, customers prefer bundled outcomes over raw technology, especially as generative AI (GenAI) and industry-specific regulations complicate deployments. Partners supply integration skills, compliance assurances and managed services that vendors cannot replicate economically with their own staff. Second, marketplace private offers and cloud credits have shortened buying cycles, decreased legal overhead and preserved list-price integrity, making indirect transactions faster and less price-erosive than many direct pursuits. Third, partner economics are attractive to finance chiefs. Paying a rebate equivalent to 3% to 5% of incremental consumption costs far less than hiring, onboarding and retaining another account executive whose compensation may run well above $250,000 annually.

Graph: Cloud Revenue Growth vs Cloud S&M Expense (Source: TBR)

Cloud leaders overwhelmingly shift their go-to-market efforts toward partner-led engagements, investing in rebates and milestone-based incentives to ensure alignment

Different programs implement different models for partner incentives

Cloud vendors now place global and regional IT services firms at the beginning of the deal cycle. These partners work with the customer and vendor account executive early to custom-build solution architectures, rather than waiting for the contract to close. Most programs use tier-based rebates that increase as the partner’s booked revenue crosses fixed thresholds. Cash arrives only after the workload reaches production, shifting delivery risk to the services team while allowing the vendor to keep its own headcount focused on product engineering and cost discipline. The result is shorter sales cycles and larger contract values because implementation details are ironed out early and customer confidence rises.

Each vendor fine-tunes the model differently. Microsoft and ServiceNow both offer joint credit in their field compensation plans, giving partners a transparent path to quota completion and naturally channeling complex transformations toward their clouds. AWS, Oracle and Salesforce take a margin-based route. They use escalating rebates and fee concessions that convert a slice of gross margin into customer-acquisition funding without changing payroll. Google Cloud and SAP occupy the middle ground. Both grant joint credit only after partners pass rigorous capability tests that cover industry focus, workload expertise, and verified proficiency in GenAI delivery. The tighter filter aims to make sure incentives land on engagements that reduce ramp time rather than pad service hours.

The efficiency upside is real, yet it comes with downside risks. Overly strict entry criteria limit geographic reach. Loose standards inflate payouts faster than revenue. To take a balanced approach, most vendors feed live consumption data and customer satisfaction scores into quarterly scorecards that can raise or lower joint credit automatically. A partner that speeds adoption keeps 100% credit toward their quota on future deals. A partner that misses milestones reverts to standard terms until performance improves. Vendors that refine these feedback loops and respond quickly to the data are likely to preserve a cost advantage as AI workloads expand. Maintaining that edge will depend on constant calibration of incentives, clear communication with partners, and disciplined use of real-time data.

Vendor spotlight excerpt

Amazon Web Services’ go-to-market strategy in review

Graph: Amazon Web Services’ Go-to-market Strategy Overview (Source: TBR)

Amazon Web Services’ go-to-market metrics

Graph: Amazon Web Services’ Go-to-market Metrics (Source: TBR)

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Key IT Services Takeaways

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

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

Key Cloud Takeaways

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

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

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

How do IT services vendors view the cloud opportunity?

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

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

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

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

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

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

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

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

Main criteria for selecting digital transformation (DT) services vendors

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

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

Customer recommendations for DT services vendors by region

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

ESIs and acquisitions — strategies that work

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

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

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

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

ESIs and technology partners — ESI perspective

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

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

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

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

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

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While the 5G PCN ecosystem is maturing, it remains underdeveloped compared to older technologies such as Wi-Fi and LTE, slowing the pace of adoption

Robust Wi-Fi and LTE ecosystems, coupled with an underdeveloped 5G-compatible device ecosystem and relatively higher costs, hinder private 5G adoption

The private 5G network market will see robust growth through this decade as a wide range of industries and governments adopt the technology. However, TBR now projects the market will reach $5.3 billion in 2030, down dramatically from our October 2022 forecast of $15 billion in 2030. TBR still believes the private 5G network market will ultimately be several times larger than the projected peak of the private LTE market, but the market is taking much longer to scale than previously expected.

The private 5G network market is challenged by enterprises viewing Wi-Fi and/or LTE as good enough for most non-mission-critical use cases. 5G (including infrastructure as well as endpoint devices and modules) remains far more expensive than Wi-Fi, and enterprises are more comfortable using Wi-Fi; most enterprises choose Wi-Fi as the primary connectivity medium for their private network, with private cellular typically utilized for internet redundancy, backup and failover. Essentially, enterprises have more clarity around LTE and Wi-Fi and are uncertain about 5G PCN ROI, causing them to lean toward existing options.

The limited selection of 5G-compatible endpoint devices (excluding smartphones) remains one of the greatest impediments to private 5G network adoption among enterprises. Ultimately, the device ecosystem for 5G needs to become broader and more dynamic to more closely resemble the device ecosystems for LTE and Wi-Fi and to provide greater selection and lower costs to adopters.

The slow development of the PCN market is partially due to vendor offerings that are not tailored to the enterprise and require trained resources to manage what are effectively scaled-down versions of communication service provider (CSP) RAN infrastructure. However, firms such as Celona are increasingly coming to market with lightweight, Wi-Fi-like PCN solutions that are built for enterprises and do not require specialized labor resources to roll out and manage. Incumbent telecom vendors are also scaling down their offerings to compete with Celona. These innovations will help alleviate this slow development over the course of the forecast.

U.S. will overtake China as the highest-spending country on 5G PCNs, partially due to maturation of the CBRS ecosystem

China has led the market in 5G PCN spend since the market’s inception, but TBR estimates the U.S. will outspend China in 2026. TBR expects the maturing CBRS ecosystem in the U.S. to contribute to growth. Vendors are increasingly coming to market with CBRS-based solutions to meet demand. In September Ericsson debuted Ericsson Private 5G Compact, its scaled-down CBRS-based solution, which followed Nokia’s October 2023 launch of a scaled-down version of its Digital Automation Cloud (DAC) PCN solution called DAC Private Wireless Compact. These solutions are aimed at small and midsize industrial sites, carpeted office environments, and campuses — areas where the traditional private 5G solutions from these vendors would be unnecessarily large and expensive. Ericsson and Nokia are the suppliers for some of the best reference cases for CBRS-based 5G PCN deployments, including Tesla (Ericsson) and Deere & Co. (Nokia) factories. In carpeted enterprises, Celona has made significant inroads, thanks to its lightweight PCN solutions that aim to make PCNs as easy and cost-effective to deploy as Wi-Fi.

5G CBRS momentum should spur growth for minor players in the market. For example, Samsung’s alliance with Amdocs focuses on PCN opportunities that use CBRS spectrum, with Amdocs providing systems integration (SI) in joint engagements. Although DISH has gained minimal traction in PCN thus far, the vendor will benefit from its vast CBRS PAL (priority access license) spectrum licenses, which cover 98% of the U.S. population; DISH won the most CBRS licenses in the 2020 auction.

TBR estimates the private 5G network market will grow at a slower rate than the industry originally expected, reaching $3.5B in 2028, due to persistent ecosystem maturity challenges

Private 5G Network Infrastructure Spend for 2023 through 2028 Estimate (Source: TBR)

TBR Assessment: TBR expects the private 5G market to grow at a more gradual rate and take longer to reach maturity than the industry originally expected as compatible endpoint devices and key 3GPP (3rd Generation Partnership Project) standards are slowly commercialized.

Most non-CSP entities are being selective about where and how to use 5G. The more mission-critical the environment, the more likely 5G will be utilized. In instances where reliability, speed and/or security are the top concerns, companies are prioritizing 5G.

Though enterprise and government interest in 5G remains robust, the timing of deployments is contingent on ROI and the availability of compatible endpoint devices. The fact that Wi-Fi remains a legitimate alternative to cellular technologies for private networks, mitigating some of the need for 5G, is also a headwind.

Private 5G spend will lag private LTE spend through the forecast as the market is hampered by a slowly maturing device ecosystem and lack of certainty around ROI

Global Private Cellular Networks 5G & LTE Spend for 2023 through 2028 Estimate (Source: TBR)

TBR Assessment: TBR expects growth in the private LTE market will slow and then decline during the remainder of the forecast period, but the slowdown will be more than offset by robust growth in private 5G investment as enterprises and governments adopt the next-generation technology for a broad range of use cases.

Private LTE has been in use for over a decade, and there is a robust vendor, device and application ecosystem that underpins this market, which reduces costs. LTE is sufficient in handling many popular and proven use cases for PCN, reducing the need for 5G. Enterprise CIOs who adopt LTE are reassured about achieving ROI, while 5G ROI is unproven.


Another reason LTE remains the dominant technology is that some vendors offer software upgradability of private LTE solutions to 5G. This approach optimizes TCO and entices enterprises to commit to their platforms before they adopt 5G. Due to these dynamics, TBR expects 5G spend to lag LTE spend through the forecast period.

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Organizations will continue to prioritize spending on AI infrastructure

Growth drivers

• Investment in, renewed focus on and adoption of enterprise AI are increasing demand for high-performing infrastructure.
• Private and hybrid cloud deployments increase demand for hyperconverged infrastructure form factors.
• Organizations are prioritizing investments in denser and more energy-efficient infrastructure solutions to make way for AI.
• Edge deployments are creating new-new workload opportunities for OEMs.

Growth inhibitors

• The enterprise and SMB spend environment remains cautious and fragile as trade wars erupt.
• ODMs are largely capturing cloud growth as they produce low-cost, custom, commoditized hardware for hyperscalers.
• Commodity hardware and the popularity of software-defined infrastructure reduce OEMs’ pricing power.
• Heightened demand for InfiniBand threatens traditional Ethernet-based networking solutions providers.

IT Infrastructure Market Forecast for 2024-2029 (Source: TBR)

TBR predicts that the top 5 covered IT infrastructure OEMs will achieve double-digit revenue growth from 2024 to 2029 but their respective market shares will decline

IT Infrastructure Market Share for 2024 and 2029 (Source: TBR)

Despite shipping over $11B in Blackwell products in 4Q24, NVIDIA is racing to increase production to meet the market’s seemingly insatiable demand for AI servers

Within the OEM market, AI server demand continues to be driven primarily by services providers and model builders, but sovereigns are showing increased interest in OEMs’ AI infrastructure solutions, presenting the OEMs with a major opportunity. Additionally, although enterprise demand for on-premises deployments of AI infrastructure remains soft, especially for the most powerful and thereby highest-revenue-generating systems, the industry expects enterprise AI demand will accelerate throughout 2025 and 2026 as customers pursuing tailored AI solutions increasingly transition from the prototyping phase to the deployment phase.

TBR predicts Dell will lead covered vendors in terms of storage revenue growth due in part to increased attached sales opportunities associated with the company’s growing server business

Key takeaways

TBR forecasts the storage market will grow at a 13.4% CAGR from 2024 to 2029 as organizations across a variety of industries invest in modernizing and hybridizing their storage estates to support current and future workloads, including those related to AI. Organizations’ data volumes will continue to grow over the next five years as the rise of AI further underscores the value behind organizations’ proprietary data.

The storage market typically lags trends in the traditional server market, as is presently the case. However, as organizations increasingly transition from prototyping to deploying AI solutions, data management and orchestration has risen toward the top of key customer pain points. Recognizing this, storage OEMs are selling customers on the capabilities of their storage platforms, comprising software, adjacent services and sometimes hardware. Additionally, storage OEMs are forming partnerships with hyperscalers and other ecosystem players, like NVIDIA, to have their storage solutions validated and certified for operability and AI system reference architectures. TBR believes Dell and Hewlett Packard Enterprise (HPE) are well positioned for growth in storage over the next five years due to their strong data management capabilities and increased opportunities around attaching storage sales to server deals.

In 2024 TBR estimates Lenovo overtook NetApp for the third-largest storage market share among covered vendors. The storage market has become more of a priority for Lenovo in recent years due to the segment’s higher margins, evidenced by the company’s recently announced acquisition of Infinidat. TBR forecasts NetApp will outperform Lenovo in five-year storage revenue CAGR, but Lenovo will retain its positioning in the market among covered vendors.

Storage Revenues and Market Share of Top 5 Vendors for 2024 and 2029 (Source: TBR)

IT infrastructure OEMs are expanding manufacturing capabilities in Saudi Arabia

EMEA market changes and vendor activities

Relative to the U.S., European economies have had more difficulty recovering from the pandemic; however, looking ahead to 2029, TBR forecasts covered vendors’ IT infrastructure revenue derived from the EMEA region will grow at a 12.9% CAGR due in large part to AI. While the EMEA market pales in comparison to that of the Americas, TBR believes the region’s strong growth will be driven both by rising AI adoption — especially among sovereigns — as well as rapidly increasing technology and infrastructure investments in countries like Saudi Arabia.

TBR believes HPE is among the best-positioned covered vendors in the EMEA geography. Sovereigns in the region already have a strong working relationship with HPE due to their legacy investments in high-performance computing based on Cray systems, and the company has made some of the strongest commitments among covered vendors to develop infrastructure manufacturing capacity in Saudi Arabia and the rest of the Middle East.