TBR’s Business Insights

Federal IT Spending Trends: Why Growth Is Contracting and Where It Is Shifting

03.30.26

The Trump administration has proposed a double-digit increase in defense spending, which will flow through to IT budgets in the Department of Defense and Intelligence Community, particularly in areas of national security, which will receive top priority. Federal IT acquisition is also slowly pivoting to embrace outcome-based contracting, while the DOD looks to accelerate IT purchasing by adopting new and innovative IT procurement approaches.

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Governance Becomes a Prerequisite for Success with AI

03.30.26

Governance was a recurring theme across content sessions and executive meetings at Mobile World Congress 2026. As telecom operators move from experimentation to operational in AI, creating a corporatewide, centralized framework for data management, model oversight and regulatory compliance is becoming essential. Without clear governance, AI initiatives often remain fragmented across business units, leading to inconsistent outcomes, duplicated efforts and limited enterprise impact.

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New Growth in Consulting Is Emerging from an Unexpected Place: Managed Services

03.18.26

A scaled managed services practice trained in spotting consulting opportunities and armed with AI-enabled solutions will unquestionably win some management consulting market share. More significantly, from TBR’s objective view, is whether the Big Four firms can manage their staffing, brand promise and technology alliances to take advantage of the managed services practices they’ve already built and use those opportunities to return to robust management consulting growth. Maybe, but probably not all four. The next two years will be telling, and TBR expects the existing differences between the Big Four will become even more pronounced.

Skills Shortage Will Challenge the Scaling of Sovereign AI in 2026

02.20.26

AI-related skills will remain scarce across both buyers and ecosystem partners as the rapid pace of innovation and the technical complexity required to enable sovereign AI continue to hinder adoption. These challenges, combined with a lack of clearly defined and compliant use cases among sovereign customers, gaps in sovereign cloud infrastructure availability and steep AI learning curve faced by ecosystem partners, will constrain meaningful investment and implementation of sovereign AI throughout 2026.

PaaS Revenue Will Outpace SaaS Revenue for Cloud Software Vendors

02.17.26

Enterprise customers are prioritizing the modernization of their existing SaaS estates rather than adding new applications, driven by market saturation, accumulated technical debt, and a growing imperative to become AI-ready. As IT buyers shift their focus toward modern platforms, traditional SaaS leaders should expect their PaaS segments to continue significantly outperforming their core SaaS businesses in revenue growth.

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Alliances Will Extend Beyond Core Offerings as AI-driven Sales and Marketing Reshape Ecosystems

02.12.26

IT services companies have their limits, and clients have preferred technology vendors, leading IT services companies to look to alliances to drive new growth. We have seen this pattern before, but in 2026 we will see IT services companies extend those alliances into devices, connectivity and even silicon, requiring a multiparty alliance approach that will strain commercial models, sales strategies and alliance leaders across the ecosystem.

Consulting Will Rebound in 2026

02.10.26

After a period of relative softness, consulting revenues are expected to rebound to high-single- or low-double-digit growth as pervasive uncertainty pushes enterprises to seek external guidance. Demand will be particularly strong around risk mitigation, strategic planning and AI adoption, positioning forward-deployed engineers, supply chain management and people advisory services as leading revenue drivers in 2026.

Bad Debt Expenses Will Rise for CSPs in 2026

02.06.26

In a K-shaped economy that increasingly separates financial winners from losers, the majority of households and businesses on the lower arm of the “K” are under mounting financial strain and are finding it more difficult to pay their bills. As these economic pressures persist, communications service providers (CSPs) should expect bad debt expenses to continue rising, with the potential to meet, or even exceed, levels experienced during the Great Recession.

How Will Advanced AI Impact Pricing, Labor Practices and Client Expectations?

02.05.26

Advanced AI may be front and center in IT services strategy, but execution challenges remain a familiar story. Despite ongoing hype around unlocking new efficiencies and nonlinear growth, IT services firms continue to grapple with the reality of needing labor arbitrage in the short term and meeting client expectations.

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New Solutions Drive New Revenue Streams for Atos’ Manufacturing Clients

02.05.25/by Elitsa Bakalova, Senior Analyst

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.

Federal IT Spending Poised for Another Strong Year in Fiscal 2025

02.04.25/by John Caucis, Senior Analyst

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.

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

02.03.25/by Bozhidar Hristov, Principal Analyst

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.

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B2B Strategic Advantage: Ecosystem Intelligence

01.31.25/by Patrick Heffernan, Practice Manager and Principal Analyst

Vendor consolidation and enterprise optimization of existing digital stacks have compelled IT services companies and consultancies as well as their ecosystem partners to think strategically about who to partner with and how to secure and expand their position within the ecosystem. As a result, aligning business priorities with alliance partners will allow IT services companies and consultancies to develop a more empathetic approach to technology-fatigued buyers. Additionally, understanding pricing and commercial structures backed by common knowledge management programs will elevate the value of joint services and appeal to enterprise buyers’ appreciation of a separation of labor, supported by greater transparency and accountability.

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KPMG Shifts Focus to Legal Services and AI-driven Strategy Consulting

01.28.25/by Bozhidar Hristov, Principal Analyst

Earlier in January news reports surfaced that a subsidiary of KPMG, KPMG Law US, had applied to operate in Arizona under a state program allowing nonlawyers to operate law firms and provide legal services in the state. KPMG is leaning toward legal services and AI-infused strategy consulting offerings to bolster sales as the firm navigates choppy market conditions within core deal advisory.

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Infosys’ Future: Scaling GenAI and SLM Innovation to Drive Growth and Stakeholder Trust

01.21.25/by Bozhidar Hristov, Principal Analyst

Developing a client-ready AI-first portfolio is not a strategy unique to Infosys, but keeping pace with the rapidly evolving generative AI (GenAI) market highlights the company’s appetite for innovation and helps it strengthen stakeholder trust. Over the past 24 months, a large portion of vendor-client discussions focused on experimenting with developing and running large language models (LLMs), often fed with either public or nonessential data. Growing adoption of the technology has introduced the need for developing SLMs that are either function or industry specific.

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What Spectrum Will 6G Use?

01.13.25/by Chris Antlitz, Principal Analyst

The telecom industry continues to struggle with realizing new revenue and deriving ROI from 5G, even after five years of market development. TBR continues to see no solution to this persistent challenge, and with no catalyst on the horizon to change the situation, CSPs’ appetite for and scope of investment in 6G will likely be limited.

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AI Agents: What Are They, and How Will They Impact the AI PC Space in 2025?

01.09.25/by Alek Maxfield, Research Analyst

Over the past several quarters, OEMs have focused on incorporating local AI-powered features into their new PC releases, with initial neural processing unit (NPU)-enabled use cases leveraging AI to further enhance collaboration experiences and extend battery life. However, AI agents take the NPU’s functionality a step further, combining the capabilities of large language models (LLMs) with other resources to partially or fully automate a wide range of tasks, including responding to emails, booking hotel stays, or opening and closing IT help desk tickets.

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AI Buzz Sparks IT Infrastructure Shifts, but Privacy and Strategic Challenges Are Impacting Adoption

12.20.24/by Ben Carbonneau, Senior Data Analyst

The industry enthusiasm surrounding AI has quickly led to shifts in organizations’ strategic priorities and expected investments such as demand for servers. Despite the hype, few organizations have operationalized GenAI to date. Instead, most are focused on overcoming initial barriers to adoption, including understanding the business implications of this new technology frontier.

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GenAI, IT Modernization and Strategic M&A Drive Infrastructure as a Service and Platform as a Service Growth

12.19.24/by Catie Merrill, Senior Analyst

Top hyperscalers Amazon Web Services (AWS) and Microsoft are capturing legacy Oracle and SAP workloads as customers continue to migrate to the cloud to not only outsource their IT operations but also drive lasting business value. Though the geopolitical outlook is increasingly uncertain, we expect customers will continue to prioritize more traditional “lift and shift” migrations, and steps vendors are taking to deliver more integrated solutions could help.

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