Senior Analyst Kelly Lesiczka joins “TBR Talks” host Patrick Heffernan for top takeaways from the KPMG Global Analyst Day 2025 event. In “IT Consulting & Strategy Consulting Drive KPMG’s Growth,” the pair review KPMG’s strategy, including its emphasis on IT and Strategy Consulting, within the context of the firm’s legacy Tax & Audit business model, as well as its position as client zero in implementing and adoption AI across its global operation.
Kelly and Patrick also look at broader trends and analysis she is seeing in TBR’s research on the management consulting space.
TBR Talks is produced by Technology Business Research, Inc.
Edited by Haley Demers
Music by Burty Sounds via Pixabay
Art by Amanda Hamilton Sy
IT Consulting & Strategy Consulting Drive KPMG’s Growth: KPMG Global Analyst Day Debrief with TBR Senior Analyst Kelly Lesiczka
TBR Talks Host Patrick Heffernan: Welcome to TBR Talks: Decoding Strategies and Ecosystems of the Globe’s Top Tech Firms, where we talk business model disruption in the broad technology ecosystem, from management consultancies to systems integrators, hyperscalers to independent software vendors, telecom operators to network and infrastructure vendors and chip manufacturers to value added resellers. We’ll be answering some of the key intelligence questions we’ve heard from executives and business unit leaders among the leading professional IT services and telecom vendors.
Kelly Lesiczka, welcome back to the podcast.
Kelly Lesiczka, TBR Senior Analyst: Thank you.
Patrick: Season 3 now. I know it isn’t that kind of amazing.
Kelly: Yeah, it’s a long time.
Initial thoughts on KPMG Global Analyst Day
Patrick: Yeah, we’re cranking through them. So, we did have a chat with our colleagues Boz and Catie and Alex about the big event that we went to at KPMG’s Lakehouse down in Orlando. You were there as well. You also got to experience the incredible 18-hole mini golf course.
Kelly: *laughs*
Patrick: But other than how impressive the mini golf was, what else did you take away from the event? A couple days long. It was a big one. What did you take away from it?
Kelly: I think it was a good two days. It definitely was structured very well. I really appreciate that AI was isolated to one day, or not necessarily isolated, but it had its own dedicated day because it gave them a chance to really talk about other things that are going on in the firm and really walk through that.
I think one of the stronger messages that I heard was definitely around how they’re trying to be customer zero and really before they’re pushing around AI and bringing a lot of those technologies and new services to their clients, they’re making sure that they know, they can- they understand them. They’re people can move forward with them. I think that was definitely a strong message that was further echoed through the KPMG Velocity platform. That was the internal one. I think that was just a stronger message that they had that further resonated the value for us that that was their new strategy and something that they’re following.
Patrick: I think too, one thing that struck me about that is that when they talked about customer zero, the emphasis was not on just the technology, which is I think what we hear a lot, like we applied this technology to ourselves. It was also on the change management part, like we went through this change management ourselves.
Kelly: Right.
Themes from client stories
Patrick: They also had some good client stories. I don’t know, without saying any of the client names, were there any that sort of, really resonated with you?
Kelly: Yeah, I think, there were a few. I think they all kind of followed their own journey, but I think they all came back to the same idea, around KPMG really understanding the whole problem and not just pushing with the certain solution, but they helped them to evolve along a certain trajectory, kind of. So, they helped them create plans and move along. And I think in a few of them we got to see hints of the Ignition Center, which was also really cool.
Patrick: Right.
Kelly: And to see how they’re impacting their clients’ own employees and how they approach situations, how they’re able to solve problems. So, I think that was really cool because you can think like, oh, you just come into a session, you can brainstorm yourself, but it’s different when you’re pulled out of your own environment and put with all these different things that are designed to inspire you or to help promote thinking and around areas you didn’t even think of before.
KPMG’s global presence
Patrick: Speaking of people from every region. I know it’d be hard to name a country that wasn’t represented at the KPMG event. Except for France. I don’t think there was anyone from France. It’s the one country that- and I shouldn’t say that because maybe somebody was. But do you think that said something about the firm as a whole?
Kelly: Yeah, I definitely think so. I think I interacted with a lot of people from Australia, just coincidentally, and a lot of people from the U.K., but they all move around a lot, too. And it sounds like a lot of them have relocated too. So, it definitely says a lot about the firm, about how they really do operate more globally than perhaps some of their other peers, for sure, as they’re able to bring those people together and also put them in all these different spots.
Patrick: Right.
Kelly: Not just where they originated.
Management consulting longitudinal trends
Patrick: And then if we sort of expand from KPMG itself to the larger management consulting space. So, you’ve been running the management consulting benchmark for a while now. You’ve been looking at PwC and EY and McKinsey and BCG for years. So, I’m curious what you think is sort of- what have been some of the bigger longitudinal changes in management consulting over the last few years and I know one thing that that in thinking about the discussion we were going to have, I know we used to say that technology permeates all of consulting, and that was something sort of, kind of new, five, six, seven, eight, 10 years ago. With GenAI, it’s sort of like that just, you know, that just sort of went right through the roof. You don’t even need to say it anymore, but are there are other sort of longitudinal trends that you think have changed the way you think about management consulting from where you were ten years ago to where you are now.
Kelly: Yeah, I think strategy consulting is an example. We’ve seen a lot of changes there as it kind of tapered off a bit, but I think with using technology, we’ll definitely see a stronger push, I think, around on how you actually use this. Now that we’re moving past just the operational phase of how do we create more efficiency, it’s now how do we actually use this to change our business model? Something that was echoed that we heard a lot over the past few years is how not just clients, but like, our vendors’ clients, they understand that they have to change their business model in order to be successful or they’re just not going to be relevant. And that was something we heard on and on again. And so, I think strategy is a big piece of that. So, how do you change your strategy to align with either technology or either tax benefits. Like how do you make the most of your geographic strategy. So, I think there are a lot of different pieces that we’ll probably see come together, how you actually look at the entire organization and not just one piece of it, for sure.
And then, managed services, I think definitely we’ve seen push a lot more. The names have kind of changed a little bit from what they originated to, but I think a lot of the consultancies are seeing the value within managed services and the benefit for them that they need to really push more in this area and really grow it because there is demand for it. It’s just finding the right balance, whether it be around tax. And then even with the audit side too, what you can do in terms of audit with managed services.
Patrick: Right, right and then back to KPMG for a minute, the audit example that they showed
Kelly: Yeah.
Patrick: It was quite impressive. And true too, that managed services now has become a way to find new consulting opportunities or sort of it’s no longer the old play of you, you know, you do the strategy consulting and then the operations consulting to lead to an implementation to then do a managed services. Now it’ll come right back around with new opportunities. And I think it’s PwC that talks about business model reinvention. And they’ve actually been talking about it for like a year and a half now. And I think, to me I heard a lot of echoes of that at the KPMG event.
Kelly: Yeah.
Patrick: I think KPMG talked about transaction to transformation.
Kelly: Yes. Yeah
Patrick: Which for them interestingly is the transaction is not like the KPMG and the client. It’s the client making an acquisition or a merger or divestiture or whatever. That’s the transaction, which then KPMG helps with that. And then they help with the transformation of the business as well.
Kelly: Yeah.
Patrick: And that kind of advising, that kind of consulting never goes away, right?
Kelly: No. And I think it’s, we saw a bit of a surge year or so ago, and now it’s definitely coming back to how we’re seeing, because people are trying to figure out what they need to do with their business, what makes the most sense in terms of offloading some of those areas that just aren’t relevant for them anymore. And then they’re able to focus on areas that they want to pursue anywhere around technology or, just higher value services. So, I think that’s definitely a good area for them to be in.
Management consulting in the next year
Patrick: So, what’s coming for the next year or so in management consulting, what do you anticipate going into the next- the benchmarks for this year? Because we’ll have one coming up in a couple of months, and then we’ll have one in December as well.
Kelly: I don’t think we’ll see as great of investments as we have in the past in terms of the technology investments like EY was really forthcoming with a lot of those larger tech investments. I don’t think we’ll see quite that scale of investment anymore. I think it’s more focusing on that internal side. Like at the beginning of the pandemic, a lot of the focus was on people and then it was- now it’s more back to business as usual, but I think we’ll see a lot more emphasis on the people. Even just looking at some of the IT services vendors, over this past quarter, the focus on training and really even within the firm and then also outside of the firm, either for somebody or with universities, I think seeing a lot more focus on the people is definitely something we’ll see. Because you need to be able to use these AI tools, to some extent in how rapidly it’s changing the viability of the platforms in terms of adoption. I know for GenAI, we’ve heard from mostly the India-centric vendors that the cost to adopt them is a lot lower now, so I think having those skills is definitely something that they’re going to have to kind of push towards, for sure.
Patrick: Right.
Threats to the traditional management consultancies
Do you think we’ll see- well so we’ve talked about this for years like the idea that the traditional management consultancies, so McKinsey, Bain, BCG, the Big Four firms, Accenture for a while, IBM for a while, Capgemini, you know, in bits and pieces. So those companies have traditionally done management consulting. And we’ve always talked about the threat from the India-centrics or you know the DXCs or the NTTs of the world. Do you think, is that threat ever going to materialize into something real? Are we going to see like a, even a Fujitsu, which is has launched Uvance and has like a consulting practice, do you think we’ll see a challenge to the management consultancies from those firms or no?
Kelly: I think the challenge comes more from other consultancies. Just in terms of looking at the composition of revenue from strategy versus Big Four versus the solutions. So the solutions that IT services, I think, might be worth watching, but I feel like a lot of the other vendors, the IT services ones that are building consulting, it’s more focused. I don’t think it’s quite comparable to the scale or capabilities of the main consultants that we watch. Just thinking about like EY and PwC and that tax, it’s something that those IT services vendors could never really look to compete with.
Patrick: Right.
Kelly: I think they’d have to do something quite large in scale and more aggressive, which would shift their whole strategy. And I’m not sure how well it would go over with their clients anyways.
It’s always something, I think, to keep in mind and watch your peers and what they’re investing in. But I don’t really think the consulting is that directly aligned. It’s, I think it’s more strategic to partner with them as opposed to think of them as a competitor. It’s more of what can we do that’ll be good. I know, I think it was PwC and DXC a long, long time ago, but thinking of- and I know that didn’t really pan out to too much, but I think that kind of structure actually does make sense in theory on what DXC would bring and what PwC would bring, like bring that consulting with those capabilities.
Patrick: Right. So, supposedly EY and Infosys have that kind of relationship now.
Kelly: Yeah.
Dream partnership pairing
Patrick: So, knowing the companies that you know and your coverage of management consulting, your coverage of IT services companies, what would be your like ideal pairing? Like not EY and Infosys, that already exists. But pick another you know, pick one of the Big Four or one of the management consultancies.
Kelly: Yeah.
Patrick: Is it McKinsey and HCLTech?
Kelly: *laughs*
Patrick: Is it? Yeah. I know you laugh when I say that, but I mean, what would be an ideal pairing?
Kelly: I do think HCL was at least one, I mean maybe with PwC or even KPMG, I think. I think the engineering that they bring, and a lot of their other technical expertise is definitely stronger than some of its peers.
Patrick: Right.
Kelly: And that’s something that a lot of the consultancies we’re seeing now are really trying to ramp up. Like PwC for example, I think they had a few engineering acquisitions. So, I think that pairing with that to see what, because HCL’s had it for years and years and they’ve constantly been building it out with more acquisitions. A lot of it’s manufacturing kind of, but just thinking about it in general, the engineering and how they’ve built it out for so many years, showing that heritage and I think working with it definitely can show you what you can actually do with it.
Patrick: Right.
Kelly: And it can help with products or something.
Patrick: And there’s no threat of HCLTech trying to build a consulting practice in any way of a threat to a PwC. Like a PwC/TCS wouldn’t work because TCS has way too much scale and size and could potentially sort of use the opportunity, use the inroads to do their own consulting work. But HCLTech, I can imagine that. Yeah. Yeah. So, all right, so in Season 4 we’ll have another chat and we’ll see whether or not that prediction came true.
Final thoughts
One last question. Back to KPMG. Back to the analyst event at Lakehouse. The same question I asked Boz and Catie and Alex, what was the best part of the event?
Kelly: That’s a good question. I feel like the one-on-ones were really helpful, and I hate to say social hour, because it’s hard to value an event on social hour, but I think the conversations had with a lot of the KPMG people, as you pointed out, they came from all over the place, from all over the world. And so, I think having those conversations with them to get their perspectives on everything within the firm and plus all those external factors that are impacting the firm, was actually really helpful. And then it feeds back into the event and it brings into a new light when you have the value, and then seeing them up on stage too was always nice because they were like, oh, this is what we’re going to talk about. And then listening to them, actually go through that and it’s like, no, like that actually does make sense. And they definitely echoed that overall message and they always came back to it, which was very valuable.
Patrick: Well, that first night was very casual. There was no set dinner. And we ended up chatting with so many KPMG people.
Kelly: Oh yeah, yeah. Right.
Patrick: It was just a much more casual setting. And so, I would say that really set the tone for the whole event, where all the KPMG people were just so open and constantly, I mean, talkative, you know?
Kelly: Yeah.
Patrick: And not in a bad way at all. In a very good way.
Kelly: No, they’re very happy to share, like what they do. And they were very passionate about what they’re doing. You could definitely tell with who they brought.
Patrick: Didn’t you get a hole in one on at least one of the —
Kelly: I did. Yeah.
Patrick: Yeah. There you go. So that was not the highlight?
Kelly: No *laughs*
Patrick: I thought it would be.
Kelly: Yeah. *laughs*
Patrick: Excellent. All right, Kelly, thank you so much. We’ll talk again very soon.
Kelly: Sounds good.
Patrick: Next week I’ll be speaking with TBR Principal Analyst Boz Hristov and Senior Analyst Kelly Lesiczka, about the potential labor pyramid collapse. Don’t forget to send us your key intelligence questions on business strategy, ecosystems, and management consulting through the form in the show notes below. Visit tbri.com to learn how we help tech companies large and small answer these questions with the research, data and analysis my guests bring to this conversation every week.
Once again, I’m your host Patrick Heffernan, Principal Analyst at TBR. Thanks for joining us and see you next week.
TBR Talks: Decoding Strategies and Ecosystems of the Globe’s Top Tech Firms
Join TBR Principal Analyst Patrick Heffernan weekly for conversations on disruptions in the broader technology ecosystem and answers to key intelligence questions TBR analysts hear from executives and business unit leaders among top IT professional services firms, IT vendors, and telecom vendors and operators.
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https://tbri.com/wp-content/uploads/2025/04/kpmg-global-analyst-day-2025-evolving-complex-ecosystems-to-solve-enterprise-transformation-cover-scaled.jpg25602560TBRhttps://tbri.com/wp-content/uploads/2021/09/TBR-Insight-Center-Logo.pngTBR2025-05-02 15:24:492025-05-02 15:24:54IT Consulting & Strategy Consulting Drive KPMG’s Growth: KPMG Global Analyst Day Debrief with TBR Senior Analyst Kelly Lesiczka
Principal Analyst Bozhidar Hristov, Senior Analyst Catie Merrill and Analyst Alex Demeule join “TBR Talks” to share key takeaways top announcements from KPMG’s Global Analyst Day 2025, held in February at KPMG’s global training facility, Lakehouse.
The group also discusses strategies of the leading advisory firm as well as multipartner ecosystem management and co-investment across declared and committed partners, generative AI and data government as a key differentiator, and more.
TBR Talks is produced by Technology Business Research, Inc.
Edited by Haley Demers
Music by Burty Sounds via Pixabay
Art by Amanda Hamilton Sy
KPMG Global Analyst Day 2025: Evolving Complex Ecosystems to Solve Enterprise Transformation
TBR Talks Host Patrick Heffernan: Welcome to TBR Talks: Decoding Strategies and Ecosystems of the Globe’s Top Tech Firms, where we talk business model disruption in the broad technology ecosystem, from management consultancies to systems integrators, hyperscalers to independent software vendors, telecom operators to network and infrastructure vendors and chip manufacturers to value added resellers. We’ll be answering some of the key intelligence questions we’ve heard from executives and business unit leaders among the leading professional IT services and telecom vendors. I’m Patrick Heffernan, Principal Analyst, and today we’ll be talking about KPMG’s Global Analyst Day at Lakehouse with Boz Hristov, Principal Analyst for TBR’s Digital Transformation Practice, Catie Merrill, Senior Analyst for TBR’s Cloud and Software practice, and Alex Demeule, Analyst for TBR’s Cloud and Software practice.
Boz, Catie and Alex, thank you for coming back to the podcast. Season three, very exciting, and I think the first time we’ve done one with four people in the room that I can recall. So, you guys are breaking some new ground here. The four of us, plus our colleague Kelly Lesiczka, were all at KPMG Lakehouse recently for a global analyst summit, which was enormous fun. A couple days, had a really good time. Played little, little mini golf, which was good. Alex, congratulations, won by one stroke. One stroke over me, I’m not going to say how many strokes you had over Catie and Kelly, but anyway.
What I thought we would do today is a little bit different. We’ve done sort of event perspectives, and we’re still going to publish an event perspective on this. I’m sure it’s out there already, but what I wanted to do was just capture some of the quotes that I heard and wrote down and get your reactions to them. So, these are, as you know, when I sit there at these events I to just write down verbatim what somebody said when it hits me as being pretty important. I’m not going to say who said this quote. I’m just going to read the quote, and then I’m going to ask you guys to all react to it.
Many-to-many ecosystem relationships
This first one is about- one of the ecosystem leaders talked about the more than just 1-to-1 alliances, but the many-to-many relationships. And what he said was “we need to show up understanding how these many-to-many relationships work, not working them out ad hoc at clients.” Boz, I’ll make you go first. What do you make of that?
Bozhidar Hristov, TBR Principal Analyst: I would say this resonates a lot with what first of all, we’ve been talking about for the last 18 months, 24 months now, and actually became very loud and clear in the last iteration of our Voice of the Partner report that we published last summer. So, I think it’s all about trust and preparation and investment in skilled resources, strength resources, knowledge management. You know, kind of thinking about that, the ecosystem is growing, and it’s growing in a different way, meaning that you are not just a two-dimensional partner with this- you still are. But you need to think about the implications of the IT architecture of the client. You have the infrastructure, you have the SaaS layer, you have the PaaS layer, you have the data layer. So, all of these are different vendors that you typically interact with on a one-on-one basis. But as clients consolidate their vendor rosters, as clients look to optimize their existing IT spend, they are also looking to optimize and consolidate their suppliers, right? So, for vendors, they need to be very sharp when they show to the client about who are they partnering best with across the IT stack, understanding the client’s IT architecture. So, the notion of like multi-party alliance is exactly that, demonstrating that trust in preparation with joint investments and really trying to get the most out of for the client essentially because clients already have at least three or more vendors that they are interacting with, you know, on the strategy side, on the implementation side, on the managed services side, and then plus a technology vendor or two. So often clients interact with at least, you know, half a dozen vendors. So, as an IT services provider, as a consultancy and trying to position itself as an orchestrator of that ecosystem, you need to make sure you know which vendors are on site and what’s your relationship with those vendors and how deep you can go with them before you even get to the client.
Patrick: So, you’re coming at that from the consultancy, from the KPMG mindset. Catie, how did that resonate with you when you think about it from the software or cloud mindset.
Catie Merrill, TBR Senior Analyst: Sure. So, I think, well to answer your question on the quote, I think it was a testament that KPMG recognized that the opportunity and the money is flowing through the ecosystem. And early on they mentioned building the firm of the future. And of course there’s a lot of moving pieces to that. But one of them that they really hit home was the alliance partners, the tech alliance partners, specifically those seven SaaS and PaaS vendors and maybe you have a different opinion, but I think from some of the peers. Maybe we haven’t seen that kind of emphasis, or at least to the same degree. So that was very compelling. And on the tri-party alliance structure, you know, a recognition that to Boz’s point, to be an orchestrator of the ISVs that may themselves not have the right partnership or go to market with each other. So, you know, KPMG’s role coming in and connecting that with, you know, the system of record in the back end, the actual platform that you’re building on and then the front office. So, all those pieces coming together using that to actually deliver a client outcome.
Patrick: Yeah. And Alex, did you see it similarly? Your coverage is similar to Catie’s, how did that resonate with you?
Alex Demeule, TBR Analyst: Yeah, I think very similarly. You know, the technology ecosystems that have been forming for years and are still forming today as we go into new, different emerging technology areas. Technology ecosystems do matter. There is differentiation there. Sometimes it’s the case where, you know, everyone’s working with everyone, but that’s not always the case. There are instances where there’s favoritism to a certain extent. There’s competitive pressures that lead to that favoritism. And we see integrations in technology ecosystems form sort of around these constraints. And so, as a services firm, understanding that landscape and understanding where that differentiation actually exists versus a more, you know, ubiquitous approach. It’s very important and it’s getting more important.
Patrick: Yeah. And I think for me, one of the things that jumped out was this idea of showing up at the client. And so that implies that you- the preparation that goes into it includes understanding that it’s not just like every other ecosystem, understanding that, you know, it is okay to pick those six or seven you’re going to work with, and then Boz, to your point, like it is about who shows up as the orchestrator who shows up as the one that can wrangle all those technology partners together.
Learning with alliance partners
All right. So, let’s go to another quote and we’re going to stick with alliance partners here. So, the quote was “our alliance partners are learning with us,” either leaning or learning, my notes are not always easy for me to read and it’s my own handwriting, I’ll say leaning “are leaning with us, and understanding solutions must be industry specific.” So, Catie, from your perspective, that is something we that the hyperscalers and the software vendors look to their services and their consultancies for. But is that industry specific where the whole ecosystem is going?
Catie: I think to some extent, yes. I know years ago we covered the trend of industry cloud, and now that’s really morphed into industry AI and I can tell you just on the cloud buyer perspective, industry cloud was really kind of dismissed as like marketing hype. And they didn’t see a lot of value in a quote unquote out of the box industry cloud solution. So, I think in that sense, the value that, you know, a KPMG can provide from that industry perspective, that’s obviously important. I think, you know, it really depends on the vendor. If you look at like a Google Cloud, you know, leading with healthcare and some of their customizations around Vertex. And, you know, KPMG has a big investment in their Google Cloud practice going, versus some other vendors, AWS and maybe some others a little bit more horizontal led. So, I think it really depends on the vendor, but I think we definitely see that level of customization and nuance heading that way.
Patrick: Okay. And Alex, this I think was your first KPMG event, right?
Alex: It was.
Patrick: It was, so for you is that industry emphasis by KPMG, does that sort of resonate with you when you think about-
Alex: Oh yeah.
Patrick: Okay.
Alex: Yeah, absolutely. And like, as Catie just mentioned, with sort of this shift between industry cloud to industry AI, you know, I- because, like, she’s exactly right. You know, we hear around, like, we’re just sort of- it’s more marketing hype than anything else. You know now I’m trying to think about sort of reaction to like industry AI and maybe it’s too early to say whether or not it’ll have that sort of criticism. I feel like, my gut is that it won’t have that criticism because I feel like the power and the- just the data aspect and having domain specific data being in pre-training models on that data, to me it seems like it’s going to be something that is a differentiator and is something that is going to be adding value. I think that right now, maybe it’s too soon to tell, but there’s a lot of money going towards that direction, a lot vendors focusing on building those industry models. So, it’s something that there’s a lot of focus in. And I guess time will tell whether or not that focus ends up being more marketing hype or real differentiating value.
Patrick: But if it’s going to be real differentiating value, a firm like KPMG, that is already having those industry discussions with their partners-
Alex: Absolutely
Patrick: has an advantage. Boz, this was not your first KPMG event-
Boz: No.
Patrick: not by a long shot. Your thoughts on that quote?
Boz: I was just listening to what Catie and Alex were talking about and I’m just thinking about, to Alex’s point about those small language models, right. So, there’s definitely an opportunity. I think there has always been an opportunity for vendors to apply their industry knowledge to their clients, because clients live in the industry. Right. And having this industry specific data will be so important to drive a more targeted discussion and more outcomes-based discussions. And obviously it’s easier to talk to existing clients because they know you, they know the industry. But I think there’s the bulk shift, you know, in the cohort of the technology vendors to think about the industry through a different way, as they build the solutions, as they partner. Obviously, the consultancies like KPMG, bring that layer of specialization, and know it, but aligning from the get-go, from the development of a solution, small language model otherwise. I, you know, with the technology partner, thinking about the industry first, I think it would be so important because it could be- it’s going to be the on the partner-based platform. When you go to split the accelerator with the industry wrapper, or it’s going to be a specific custom model development with industry knowledge with the client data. So, having those industry conversations with the technology partners, I think will be really important from the beginning rather than just being a one blanket statement and say we have XYZ, you know, industry models. Right? You need to be very strategic about how you develop, how you sell it and how you manage it with clients.
Patrick: And if I remember right, there were a few industry specific leaders there, healthcare in particular, at the event, but it would be curious to see a year from now when they do their next analyst summit are there, based on this discussion we’re having now about the importance of industry to their technology partners, will there be more KPMG industry leaders emphasizing the importance of industry, going forward?
Being client zero
So, all right, two more quotes. This one, Alex I’ll start with you. The quote was “we are passionate about being client zero,” what we often call customer zero. But what do you make of that, passionate about being client zero?
Alex: I think that it’s like the exact stance to take right now. And I think that the big example we always talk about, GenAI, you know, what they’re doing to build in-house GenAI capabilities. You know, when we talk about Velocity and Clara, like stuff that’s core to their business, that’s just something that you can point to in the efficiencies that they can kind of get within their own operations. It’s really the approach that needs to be taken. And, you know, as we just talked about change management and I think maybe we’ll be talking about it more. As you’re setting up a strategy behind GenAI change management, if you’ve already gone through that process internally, you’re so much better prepared to go to the client and say, this is how we got our employees engaging with this internally built tool. This is how we did it. And being able to kind of have those best practices dialed from experience, I think makes a world of difference.
Patrick: Yeah. And we’re going to get to change management in the second. But you mentioned Clara and I think I was shocked Boz when I told him after the event that the KPMG Clara, the audit platform demo breakout was my favorite. I really kind of- I dug what they were talking about when it comes to audit, which I have never, ever said in my life. So, Boz what’s your thought on the “passionate about being client zero?”
Boz: Scale. I mean, KPMG, obviously they have a large client base. But the majority of their business comes from large enterprises, right? Obviously they have some mid-size clients as well. The different segments in different countries, jurisdictions, regions, yada yada. But I think because KPMG is a large firm, applying being customer zero, being passionate about it. It’s about understanding how you can apply a technology like that at scale, right? And translating that back to the clients. So, you know that the most important clients are mostly equal to your size.
Patrick: Yeah.
Boz: Talking about scale, you need to be able to have that application and be like more of a apples-to-apples comparison. So for me, being passionate about being customer zero is about scale, demonstrating scale, and ability to manage risk at scale.
Patrick: Yeah, that’s fascinating. I hadn’t thought of it that way. All right. Catie, your thoughts on being passionate about client zero?
Catie: Yeah. Just to follow in, you know, Boz and Alex, I think it’s more just a necessity, but I will say it’s very aligned too with the tech partners doing client zero and implementing their own tech and communicating, you know, value either quantitatively or qualitatively to the clients around GenAI. So, having the partners, it’s another way for the partners to align on delivering the GenAI value to the client.
Patrick: Right. And for the tech partner, scale is everything. So that feeds right into what you’re saying Boz. And also, we’ve had so many conversations about when it comes to GenAI, how hard the leap is from a proof of concept to scale and for KPMG to be able to say, you know, we’re coming in with scale proven because we’re client zero.
Boz: Yeah.
Patrick: So that’s pretty fascinating.
Change management
All right. The last one is in fact change management. And the quote is “the road to value is paved with human behavior and change.” I almost jumped out of my seat when she said this because- to just yell amen, amen, amen. Of course it is. And as we have said for a decade now, the technology is never the problem. The humans are the problem. And change management as you said earlier is really a critical part of this. So, Boz I’ll go back to you to start, “the road to value is paved with human behavior and change.” Obviously, you know what I think about that. How did that quote resonate with you?
Boz: Well, I think if you go back to the previous quotes about the passion of being customer zero, applying change management to itself I think it’s important. But, you know, and that’s another part of the lessons and how you can actually connect with the clients about change management, right. Change management is a core service offering for KPMG and most of the other consultancies that we track here at TBR. But I think we also heard very strong examples of use cases while on site at the event about how KPMG did the change management alongside their clients. So, I think it is probably the hardest of all services any IT services company can do. And not that the companies are incapable of doing it, it’s about how you measure the success of a change management program.
Patrick: Right.
Boz: So that’s the biggest thing. And it’s a good problem to have because you can always come back and continue the change management. It’s like a digital transformation, change management is never ending essentially. So, it’s a good way to think about it. But it also starts with the recognition, that is to your point, it’s not the technology it’s the people that’s the problem.
Patrick: Yeah.
Boz: I think we talked earlier in a different conversation about how with AI, just to continue on that technology, any technology, but the AI specifically right now, GenAI is presenting such a hesitation of all employees and almost feels like it’s sometimes enterprise employees may be sabotaging the adoption. And, you know, it’s hard, you know, because they may be seeing that as a threat to their existing, you know, positions. So, change management, it’s a prerequisite, but it’s also just kind of a necessary evil that has to happen. And without it, you know, no technology will survive, Right?
Patrick: Yeah. So, Catie, KPMG said the road to value is paved with basically change management. Boz just described change management as a necessary evil. So, on the road to value, is there a necessary- how did it resonate with you? What did you think when you heard that?
Catie: Just when I heard that, I mean, we talked to enterprise cloud customers, and I have so many quotes where they’ve actually said like, change management is the hardest part. So, it’s definitely something that we’ve actually seen firsthand in our research. So that’s really the first thing that hit me. And I know there were a lot of customer stories at the event where they talked about where KPMG came in and actually implemented a change management group. Either, you know, after kind of that technology modernization and kind of before the data piece. So, you know, we have a lot of those examples, and just kind of going forward and looking for where AI plays into all this specifically agentic AI and kind of the different types of, you know, the collaborator agents that work with the human and are more context aware and kind of how that will play and more the creative problem solving aspect of it. So, yeah, those are- that’s my thought on that.
Patrick: Excellent, excellent. All right. And Alex, what do you think when you hear than.
Alex: Yeah, I mean I feel like I just have to reiterate what my colleagues have already said because I think they hit the nail on the head. You know, the customer breakout for CVS, the Sherwin Williams CFO, like this idea of legacy employees entrenched in old ways making it hard to progress with these transformational efforts. You know, it’s always a recurring theme. And those two didn’t even involve AI. So, it’s something that’s important with all IT projects. And I do think that with AI, it takes a step up in importance because of the magnitude of the change that it can have on an employee’s day-to-day life. If we continue to go down this path of where we think we’re going. So, it’s something that is going to be very hard, and that’s to be at the user level, and it’s going to be something that has to be tackled by a bunch of different ways. Whether that be at the technology layer. You know, I’ve talked about this with others about, you know, abstracting agents away. And so how are you managing orchestrating agents with as few prompts as possible? So, the end person, the human engaging with these agents, they’re interacting with the agents as little as possible. And that is sort of the technology side of it, teaching the user how to prompt accurately, precisely so that the tool can do what the employee wants it to do. It’s a new area that pretty much everybody’s coming at with a beginners mindset, you know, we’re prompt newbies at this point. Like maybe some of us have taken more courses than others. But, you know, across the economy, it is a beginner mindset when it comes to GenAI and interacting and using GenAI. And that has to be something that’s handled with training and technology consideration.
Patrick: Yeah. And that gets really into the human behavior part of that quote. And I think one thing we heard about during one of the sessions was a transformation that had gone on where they intentionally didn’t use the word transformation. They actually came up with a name for the project. I think it was Leapfrog or something like that, where they talked about- so they didn’t have to use the word transformation, which fits right in with sort of the human behavior part. You want to do this change, but you don’t want to call it change management. You don’t want to call it digital transformation. You want to call it something else.
Final thoughts
So, as always, when we do these wrap-ups from an event that we attend, we always have to talk about either the most fun part of it, the best part, in this case, about Lakehouse as a facility, or the best food. So, I’ll let you guys choose what you want to say, whether there was something that you really loved about Lakehouse., Boz, you’ve been a couple times now, Catie you’ve been a couple times, too, right? Or was this- this is the first time, too, all right. So, what you loved about Lakehouse, or what food you loved or just overall, what was the most fun part of the experience? Boz you’re the most experienced one, so you have to go first.
Boz: Well, unfortunately, I couldn’t spend the entire time there, so that was kind of like my personal kind of like, “oh, I should’ve” you know, “I could have. I should have,” you know, if I could, I mean, I’m sure I’d spend more time, but what I really enjoy out of, like obviously the facility is fantastic, you know, but I really like how, you know, KPMG, gives us a chance to browse around, you know, the gift shop and pick up some swag. So, I definitely appreciate that. You know-
Patrick: As you’re sitting here in your swag.
Boz: As I’m sitting here in one of my swags that I have picked up, you know, from KPMG. So, yeah. So definitely appreciative about that.
Patrick: Nice. Catie, how about you. What was the best part, or the best whatever.
Catie: Yeah. The facility obviously. Great. I was very surprised. I mean, you guys told me how big it was before going in there, but I was very surprised at, you know, the magnitude of the facility and all the amenities. I enjoyed using the gym and playing golf with you guys. So, yeah, it was, all around a great experience.
Patrick: Playing golf, but it was mini golf, So it wasn’t-
Catie: But mini golf.
Patrick: Gotta make it so- We don’t want anyone to mistake that we went to Lakehouse and played nine real holes. Alex?
Alex: For me was the networking with KPMG folk. You know, I like, this is my first KPMG Lakehouse Analyst Day and I’ve been on, you know, Teams calls with a lot of these folks but I’ve never met them in person. And so being able to meet them in person and, you know, get their takes on some of the same questions, I’m thinking of, that was really good. I felt like I walked away feeling like I made some good connections. And, I really enjoyed, you know, talking to them as people and learning about their personal lives a little bit, too.
Patrick: Yeah.
Alex: A lot of really good people over there.
Patrick: Yeah, a lot of really good people. And I’ll say, because this is the podcast that I do all the time, I get to say three things that I loved. One, the one-on-ones, everybody showed up for those one-on-ones, like so tuned in to who we are, like what we care about. Obviously I met a number of them before, but they were, I mean, those one-on-ones were like, let’s go. There was no trying to extract any information. They were just coming right at us with, you know, this is what we think and asking those questions. So that was really good. Another thing I really liked was when one of the KPMG leaders told me that they had read Boz’s most recent piece about the legal acquisition they made. Which was great that they had read it. And then they were like, I don’t know why you even wrote that. It didn’t even matter anyway. So, it’s very dismissive of your piece which I thought was very funny. And then I loved the first night sitting around, having drinks, with it was to your point, Alex talking with Kevin, one of the people that was there, but just sitting around with the KPMG- it was so relaxed. And I also love the fact that I had the Barolo, and by the end of the night, pretty much everybody was having the Barolo. I think we drained all their bottles there of that particular wine. So, it was enormous fun. So, any other last words on the KPMG event before we wrap?
Boz: Looking forward to the next one.
Alex: Yeah. I can’t wait to go back.
Boz: Hopefully I can make it the entire time.
Alex: I love 80-degree heat in the winter.
Patrick: Yeah, true. Leaving Massachusetts for, the warmth of Orlando was nice a couple of weeks ago, so, excellent. Boz. Catie. Alex, thank you very much.
Alex: Thank you.
Patrick: Next week I’ll be speaking with TBR Senior Analyst Kelly Lesiczka about her takeaways from KPMG’s Global Analyst Day and all things Management Consulting. Don’t forget to send us your key intelligence questions on business strategy, ecosystems, and management consulting through the form in the show notes below. Visit tbri.com to learn how we help tech companies large and small answer these questions with the research, data and analysis my guests bring to this conversation every week.
Once again, I’m your host Patrick Heffernan, Principal Analyst at TBR. Thanks for joining us and see you next week.
TBR Talks: Decoding Strategies and Ecosystems of the Globe’s Top Tech Firms
Join TBR Principal Analyst Patrick Heffernan weekly for conversations on disruptions in the broader technology ecosystem and answers to key intelligence questions TBR analysts hear from executives and business unit leaders among top IT professional services firms, IT vendors, and telecom vendors and operators.
“TBR Talks” is available on all major podcast platforms. Subscribe today!
https://tbri.com/wp-content/uploads/2025/04/kpmg-global-analyst-day-2025-evolving-complex-ecosystems-to-solve-enterprise-transformation-cover-scaled.jpg25602560TBRhttps://tbri.com/wp-content/uploads/2021/09/TBR-Insight-Center-Logo.pngTBR2025-04-25 13:51:152025-04-25 13:51:18KPMG Global Analyst Day 2025: Evolving Complex Ecosystems to Solve Enterprise Transformation
Who gets the best talent? Who decides what’s next? Who does the selling? How does everyone know what everyone else is doing? And what role will managed services play?
Despite their digital transformations over the years, TBR is still hearing these five questions from the Big Four — KPMG, EY, PwC and Deloitte — and in this episode of “TBR Talks,” we leverage our recent publications on the firms to address these questions on internal operational challenges of the Big Four consulting firms. From how they decide on talent allocation to selling, regional management and revenue attribution and visibility across often opaque regional management hierarchies, we’re diving in, in this episode.
TBR Talks is produced by Technology Business Research, Inc.
Edited by Haley Demers
Music by Burty Sounds via Pixabay
Art by Amanda Hamilton Sy
The Big 5: Key Intelligence Questions from the Big Four
TBR Talks Host Patrick Heffernan: This is Patrick Heffernan, Principal Analyst at Technology Business Research. And we’re doing a special episode of the podcast today because we released a blog a couple of weeks ago, and we have been getting a lot of questions about it. It’s about the Big Four firms, that’s Deloitte, EY, KPMG and PwC, and the five questions that they constantly struggle with. So, even as we have seen these firms evolving in recent years and really going through some different organizational/structural changes, digitally transforming themselves, they still struggle with five basic questions. And those are; who gets the best talent, decides what’s next, who sells, how everyone in the firm knows what everyone else is doing, and then, of course, what role will managed services play.
And when we talk about who gets the best talent, what we really mean is who decides how they deploy the limited resources they have, the limited talent resources that they have, to clients literally around the world. And when you’re staffing an engagement, who gets to decide who brings which talent to which clients? Managing these competing demands for resources requires exceptional leadership. And as we’ve seen through the years, sometimes it means upending the organizational structure to better suit a new way of deciding who gets the best talent.
That second question, of who decides what’s next? That’s probably been the biggest challenge over the last few years, as all of these firms, member firms that they are with partners that own them, have to at some point make decisions about their own investments, about what technologies, about what offerings, about what capabilities they’re going to invest in. And so, at some point, a group of partners in each firm has to make a business case. They have to pull together resources. They have to convince the firm to bet on something new. Being late to the market, late to the way things are changing, late to the way that their clients’ questions are getting answered, that hurts them. So, of course, does the fear of being too entrenched in selling what you’re selling today to be able to sell what you need to sell tomorrow.
And speaking of selling, who actually does the selling? These are Big Four firms that traditionally have the partners leading on selling their capabilities, on selling to their clients. But technology has permeated everything, even the consulting space. So, technology has become more and more difficult to understand, more and more difficult to sell. So, the question then becomes who actually does sell what the firms can do? Who decides which partners are actually selling to clients? And just for example, software, which a lot of these firms have begun selling off and on in different ways over the years, it’s fundamentally different to sell software than it is to sell services. So, expanding a firm’s capability around software leads to the question who’s going to sell it?
And then speaking of questions within the firm, there’s how does everyone know what everyone else in the firm is doing? Today all the Big Four firms are leveraging AI enabled platforms to enhance internal knowledge management and will likely see significant improvements in that. But the challenges will persist as new offerings, capabilities, use cases, learnings, people constantly refresh and the pool of knowledge which needs to be shared for the Big Four firms to be able to bring their entire selves to a client. I would just note on this pretty much every company we’ve ever spoken with at length struggles with knowledge management.
And then the last part is really maybe unique for the Big Four firms. And that’s the role that managed services is going to play. And when we say managed services, we don’t mean just IT implementation. We mean actually long term, large scale managed services around a particular technology. And in TBR’s view, the role of managed services may prove to be the biggest differentiator among these Big Four firms that are very much alike, over the next five years, even as managing talent in a generative AI and an artificial intelligence world, and keeping pace with partners technologies is going to be a challenge for Big Four leadership.
Final thoughts
So, what does all that mean as a whole? Really if you’re a client, there are other questions that matter more. If you’re a client of a Big Four firm, you need to be asking whether those firms can solve your problem. Do you trust them. You know, those are the basic things. But if you’re a technology partner in the Big Four ecosystem, these questions are really critical to understanding where your alliance partner is headed, where the Big Four firms that you’re partnering with are going next. And do you really understand what they’re bringing to the table and what differentiates them from other Big Four firms and the other IT services companies? And then, of course, if you’re running a Big Four firm, you’re addressing these questions is going to determine your internal organization’s structure. It’s going to determine your strategy for the next five years. So, take a look at that blog and please send us feedback. Let us know what you think. Thanks.
TBR Talks: Decoding Strategies and Ecosystems of the Globe’s Top Tech Firms
Join TBR Principal Analyst Patrick Heffernan weekly for conversations on disruptions in the broader technology ecosystem and answers to key intelligence questions TBR analysts hear from executives and business unit leaders among top IT professional services firms, IT vendors, and telecom vendors and operators.
“TBR Talks” is available on all major podcast platforms. Subscribe today!
https://tbri.com/wp-content/uploads/2025/04/the-big-5-key-intelligence-questions-from-the-big-four-cover-scaled.jpg25602560TBRhttps://tbri.com/wp-content/uploads/2021/09/TBR-Insight-Center-Logo.pngTBR2025-04-23 11:05:162025-04-23 11:06:27The Big 5: Key Intelligence Questions from the Big Four
Research Analyst Alek Maxfield and Senior Analyst Ben Carbonneau of TBR’s hardware research practice share insights into the performance forecasts and emerging solutions of leading semiconductor providers and OEMs.
Additionally, the pair discuss their predictions for the hardware market in 2025, including the possibility that the much-discussed AI PC refresh will be overshadowed by other drivers of enterprise spend.
TBR Talks is produced by Technology Business Research, Inc.
Edited by Haley Demers
Music by Burty Sounds via Pixabay
Art by Amanda Hamilton Sy
AI PC Hype vs. Reality: What 2025 Holds in Store for the PC Market
TBR Talks Host Patrick Heffernan: Welcome to TBR Talks: Decoding Strategies and Ecosystems of the Globe’s Top Tech Firms, where we talk business model disruption in the broad technology ecosystem from management consultancies to systems integrators, hyperscalers to independent software vendors, telecom operators to network and infrastructure vendors and chip manufacturers to value added resellers. We’ll be answering some of the key intelligence questions we’ve heard from executives and business unit leaders among the leading professional IT services and telecom vendors.
I’m Patrick Heffernan, Principal Analyst, and today we’ll be talking about 2025 predictions for AI PCs with Ben Carbonneau, Senior Analyst for TBR’s IT Infrastructure practice, and Alek Maxfield, Research Analyst for TBR’s Devices practice.
Analyst’s coverage
All right, Ben, Alek, gentlemen, thank you very much for coming in today. Being on this podcast, I thought we might start with an overview of your portfolios. I’ve done this podcast now, this is, I think season three. I know my portfolio TBR really well. I know the companies that my practice covers, but I’m not entirely sure I know the companies that you guys cover. I probably know them, but I don’t know which ones fall into which practice. So, if you could maybe just walk through, who do you cover? Alek, who do you cover, Ben? And then we’ll jump into some of the questions I have about your predictions for this space going forward.
Ben Carbonneau, TBR Senior Analyst: Sure. I can lead off this question. So, our Devices and our IT infrastructure practices are kind of organized under one broader practice. I think of it more as a hardware practice, where my coverage is mostly IT infrastructure focused, covering companies like Dell Technologies, HPE, Lenovo, Super Micro, companies like those infrastructure providers of compute for the data center, storage and networking. And then Alek also covers jointly Dell and Lenovo from a device perspective as well as some other companies. So, Alek if you want to elaborate on that.
Alek Maxfield, TBR Research Analyst: Yeah, exactly. So, our overlap is that Dell and Lenovo where they’ve got the IT infrastructure side as well as the devices side, and then the ones where I’m sort of, acting as the primary author, would be Apple, as well as HP Inc.
Patrick: Okay. Yeah. And so, that’s interesting that you’ve got that overlap because we have something similar in other practices where we look at SAP very closely from the services side, but of course we don’t cover SAP the way that the Software practice does. So, all in all, it’s, I think that my experience of being here in TBR longer than you two, certainly, is that we’re increasingly doing more sort of cross practice stuff, breaking down a lot of the silos.
AI PC nomenclature
So, I want to get into the predictions document that you released at the end of last year, looking into 2025 and a couple of things that jumped out at me. One was you stated pretty clearly that- and what we’re going to talk about primarily are AI PC. So artificial intelligence, do you, do you call it like artificial intelligence enabled PCs or embedded PCs, or what’s sort of the right way to think about it?
Alek: So, that’s something that has come up a lot over the last year since December 2023 when Intel put out their first sort of line up with the chips that were kind of creating this new AI PCusbsegment. So, AI PC is a little bit of a loose definition, I think, the loosest possible definition. And then you can specify within it, but the loose as possible definition is a PC with that neural processing unit. So that’s sort of that heterogenous processing aspect where there’s not just the CPU and the GPU, there’s an additional- the NPU specifically for those AI tasks.
Patrick: Okay.
Alek: So, that’s kind of where the AI PC thing comes in.
Ben: And I would only just add to that. I think you hit the nail on the head with the inclusion of the neural processing unit on those AI PC chips. So as PC silicon has evolved kind of first it was mostly CPU centric. But now at the heart of almost all PCs are what we call a system on a chip. And that integrates multiple different processing units onto one piece of silicon die and that would be a CPU, a GPU, and a NPU. So that is kind of what we’re thinking of at TBR, when we define AI PC, it’s something that features one of these AI PC SoCs. So, I think another important distinction to make is that AI workloads aren’t new, obviously, with the release of ChatGPT, you know, we hear AI more and more and marketing language. And I think, you know, a lot of the OEM is would like you to think that this is a brand new category, but really AI enabled workloads have been possible on PCs, leveraging GPUs, for gaming or professional visualization workloads from the likes of Nvidia for several, several years. And I think now a really good metric that I like to look at is, you know, while the NPU does enable some of these lighter workloads, and I think really the value proposition behind the NPU is energy efficiency. So, this handles things like video blurring and audio suppression, some of the heavier workloads like model fine tuning, those are going to be taking place on Nvidia GPUs. And a good, little number here is if you’re kind of a computer nerd like Alek and I, we follow TOPS, which is trillions of operations per second. And it’s an AI metric for performance. I think to be considered in Copilot+ PC, which a lot of these new AI pieces are. The NPU has to be able to do 40 TOPS performance alone. And that is in contrast to, I think Nvidia’s newest RTX GeForce 4090 GPU for PCs, which does 1321 TOPS. So it’s not really comparable in the sense of total workload performance, but really just kind of what the NPU is designed to do, which is handle those more pervasive background AI tasks.
Patrick: And in the broad scene of technology, it kind of makes sense that you would have, I mean, every single smaller piece of the PC or the tablet or the whatever, even the phone is always going to be a smaller amount of compute power than the mainframe, so that totally makes sense. But that is a huge difference between 40 and what’d you say 1300?
Ben: 1300. Yeah.
Expectation recalibration
Patrick: Yeah. So now that we know what we’re talking about with respect to AI PC’s and I like that the definition can be a little fuzzy. You stated though, in your predictions document, that the AI PC OEMs misjudged the market, thinking that new AI PCs would drive a refresh cycle. Do you think those OEMs have sort of fully recalibrated their expectations now? Do you think they see what you’re seeing, which is that slow ramp up to adoption that’s dependent on other ecosystems? Or are they still do you think they’re still betting on that hard charging refresh cycle? Where are we right now.
Alek: Yeah, I think they’ve definitely tempered their expectations over time because I think when we were first seeing AI PC kind of emerging as that new product category, the proliferation of the AI PC was sort of at the forefront of what was going to be driving the next refresh cycle. And they’re definitely still mentioning it, and they definitely see it as one of the factors. But I think right now it’s sort of the least of three important factors, which are, huge aging install base where those commercial PCs are going to have to be replaced regardless of anything else. The end of Windows 10 support, which is going to be- it’s currently set for October 2025. And then the last aspect is the kind of leaps that they’re making in the technology in AI PC and how they’re sort of creating experiences to drive adoption of the AI PC. So, it’s definitely still one of the factors, but I think it’s sort of been- they pulled back a little bit from it being THE factor.
Business model changes?
Patrick: So, it’s obsolescence and obsolescence are driving the first two. And then really it’s the new stuff is going to latch on to that. Yeah, that makes sense. And so, when I think about them having to recalibrate does that- how much- does it change their business model at all in terms of how they’re investing. Or is it sort of we were going to make those investments in bringing out this new technology anyway, investments both in the technology itself, but then also in like the go to market and the, you know, the sort of selling it. Has that changed at all or are they sort of continuing down that same path?
Alek: I think, that was something that was actually really interesting. I think I kind of get what you’re getting at where, I think Dell was one of the companies that was really interesting to look at last quarter because, just recently in January, they had sort of a refresh of their whole portfolio where it’s AI PC focused, but they were conspicuous silent on AI PCs in 3Q24. Where they were kind of, I think they were modifying their sort of go to market timing a little bit because they see the refresh cycle and AI PC adoption as being pushed forward. They were kind of trying to capitalize a little bit later, kind of seeing the writing on the wall in terms of that sort of cycle being pushed out.
Co-opetition
Patrick: All right, that makes sense. And that actually explains why in reading the predictions document, you highlighted not Dell, but actually HP and Lenovo more. And one of the questions I had on that was you talked about new offerings and you said these companies I’m going to quote here, “will continue to position these agents as complements to Microsoft’s Copilot+ rather than replacements. As they will shy away from both attempting to compete with Copilot+ and other cloud-based offerings, and from alienating Microsoft, a vital partner when it comes to AI.” So, when I read that, it strikes me as such a clear example of co-opetition vendors having to compete and cooperate at the same time. Microsoft has done that its entire life of Microsoft. That’s who they are, but HP and Lenovo may be not as well versed at or well-practiced at that co-opetition. So, are they going to be able to manage? Because doing that requires managing your alliances, your ecosystem, your go to market, all those challenges around how you position yourself in co-opetition. So, when you think about HP and Lenovo, are those companies ready for that kind of environment? Are they going to be able to succeed in that kind of environment?
Alek: I think so. I think we kind of see it as sort of an extension of what they’ve done already with the Windows side of things, where we have the PC OEMs and they obviously have to work in tandem with Windows, where, for example, there will be things like Windows Defender, is the Windows proprietary security features.
Patrick: Right.
Alek: And then, you know, the OEMs have their own security sets that sort of work alongside that. So, I think it’s going to be kind of an expansion of that.
Patrick: Right, that’s interesting. So, and that’s an area where they have been doing that forever and they’re not new to the game of doing cybersecurity, they’ve been for a long time embedding and enabling cybersecurity alongside Microsoft. But at the same time they’re competing with them. So, Dell in particular, I think of as having a really robust set of cybersecurity offerings.
Alek: Yeah. Exactly.
Advisory offerings
Patrick: Okay. All right. Yeah. That makes a ton of sense. So, you also mentioned in the predictions, I’m going to quote again, “OEMs will always focus on the development and delivery of advisory services that help organizations identify how they can maximize their ROI when purchasing AI PCs.” I have to admit, I read the whole thing. That’s the first thing that jumped out at me. I know this is the third question and the second time I’m quoting, but that word advisory for me just sets off alarms because maximizing ROI when buying AI PCs, that can mean so many things. It can mean business model changes, efficiency through organizational changes, things that consultancies typically do. It can also mean staying very much within the lanes of what is the value you’re going to get, or how can you optimize the value in this particular purchase or in this particular set of purchases? Some OEMs are very good at staying in that lane. Other OEMs, in my experience, have a tendency to want to wander into the business side of things and into the business consulting side of things. So, when you think about the companies you cover and this very much goes to both of you, do you anticipate the advisory side of their offerings expanding as they expand how much they’re selling AI PC’s, how much their portfolio expands? Does the advisory part expand with it? And I’m highly biased when I ask that question because I think it shouldn’t. I think the companies that do well are the ones that stay in their own lane. But if there’s the opportunity there and they would be leaving money on the table for a consultancy, maybe they’re not going to do that. So where do you come down on how this is going to all play out?
Alek: I think really kind of your last point was sort of what my thinking was on it, where they don’t have any interest in leaving the money on the table in these situations. And also, there’s been this huge push, you know, over the past several quarters, and it’s just going to continue over the next, you know, several years where companies are really focused on increasing their services businesses. You know, just because hardware is a tough market.
Patrick: It is.
Alek: PC hardware is a really tough market. So, they’re definitely going to be trying to I think, increase their own services capabilities to sort of push-
Patrick: Services is a tough market too,
Alek: That’s true. That’s true.
Patrick: It’s dependent so much on people and permission and hardware companies traditionally have gotten permission through the things that people actually- the physical things that you’re buying, and people has not been the top priority for hardware companies.
Ben: Sure. Yeah. So from my perspective, I see kind of more of that advisory piece as it relates to these AI deals and engagements more being kind of like, if I think of it and I’m the OEM, I think of it more in my cost of sales rather than something that I’m explicitly offering to gain revenue. I think it’s just a way- I think especially for PCs like Alek was alluding to, obviously a commoditized market. You know, PC OWMs are hoping that maybe it won’t be the case of the AI PC. I think it will continue to be a commoditized market. So, they need to offer these services to bolster their margins and whether they’re really gaining any extra revenue dollars from these advisory services, I think is less to the point. And more of the point is just kind of increasing the depth of the engagement with the customer to sell those things that they’re good at, which are like support services.
Patrick: Right?
Ben: You know, not those advisory pieces, but I think almost and I kind of tie it back to, you know, what HP and Lenovo are offering with HP Companion, and Lenovo AI Now, those two AI agents. It’s really kind of having these complementary adjacent offerings in their portfolio to be able to try to differentiate themselves from the other competitor. When really, you know, who knows? Do they really think these are going to be big consumption drivers? I don’t think that they’re going to be super differentiated like advisory services. Again, you know, these are hardware OEMs. They’re not skilled in the people business. Right.
Patrick: Right.
Ben: So, I think they understand that. But by having these offerings and being able to talk about them in a discussion, I think it just helps their sales motion with a deeper engagement, whether the services wind up getting delivered, or the AI agents wind up actually being used over Copilot.
Patrick: Yeah. I’m glad you said that, because in the predictions document, you talk about how it’s going to be very hard to differentiate. And services might be an area where they can do that. And I read that and I was skeptical for two reasons. One, differentiation is almost always impossible. It really is sort of a holy grail and sometimes a holy grail that is too much effort and is wasted trying to reach it. But then I was skeptical that services could actually be where a hardware OEM could come and do that. But I think I see something here where they’re not doing it for the revenue so much as they’re doing for the retention. They want to hold on to those clients. They want people to get locked into buying their equipment, their stuff. And actually, that is something that services companies, that’s the most important metric of their own, you know, how they’re evaluating their own success is client retention. And so, if they can latch onto that as part of what their services do for them, then they actually will- the differentiation will come simply through the “we hold on to our clients.” It’s going to be an interesting space to watch.
Changes from GenAI
So, I got to ask, you know, the sort of this time of year- all the questions around generative AI and thinking about what’s coming. And I’m curious, and this is a not an easy question, I understand, but put yourself in December of this year, December of 2025, what are you going to look back and say, this is the development that I expected to happen, and I’m glad it did, or this is what came out of nowhere and I’m surprised by it. Or this is the way that we’re talking about generative AI now that was different from where we were at the beginning of this year in January. Like, what’s the biggest change? I guess in a long way of saying and giving you time to think, what’s the biggest change that’s going to come because of generative AI in your particular space? Or maybe more broadly across the ecosystem?
Ben: Personally, for me you know, with respect to devices specifically, I think it’ll be changes in the adoption of some of these AI agents. So, I know that, for instance, Copilot+, one of the main features that Microsoft is touting is recall, and the ongoing joke kind of in the devices space is that recall keeps being recalled. So, I think it went out just a few months ago to some of the Windows Insiders. I think it’ll be interesting to see adoption of kind of some of these more almost seemingly invasive technologies like Microsoft Recall and how that will be received by the public. And then how that might drive adoption. I think another thing, with respect to AI PCs is we always hear that refresh, you know, that third factor, like Alek was saying, AI PCs being a driver of refresh is really dependent on killer apps being developed.
Patrick: Yeah.
Ben: So, you know, there’s a lot of investment going toward ISVs, whether that’s from some of the silicon vendors or from the PC OEMs and developing applications that leverage the NPU. But personally, it’s my take that I don’t think there will be any definitive killer applications for the AI PC. And I think this just ties back to that 40+ TOPS versus 1321 TOPS thing we’re talking about at the top.
Patrick: Right, right.
Ben: So, I think the NPU’s value is really in extending battery life as the chip can be more efficient for certain workloads than the GPU. But enabling a net new killer application, I personally don’t see that happening.
Patrick: Okay.
Ben: So, in December, I’ll be eager to see if I’m eating my words, or if I was-
Patrick: It’s sometimes a harder prediction to make that something’s not going to happen. So. Yeah, Alek anything from you on this one?
Alek: Maybe not this December, but next December. I think something that is interesting to me is like, how much of the increasing AI PC adoption is going to be because people are going out of their way to buy AI PCs, because they want the AI PC specific features, or how much of it is just going to be the consequence of, “well, I need to refresh my PC anyway because I’ve had it for four years and all the PCs in this price bracket or whatever that I’m looking for, just have an NPU” regardless of whether you really want it or need it or not. And how much- because the whole thing is, you know, we’re going to have however many percent of the total PC shipments that go out are going to be AI PCs by this time. And it’s like, maybe this is something that you can’t really know, and they’re not really- the OEMs aren’t going to say this, but I think that there is sort of that dynamic that I’ll be watching where it’s, you know, how much is it really that they’re sort of driving this great interest in the AI PC and how much of it is a consequence of they’re just stuffing their portfolios with AI PCs?
Patrick: It’s just baked in. Right, right. Yeah.
Energy considerations
How about one last question. Energy. You touched on briefly in the piece and then, you know, I’ve got an interest in it. Because there is that concern, that huge concern in our broader generative AI predictions piece, we talked about energy quite a bit and the concern that the demand for energy around generative AI. And with an AI PC, is it alleviated because you’re only at 40 TOPS. You’re not at 1300 TOPS? But I really honestly don’t know. So, what is the long-term play around energy with respect to AI PCs? Do they take more energy? Do they spin faster, therefore they require more.
Ben: To me, I think, that runs in parallel with kind of what I see in the infrastructure market. If I just think of the PC as an edge device. I think, you know, what we’ve seen over the past several years, there’s more and more data being collected and processed by organizations, and more of more of that is happening at the edge. I think there’s always that, you know, go to the cloud or repatriate from the cloud. That’s always going to be, kind of a cyclical thing based on costs. But I think that as more AI processing happens at the edge, there’s definitely, a possibility that it does save that energy with less being sent up to the cloud, processed in the cloud, and being sent back to back to the core data center.
Patrick: Right
Ben: So, less data transmissions and more AI processing at the edge, I think does have- you know, is possibly something that will conserve energy in the long run.
Final thoughts
Patrick: Yeah. Well, I hope you’re right, because I think that’s one of my biggest concerns. So excellent. Gentlemen, this was so much fun. Really enjoyed it. And, we’ll have another chat if not in December- or if not before that, certainly in December. So we can find out whether we were right or wrong. Thank you guys.
Alek: Awesome. Thank you.
Patrick: Next week, I’ll be speaking with TBR Principal Analyst Boz Hristov and Senior Analyst Kelly Lesiczka about the potential labor pyramid collapse. Don’t forget to send us your key intelligence questions on business strategy, ecosystems, and management consulting through the form in the show notes below. Visit tbri.com to learn how we help tech companies large and small answer these questions with the research, data, and analysis my guests bring to this conversation every week.
Once again, I’m your host Patrick Heffernan, Principal Analyst at TBR. Thanks for joining us and see you next week.
TBR Talks: Decoding Strategies and Ecosystems of the Globe’s Top Tech Firms
Join TBR Principal Analyst Patrick Heffernan weekly for conversations on disruptions in the broader technology ecosystem and answers to key intelligence questions TBR analysts hear from executives and business unit leaders among top IT professional services firms, IT vendors, and telecom vendors and operators.
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https://tbri.com/wp-content/uploads/2025/04/2025-genai-predictions-for-it-insiders-cover-scaled.jpg25602560TBRhttps://tbri.com/wp-content/uploads/2021/09/TBR-Insight-Center-Logo.pngTBR2025-04-21 11:04:422025-04-21 11:04:46AI PC Hype vs. Reality: What 2025 Holds in Store for the PC Market
How are research firms, including TBR, and market and competitive intelligence groups within technology vendors using powerful new generative AI (GenAI) tools?
In this episode of TBR Talks, TBR Senior Vice President Dan Demers joins Patrick to discuss how global systems integrators, telecom vendors, hyperscalers and others are deploying GenAI internally to improve operations as well as how they are delivering GenAI solutions to enterprises across the global ecosystem.
TBR Talks is produced by Technology Business Research, Inc.
Edited by Haley Demers
Music by Burty Sounds via Pixabay
Art by Amanda Hamilton Sy
2025 GenAI Predictions for IT Insiders
TBR Talks Host Patrick Heffernan: Welcome to TBR Talks: Decoding Strategies and Ecosystems of the Globe’s Top Tech Firms, where we talk business model disruption in the broad technology ecosystem from management consultancies to systems integrators, hyperscalers to independent software vendors, telecom operators to network and infrastructure vendors and chip manufacturers to value added resellers. We’ll be answering some of the key intelligence questions we’ve heard from executives and business unit leaders among the leading professional IT services and telecom vendors.
I’m Patrick Heffernan, Principal Analyst, and today we’ll be talking about 2025 predictions for GenAI with Dan Demers, Senior Vice President of sales and marketing.
Evolving GenAI questions
Dan, thank you so much for being on the podcast. Always good to have a chat, I know we had a really good conversation last season. And what I want to start off with this season is talking about what’s changed around generative AI. And I want to ask you, particularly because of your role here at TBR, you talk to clients across the entire spectrum. So, consultancies, IT services companies, telecom vendors, infrastructure OEMs, cloud everybody. So, you hear their questions and I’m curious when you look back on the last year and think about generative AI, how have those questions changed?
Dan Demers, TBR Senior Vice President: Well, thanks for having me, Patrick. It’s a pleasure to be here. Yeah. Interesting question, the way that you frame it. So being one of the leading advocates for TBR out in the marketplace, I get to travel, I get to travel with you, other analysts, and I do speak with front line intelligence folks inside all those companies as well as executives. And I think you can go back about two, maybe two and a half years now where generative AI, ChatGPT everything really started to break. And we immediately got, I would classify it as kind of two sets of questions. Because TBR is known as a company that can dive into the operational performance of these technology companies, people come to us and ask for an operational breakdown. So, companies were asking us if we’re going to compete against Google, against Dell, against Microsoft, against pick the company, they’re asking us what is their customer zero approach to GenAI. So, we immediately began to get questions, what are you hearing about? And can you share anything about what are these companies doing internally? And simultaneous to that, as they were looking at internal adoption of agentic AI, generative AI, they were trying to understand what are the emerging use cases, what are people putting out there from an experimental, a developmental standpoint? What kinds of proofs of concept were people baking? And as soon as those conversations around those early stage deployments, we immediately started to get commissioned to do primary based research in looking at what are the paid POCs. It immediately- the entire explosion of the technology and the adoption of the technology was accelerated. And we were getting questions week after week of the entire acceleration of that adoption, as far as what are the OEMs doing for infrastructure here? What are the SIs doing for integration and digital transformation, and how are they using this with S/4Hana migration? All of the questions that we get around every other aspect of technology.
Patrick: Right.
Dan: You could almost guess that they were going to layer in so what does that mean for GenAI? What does that mean for artificial intelligence, machine learning, robotic process automation, how is that being implemented.
So, it really became two paths. What are people doing internally? How are they gaining efficiencies? I mean, heck, we had a long conversation at the beginning of last year about how the entire labor pyramid was going to collapse.
Patrick: Correct.
Dan: And how- and I think we’ve seen that
Patrick: Yes.
Dan: There’s been significant- your prediction was accurate. The reductions in force, the optimizations, whatever people want to call it. There were highly profitable companies that shed headcount in ways that, I’m sure for the folks who were unfortunately let go, didn’t make sense to them, but at a super high level inside those organizations, they had to stay in front of the next company on Wall Street to make hard cuts to optimize their labor pyramids to ensure that they were automating what could be automated, that they were on that bleeding edge of automation so that no one else could get in front of them.
Language models and TBR data
All of which leads me to my second question, because now we’re talking about language models, which 3 or 4 or 5 years ago, neither of us knew what a large language model or a small language model was. Now we talk about them all the time. And our clients are using our stuff in their models.
Dan: Yes.
Patrick: Can you talk a little bit about how that flip switched and then what, you know, what we’re going to see going forward in 2025 with that.
Dan: Well, I think it’s to the point about a discrete, defined small language model. We were approached, right after the wave of adoption of these ChatGPT-like tools by a handful of our customers, the majority but not all, the majority of them in the advisory, integration, professional services space. And they sought license to ingest in a, you know, a private environment in their own environment, our data, both our qualitative and quantitative, in a discrete small language model. And they wanted to begin to understand what licensure would look like, how they could access, what kinds of API feeds, what kinds of security protocols. And then we quickly began to explore and discuss the kinds of limitations of what a generative AI model could do with our proprietary intellectual property. Not knowing necessarily what our immediate peers were doing with these customers, but you can start to discern the kinds of questions we’re being asked and the ways in which they’re seeking to commercialize that engagement. Everyone recognized that is a value to that, and there’s very, very complex technologies, blockchain ledgers and, you know, credits and bits and pushes and pulls, versus an all you can eat, easy to process, easy to manage model.
So, we very early on, in one of the very first firms that started to do this internally, as they were building their own series of small language models, and without getting into anything confidential, proprietary, an array of models that in an appropriate way communicated in such a manner as to maintain the hygienic quality of each distinct model, but yet aggregate it up into a summarization tool and a generative tool in certain respects. And so, what we’re seeing is, again, we’re engaging commercially with a number of these advisory firms and other firms in the IT services space, in the IT infrastructure space, looking at how our- the key things that I remember them stating, we’re seeking well-architected, trusted, clean data, ideally propriety data. Anybody and everybody can crawl what’s available. And there’s, you know, various legal and ethical questions coming out on information that’s in the public domain, information that’s available publicly but isn’t public domain information. Versus a trusted source where they could enshrine licensed rights that their legal team was comfortable with. And so early on, we made as easy a tool to work with a these firms are able to a weekly basis, cache our entire live database. They can vet new data from old data. So, they have in their secure instance, of an SLM of TBR, and they’re able to crawl that with the appropriate licensure where we’re comfortable with how that’s established. And for us, we preferred it to be a simple model, versus these kinds of credits in blockchain ledgers and very advanced technology that in many ways duplicates the cost structure of public cloud. And I think we’ve seen the ease with which people can migrate workloads to public cloud, but then they get these bills and they’re scratching their heads saying, “I was told this would be so much cheaper.” So instead of trying to build this ever-spinning faster needle and meter of fee, TBR has decided early on let’s be the easy partner to work with. So, we do flat rate, it’s push pull as many times as you want, as many calls as you want, and we grant licenses so that our clients who have these tools, they can feel comfortable using our data, using our analysis as either a generative output of our SLM or as a combined output of an aggregation of other SLMs, and they’re able to use it internally, externally, to their heart’s content. And we’re seeing for TBR an absolute increase in the utilization of our data and analysis, because we’re seen as a vendor that’s not going to have that meter spinning and spinning and spinning. And so those responsible for the for the bill realize, well, at least we don’t have to gate or meet or restrict the TBR SLM in that case. So, it’s a really interesting I think, evolution.
things that they can find in the open market. And it’s shortcuts, it’s helping them get faster, it’s helping them be more creative. It’s decreasing the amount of time to build these sorts of mundane lists that oftentimes take hours, and, you know, these tools can do it in a minute. But it’s tapping into what’s publicly available. And what we’re realizing is, even if our analysts begin to explore how they can collect different public sources of information so that they have an easy place to work from, we get relied on because our analysis and our data is- the core is proprietary. You can’t get it publicly. And I know that’s what, when a firm that’s using us as, we are their vendor, they’re using internal data sources. They’re using, I can only imagine other third-party data providers, they’re using us. And it’s that understanding that, sure, this language model is out there, you know, cruising sesamestreet.com, you know, it’s getting information from every source.
Patrick: Right.
Dan: But then there’s that, as they said, trusted, clean, well-architected data that can’t be found anywhere else. So, I think that’s going to be a really strong place for enterprises to figure out how to play, for those advisory led firms who have the risk and compliance and the governance strength to be able to help design that. And then ultimately for data providers no longer being able to just, you know, artfully reproduce what’s publicly available, but to genuinely produce meaningful, proprietary, impossible to get elsewhere analysis and data that’s going to prove to be invaluable.
Patrick: From a trusted source, I think that’s the most important piece of it, because when I look at it, not from the TBR commercial terms or from the ease of doing business perspective, but from the how is TBR’s data going to be used in the real world? How is going to be used by our clients? What are the challenges that they’ve already run into that we could only make worse if we don’t do it right, but we can make better if we do it right. And because it’s a trusted source, and like you said, because it’s proprietary, they can’t get it from anywhere else, it’s coming to them as a trusted source. I keep coming back to that because the biggest stumbling block to faster adoption of generative AI solutions is data; is data orchestration, data cleansing, data management, and all of that. And so, when it’s coming from a trusted source, you immediately check all those boxes right away. And so not only is it the easier to work with commercial terms, it’s also the data that’s trusted from a trusted source. And that makes such a huge difference.
Dan: Absolutely
Use cases
Patrick: I’m curious too. So, the other thing, not only do you hear questions, but you do hear use cases. You do hear some wild stories about- well, I’m guessing some of them are wild, about what clients are actually doing out there. What some of the GenAI sort of, “here’s a crazy story, can you imagine we were able to do this?” Are there any that kind of come to mind? I feel like at the beginning of generative AI, there were all kinds of, you know, use cases around how we got rid of half of our marketing department because we were able to create collateral just using, you know, ChatGPT and Copilot. But we’ve passed that now. We’re past that first stretch of crazy stories. Are there any that you’ve heard recently or that you think maybe are going to be coming in the near the near future? Use cases that are really centered on deploying generative AI in a way that’s creative or a way that’s new.
Dan: I don’t know about creative, but the one that I hear time and time again from your colleague in the telco space, Chris Antlitz and his staff are talking a lot about call center disruption, and I have not sat in on any briefings or calls with either our telco vendors or telco operators to really hear that play out. But as a consumer, especially as someone who you know from time to time, you have to interact with like a doctor’s office or a hospital or an auto dealer or- I’m dealing with call centers as a consumer, and that experience continues to decline in user quality. It’s horrible. And there are times when, although today you really can’t tell if it’s an artificial-intelligence-backed bot speaking to you, it’s become harder and harder too. You know, 2 or 3 years ago you could, and getting prompted to assert or state what it is you want or need and it’ll be great when that actually works, because I don’t think that’s working yet.
But that’s one of those promises to come that I’ve heard a lot about in the last 6, 12 months. That disruption to the call center and how that can increase customer satisfaction and retention, I’ve heard those assertions made, if that’s a promise they could keep, I think you’d end up with a lot of happy customers. And I think you could really have an impact in your business if that truly would work.
Patrick: Right. If you get the efficiency and especially if you get the customer retention.
Dan: Yeah.
Patrick: Because I think that’s one thing we have seen with generative AI is that it has been that accelerating technology, which is pulling through robotic process automation, pulling through AI generally, pulling through it at through analytics. Eventually, you know, knock on wood here, it’s going to pull through blockchain. I mean, there’s a lot of technologies that are going to come with it. And when those technologies are also adopted at a more accelerated pace, you’re going to see the disruption across businesses. I mean that’s the history of businesses, that when new technologies come along, that you get new entrants into an ecosystem that disrupt everything. So, we’re going to see companies that are going to need to retain their clients and be more efficient and call centers are one area where that can make a big difference.
Dan: The other the other thing I’ve seen personally, so as a sales executive, I receive quite a bit of unsolicited inbound inquiry from other salespeople trying to sell a solution to me. And inevitably, just with social media tools being the way they are, I have in my algorithm an endless array of 15 second and 30 second videos on AI tools for salespeople. And one of the things I recall seeing in the last couple of weeks was a chat bot that was engaged by another chat bot, and it was an AI clearinghouse of sales tools, and they were showcasing how the bots have gotten such a place where they can fool one another. And it was a sales back and forth between customer-bot and sales-bot that as someone who’s sat through enough sales trainings in my life and I’ve led plenty over the years, it looked like the best role play I’ve ever seen. And it was just two chat bots literally going back and forth.
Patrick: Right.
TBR use cases
Dan: So, I certainly can see, and we’ve been approached as an organization with the new tools that we’re launching in terms of our client portal, bringing a bot to life. You know, we’ve joked about probably one of our top three analysts, he’s on your team, Boz. Boz Hristov, you know, we joke about having a Boz-bot.
Patrick: Yeah.
Dan: And woe be the day when that ever happens, because the world will bow at the Boz-bot’s feet.
Patrick: *laughs* Right, yes.
Dan: But to be able to create, I think that’s the promise, right? If we can have a tool that can really read and map all of our intelligence, our analysis, our data, to be able to posit solutions to the search queries that can then point back to the actual research itself and annotate and provide citation to different data sets into different research streams. For us that’s sort of that next evolution because while we have a discrete and finite pool of data, as I know I’ve heard you say, you’ve said this many times, it’s a relentless stream of data.
Patrick: Yes.
Dan: So, our entire data lake of quant and qual is essentially refreshed every three months. And it’s voluminous. And to be able to track that and to be able to extract what you want out of that and what you need out of that, the new tool does that to a good deal. But to be able to have a generative tool that can help stitch together answers and inputs and ideas across various analysts’ outputs. I think that, for us, becomes sort of that next step that I’m eager to see us take in the coming year.
Patrick: Yeah, I was going to wrap up by asking you where you think we’re going with all this, but that really summed it up nicely.
I do think the- I have always talked about how we relentlessly produce, we also relentlessly research. And so, we’re going to reach an inflection point hopefully again, knock on wood, where that Boz-bot in reality is simply being able to tap into everything he’s researching all the time. And so, you won’t need to wait for Boz to write a report. You’ll be able to tap into the research he’s doing now, what he’s thinking, how he’s reacting to what he’s reading relentlessly. It’s frightening. Yet it might be coming soon.
Dan: You know, and I think we’ve already heard from users. So among our tens and tens of thousands of users every week, every month, there are people that we can see will download Catie Merrill’s research consistently, or Boz’s research religiously or Chris Antlitz or Mike Soper, etc. so we know that there are people who, because of their needs, their workflows and their interests, they’re reading everything that, Steve Vachon is writing.
Patrick: Right.
Dan: And so, if we can generate a tool that helps Steve amass and organize everything that he has on his weekly monthly reading list, and his listening list, and all of a sudden you’ve got a transcript of every single investor call that he sits in on, if he has all of the reading materials. And now all of that is in his little Vachon-bot or Boz-bot, and then it’s not necessarily going to take his place. It never will. You can never replace Catie Merrill, but there’s always going to be that bandwidth limitation. Right. And I know Catie’s value is briefing and speaking to companies like Accenture or Informatica or Dell or whomever. The highest value that she can bring, or Steve can bring is that on the fly, lifetime of knowledge of what these companies do, how they run, their corporate culture strategy. You can make assertions, and you can help our clients project and predict future behaviors and partnership dynamics. And then all that just hard labor of consuming if we can, if we can help them shortcut that. It’s still their trusted sources; it’s still their data. They’re getting dirty in their data. But we can just help augment that. They’ll be able to spend more time delivering the real value, which is you’ve sat in on these calls just as I have. You’re more of a generalist, and you’ll bring in the expert, you’ll bring in Catie Merrell, and she’ll talk about the deep knowledge she has on Equinix as an example.
And Equinix. Right,
Patrick: Right.
Dan: They’re a critical component of the ecosystem. And who has time to master every company in every dimension of this ecosystem.
Patrick: Right.
Dan: Well, good thing we’ve got a team of experts who focus on a discreet 3 to 7 companies, and they can tell you anything that you need to know about, how does Digital Realty partner with HPE versus Dell, and what’s the advantage and who has the better relationship, and what does that mean and which metro area? I’m clicking into data center colos. But that’s just that’s just one- that’s one orientation of a flavor of expertise that our team brings. And to be able to free her up, to be able to speak more to the client, to speak more to the market. I think that’s the ultimate promise to be able to take what’s public, to be able to build our proprietary, and then to be able to speak that out. That’s where I see AI at TBR, and I can only imagine our peers and friends at places like IDC, Gartner, etc. are all doing the same kind of thing.
Patrick: Yeah.
Dan: How do how do we free up our experts to deliver the highest value? How do we give them tools that they themselves trust? Because they’re the ones that have to defend the analysis, defend the data; they need to rely on the trusted workability of that tool so that they can be out there helping our clients be time to decision, make the right investment calls, make the right partnership calls, make the right staffing decisions for the right partnership in the right geo in the right industry vertical.
Patrick: Right.
Dan: That’s our gold. That’s our specialization. And the more we can do that for clients, either on a Teams call or face to face, it gets back to the trusted source of data. Right. And how do we get to that trusted source of data to become proprietary so that no one else has it, and we know how to deliver it. And the Steve Vachons of the world and the Catie Merrills of the world know how to deliver it.
Patrick: Yeah. I know we’re going long here, but I’ve got to bring this up because you sort of hinted at it, you’re sort of going down a road. That reminds me of when I first started doing competitive intelligence with Deloitte way back in the day. And one of the first lessons I got from a guy named John Shumadine, at the time with Deloitte, not there anymore, but anyway, was in order to be really good at providing competitive intelligence, I had to know what my readers were reading. It wasn’t enough to go to them with what I thought was important. I had to know, what are they reading every day? So, you know, is the head of consulting for Deloitte, reading the Wall Street Journal or the Financial Times or the New York Times on his car ride in in the morning, like what’s his paper? What’s his reading? Because you didn’t want to give them stuff they already knew because they had already read it. What you started to hint at was this idea of our clients being able to understand, because they’re seeing all the data that we’re using because we’re a trusted source, the Boz-bot or the Vachon-bot, well they’ll eventually know where are all the things that we’re pulling from. What are the things, like I said before, like being able to tap into that relentless stream of research. So, building up that sense of trust. And it’s a weird idea to think, okay, our clients are going to have to know what is Boz reading, what is Boz thinking, where is Boz is getting his information. But that’s actually going to be very valuable for them in terms of building up that trust and knowing that, it’s a way of taking it from this is a valuable source of information, to this is a valuable, trusted, relentless, I know where it’s coming from, and why it’s giving it to me, and why it’s seeing it that way kind of source and that that, I think, is where we go from just being able to provide what you talked about, that ability to make better, quicker, faster decisions, to the confidence behind being able to make those decisions because you got this, you got TBR behind you basically.
Dan: Yeah, we know we have a very interested potential new partner, new client when they start asking those questions, help me understand how is Boz getting at this? Show me Alex Demeule’s methodologies and how is he arriving at-? Tell me again how you’re able to get Adobe’s trailing 12-month revenue by partner? How do you know Accenture and Adobe’s breadth and depth of their-? It’s not behind closed doors, but it’s our ability to unpack how Salesforce, Adobe, SAP, Azure, how they’re partnering with the top 17 or so global systems integrators to drive the majority of enterprise spend.
Patrick: Yes, yes.
Dan: It’s growing. This is an ever growing more important aspect of the market. And our team of experts have unpacked kind of the secret code to building out revenue credentialing, training, headcount, build with, design with, sell with. “How is that possible?” And once they understand and they can see the math and they can see the assumptions and they can understand how we’re sourcing this, well then this whole new world of decisions that can be made based on objective data opens up to them.
Patrick: Right.
Dan: Whereas before. “Well, I know Accenture.”
Patrick: “I got a guy.”
Dan: Yeah, “I got a guy. He’s good.” And you know what he is good.
Patrick: Yeah.
Dan: We know the guy too. He’s a great guy. You’re going to go have dinner with him in Dallas.
But it’s not about knowing the guy. It’s about, what is that guy? And then what is his immediate peer at, say, Deloitte or at, say, EY, KPMG, etc.? What do all of them do with SAP?
Patrick: Right.
Dan: Versus Oracle versus Workday versus ServiceNow versus Dell.
Patrick: Right.
Dan: Those are the questions that- and it comes back to what are they reading, what’s the data they’re compiling, how are they- you know the combination of cross practice, internal TBR talk right, bringing data from two different teams that ten years ago, really almost never spoke to each other.
Patrick: Yeah.
Dan: It’s just the workflow thing. Everybody liked one another. It was just people had models sitting on their own private machines, and the digital transformation of TBR has been- I mean, again it goes back to customer zero, right? We’re preaching this, we’re practicing this, and we’re seeing the benefits of this as I think finally, good data is being implemented, good architecture, trusted sources. I think enterprise is really going to start to unpack that value. It’s probably been a little bit longer in terms of enterprises expectations versus reality, maybe a little bit like this podcast, a little bit longer than perhaps I thought.
Patrick: That’s all right.
Final thoughts
Dan: But, you know, to put a bow on it, I think the value is going to start to get realized, that the revenue is going to go up the chain a little bit, based on what I hear you all talk about. I think the same for us. We spent a lot of money on digital transformation, we’re seeing massive dividends, last year, this year with new tools, highly proprietary, actionable intelligence. And we’re looking at AI tools ourselves and how that’s going to help our client and our user experience really explode value each individual user and each client.
Patrick: And we’re setting an example, we’re customer zero for breaking down silos and you can make things actually happen.
Dan: And it worked. It’s fantastic. Yeah.
Patrick: Excellent Dan, thank you so much. We will reconvene in a few months and have another chat.
Dan: Love it. Thanks a lot.
Patrick: Thanks.
Next week, I’ll be speaking with TBR Senior Analyst Ben Carbonneau and Research Analyst Alex Maxfield about TBR’s 2025 predictions for AI PCs. Don’t forget to send us your key intelligence questions on business strategy, ecosystems, and management consulting through the form in the show notes below. Visit tbri.com to learn how we help tech companies large and small, answer these questions with the research, data, and analysis my guests bring to this conversation every week.
Once again, I’m your host, Patrick Heffernan, Principal Analyst at TBR. Thanks for joining us and see you next week.
TBR Talks: Decoding Strategies and Ecosystems of the Globe’s Top Tech Firms
Join TBR Principal Analyst Patrick Heffernan weekly for conversations on disruptions in the broader technology ecosystem and answers to key intelligence questions TBR analysts hear from executives and business unit leaders among top IT professional services firms, IT vendors, and telecom vendors and operators.
“TBR Talks” is available on all major podcast platforms. Subscribe today!
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TBR’s Public Sector Senior Analyst John Caucis joins the podcast to share how the very real concerns have led to net-zero impact on federal systems integrators’ financial performance in the last fiscal quarter, with some leading services firms revising guidance upward. Are the fears going to be substantiated into the next fiscal quarter, or will demand for IT modernization within the U.S. federal government remain?
Public Sector Analyst James Wichert also joins Patrick this episode for a discussion on the realities of Department of Government Efficiency’s impact on vendors and the market.
TBR Talks is produced by Technology Business Research, Inc.
Edited by Haley Demers
Music by Burty Sounds via Pixabay
Art by Amanda Hamilton Sy
DOGE Disruption in Federal IT Services: Zero Financial Impact, Despite Uncertainty and Low Expectations
TBR Talks Host Patrick Heffernan: Welcome to TBR Talks. Today we have a special bonus episode with John Caucis and James Wichert to talk about what’s happening in the federal space.
Upcoming and existing analysis
John Caucis, TBR Senior Analyst: Thanks Patrick, there’s a lot going on. As I’m sure everyone’s aware, there’s no shortage activity these days as the Trump administration and their Department of Government Efficiency has and continues to upend the market. Where we stand right now with our research in the federal IT market, we’ve published three special reports over the last several weeks, detailing first the sphere of companies that we track, systems integrators or FSIs as we call them, federal systems integrators, how we see them positioned to contend with the challenges stemming from DOGE, the Department of Government Efficiency, how we see them in terms of strengths and weaknesses, areas of opportunities. That was our first special report. We followed that up now with a series of reports that we’re- a series of blogs, I should say, that we’re going to refer to as the DOGE Impact Series, the first two of which, and they’re following the earnings cycle of the companies that we track in federal IT, the first two blogs, went to press recently. SAIC released their fourth quarter earnings a couple of weeks ago, and we put together our thoughts on the impact of DOGE on SAIC, which I’ll talk more about in a few minutes, as well as Accenture. Accenture Global released their earnings for, I believe, what’s essentially the first calendar quarter of 2025, their fiscal year is somewhat offset the calendar. So, we got some insight from them on how DOGE is affecting their federal business. So, you can expect to see additional blogs come out, you know, within a week or two of the company earnings. We already know when General Dynamics, for example, is going to be releasing their next earnings. CACI will be around the same week, this is in and around the week of the 21st of April. So that’s upcoming.
What have we seen so far
What we have seen thus far: zero impact. And our next federal benchmark will be out in about a week or so, covering the fourth calendar quarter of 2024. And there was for all intents and purposes, zero real impact on the companies aside from the uncertainty that has descended upon the market. We didn’t see any impact financially. None of the companies that we track, you know, they’re still on track, Booz Allen and CACI and none of the companies that reported their fourth quarter earnings dialed down any aspect of their earnings, growth or profit wise, as a result of expectations with respect to DOGE. In fact, Booz Allen, CACI, they elevated their guidance for their fiscal 25. Booz Allen’s fiscal 25 just ended on the 31st of March, CACI’s fiscal runs to June 30th. We haven’t heard although we will be keeping an eye, obviously, on their first quarter results to see if that changes. So, no impact in the fourth quarter aside from the election itself. And, you know, the qualitative uncertainty that has descended upon the market.
James Wichert, TBR Analyst: I think based on our last podcast discussion, all of my vendors had already shared their earnings. So, not too much to talk about on that front updates wise. But what I would say is interesting is now that the quarter is over, and I’ve been filling out reports and everything, it would seem like award activity slowed down in the first quarter compared to prior years. And, you know, maybe that’s part of the uncertainty with DOGE. I would certainly say the newsrooms for several companies have slowed down. They’re less willing to share information at this point. Like, John said, a lot of the tangible disruptions, like, you’re not going to see it in 4Q and we’ll certainly hear about it in this upcoming earnings cycle. I think the tangible disruptions to a lot of vendors, and they’re certainly undergoing chaos, but it won’t be as drastic as I think a lot of people are thinking. So, looking at all the contracts that have been canceled, Peraton’s had something like $20 million canceled just in the first quarter. It was all work with, I think it was the CDC. And then you dig into that, but it was like the total contract value of all their opportunities canceled. But then you dig into it and each of the contracts are already largely done. Most of the funds are already obligated. And then, you know, that’s a similar story with a lot of the other vendors I track, like, you know, the total contract value is like, you know, relatively high, you’ll see like $100 million for some of them. And then you dig into it, and a lot of these contracts are already, you know, the work’s been largely completed. You know, most of the funds are obligated. So, you’ll certainly see an impact.
And, you know, maybe some guidance’s, I know some people elevated their guidance in the last quarter. Maybe we see a little pullback on that just given all the uncertainty all around, but I think the tangible disruption for several of these vendors, it’s not going to be the -10% or something that the market’s expecting for this quarter.
John: But ICF, James, I believe is one of the companies that had dialed down its guidance.
James: Yes.
John: But did they or did they not cite DOGE as a reason for that or?
James: So, for ICF dialing down their guidance, a lot of that was at the time USAID was being heavily disrupted and they already had some substantial- like, ICF is one of the smaller vendors we cover, and so, they had like an over $100 million contract with USAID to do, I think it was demographic surveys, and that alone got caught up in that, they had additional work with USAID. So, it significantly messes with their estimates for the federal part of the business. There’s also the uncertainty of a large part of DOGEs disruptions have been in the federal health space, which is pretty much where a huge chunk of ICF’s federal business is. I think 25% of it in 2024 was HHS alone. So, for them, the worst case is 10%. Assuming, all their big fears come true. I think their best case they were saying was flat. And I think Maximus was in a similar spot. Not nearly as drastic, though. So, I think Maximus is forecasted maybe, and, you know, correct me if I’m wrong, I think it was plus 1% and then -3% overall. But the federal business wasn’t expected to drive it down at the time.
And, all right, this is certainly like a tricky situation. There’s a ton of uncertainty and everything’s changing from day to day. I mean, the big update I saw like a day or two ago was Musk maybe taking a step back from DOGE and, you know, his, like, special government employee status is set to expire around May or June. And, you know, they believe they’ll be able to reduce the US deficit by like $1 trillion in that time frame. And then now very recently he’s like, it was either last night or this morning, he’s saying like it’s not happening. It’s fake news. But it is an interesting situation, like what happens next if he does go away, what happens to DOGE. And you know, if the department does stick around, that Hulk Smash approach, it’s nearly over. It could really be an opportunity for consultants and FSIs to get in there and start working with them. There’s only so much they can probably hack away at from agencies’ budgets and, Patrick, I know you’ve talked about how government is services before, and if you cut government you cut services. So, when you cut government spending, you’re saying essentially that service isn’t worth it. And at this point, maybe the vendors have a chance, if he does step away and DOGE sticks around, and it’s changing its approach. It does have a way to pinpoint the remaining areas to trim down on spending, but the bigger opportunity would be how they can offer modernization services that enable operational efficiency. You know, especially it’s like tens of thousands of employees, if not like hundreds of thousands of federal workers are, you know, their jobs are cut. And HHS has already begun the process of slashing 10,000 jobs.
Patrick: Yeah. I’m glad you said the word uncertainty 4 or 5 times there. And that’s exactly where we’re at. John, any other last thoughts?
John: Well, James makes a good point with respect to what services are expendable, what services aren’t. I think that’s still up in the air. And he makes another good point that I want to dovetail on, which is the amount of modernization work that still needs to happen. Yes. Five years ago, the pandemic really put the spotlight on the need, the dire need in the civil space, in many cases for IT modernization. The DoD, the intelligence community, they’ve been much more- they’ve been ahead of the game in terms of modernizing, as you would expect. You know, we have nation state rivals that we need to stay ahead of, or at least on par with technologically. And so, they’re much more mature when it comes to cloud computing when it comes to AI, GenAI, agentic AI, quantum computing, etc. But even with the acceleration and modernization that the pandemic drove, it sped up what was already a snail’s pace in terms of the speed of modernization. It did speed that up somewhat, but not- there’s still so much work that needs to be done. I mean, it’s hard to gauge that.
Patrick: Right.
John: But, if you- one way of perhaps looking at this is if you look at the federal IT budget in the last year of the Trump administration 1.0, it was about $92 billion. In the last year of the Biden administration, it was roughly, I think, with the numbers that we’re seeing now, are between and $130 and $135 billion. The increase over that four-year period is roughly $85 billion. If you look at the increase in cloud spending, it’s not following the same trajectory. So, we’re trying to figure out, well, where did that $85 billion in additional spending go? Did it go to people? Did it go to technology. Did it go to software and hardware? And maybe that’s what DOGE has been looking at, you know, saying we had expected, you know, greater investment in technology, hardware, software. And we know that there has been some certainly, you know, certainly in the DoD and the intelligence community. But has there been enough investment there, or has it just been you investing in expanding IT staffs? We don’t know. That’s another area of uncertainty. But the bottom line is this, the volume of modernization work is still- there’s still a lot that needs to be, and there’s a lot of work to be done there.
Patrick: Right, that’s super helpful John because it’s sort of putting- there’s how the federal government has to actually continue to operate, you know, things that- you still gotta keep the lights on, you still gotta pay the bills. And then there’s the federal government actually does need to modernize a lot of its IT systems. And then to James’s point about, you know, flat or, you know, the worst-case scenario for a lot of these companies, that middle section that I just said, that modernization, that’s going to provide them with the opportunity even if there’s chaos and uncertainty in terms of everything else going on.
Final thoughts
So, gentlemen, thank you very much. We will do this again, I suspect, in the near future because change is constant at the moment and chaos rules. So, talk to you guys, probably in a couple of weeks.
John: Thank you.
James: Sounds good.
TBR Talks: Decoding Strategies and Ecosystems of the Globe’s Top Tech Firms
Join TBR Principal Analyst Patrick Heffernan weekly for conversations on disruptions in the broader technology ecosystem and answers to key intelligence questions TBR analysts hear from executives and business unit leaders among top IT professional services firms, IT vendors, and telecom vendors and operators.
“TBR Talks” is available on all major podcast platforms. Subscribe today!
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What challenges will IT decision makers face in the current macroeconomic environment and amid the need to manage enterprise data, workload migration and ongoing services? In this episode, titled “Cloud Workflow Predictions for 2025,” TBR Principal Analyst Allan Krans shares his analysis of and predictions for cloud market share in 2025, including expectations for generative AI (GenAI) spend and the impact the technology will have on the market.
Patrick and Allan also dig deeper into anticipated ROI for recent GenAI investments, compared to more common digital transformation engagements for cloud players such as Microsoft’s Azure, Amazon Web Services and Google Cloud Platforms
TBR Talks is produced by Technology Business Research, Inc.
Edited by Haley Demers
Music by Burty Sounds via Pixabay
Art by Amanda Hamilton Sy
Cloud Workload Predictions for 2025
TBR Talks Host Patrick Heffernan: Welcome to TBR Talks, Decoding Strategies and Ecosystems of the Globe’s Top Tech Firms, where we talk business model disruption in the broad technology ecosystem from management consultancies to systems integrators, hyperscalers to independent software vendors, telecom operators to network and infrastructure vendors and chip manufacturers to value added resellers. We’ll be answering some of the key intelligence questions we’ve heard from executives and business unit leaders among the leading professional IT services and telecom vendors.
I’m Patrick Heffernan, Principal Analyst, and today we’ll be talking about 2025 predictions for Cloud Market Share with Alan Krans, Principal Analyst for TBR Cloud and Software Practice.
GenAI ROI skepticism
Allan, thanks for coming in, always good to chat about predictions for 2025, what you thought in 2024 which now as we get into 2025, you might be changing your mind already. We’ll see. We’ll find out. I’m curious, having read the predictions document that that you put out last month, there was some skepticism around the return on investment on generative AI. And I’m curious if that skepticism that runs across the entire ecosystem, including the clients, is that fueled by some overspending on earlier technologies? Is it a result of sort of the relentless hype around generative AI in 2023 and 2024? Is it a realization that most enterprise’s data is just too messy to get a return quickly? Like, what’s the biggest reason why there’s this persistent skepticism around the return on investment?
Allan Krans, TBR Principal Analyst: Sure. Yeah. And I think it’s a lot of those things rolled all up into one. And so kind of starting with the general landscape of buyers in, you know, late 2022 going into 2023, looking at cost optimization. Right. A lot of uncertainty in their markets and geopolitical situations. And so that makes saving money, spending less, really top of mind. And so, with the cloud market, you know, when it was first growing, it was such a small portion that it was a cost saver. It was a way to reduce IT expenses, but that’s no longer the case. It’s such a large portion of most enterprise IT budgets that if you’re going to save money overall, you have to look at optimizing the cloud environment. And so, a lot of the generative AI has inherited this, you know, focus on cost. Really looking at the financial metrics for the justification for these investments. And so that’s kind of leading in, you know, what’s- leading to some hesitancy around large investments. That’s the other thing. It’s tough to really get enterprise production use cases for GenAI without not only spending a lot on the technology itself, whether that’s provided from a cloud provider, whether that’s going to be something that’s on prem. And obviously there’s a lot of infrastructure and facility costs that go into that. You know, to really get those financial returns requires a bit of a leap of faith. And it’s in some ways tough to ask enterprises to go forward with that when there’s a lot of economic uncertainty for them.
And then also there’s the general shift in terms of how are we going to manage it? Do we have the skills to do this properly? Are we secure? And then dealing with the state of the data that already most enterprises would have said, we need to do a refactoring, a data cleanse, to make sure that we’re not just getting outputs that are resulting from improper data management practices. So, there’s a big investment there in terms of the underlying data that will be used in this, in order to really get the best out of it.
And so, you know, with all that said, a lot of enterprises felt like they had to move early.
Patrick: Right
Allan: And get started with it. And so they’ve done that. They’ve spent, in some cases, you know, pretty significant increases from other areas of the budget, thinking of it, kind of in an R&D, a way to kind of secure their, place in this new world where AI is going to fuel a lot of business processes and help them automate and make better decisions, and part of the issue with those early use cases is there’s a kind of gray area of return where just because you’re more productive doesn’t mean that you’re going to either realize more revenue or be able to reduce your expenses in certain operational areas.
Longer term, I think there’s a large promise in terms of what it can deliver to enterprises. It’s going to take a long time to get there. And so, I think there is this kind of trough of, you know, looking at the early investments, but thinking that they’re going to need to do a lot more over the long term. And that’s, a little bit daunting when you start to think about the change that that brings.
Patrick: Yeah. And so, you said a couple things there that we’re so used to in the technology space, like talking about use cases, talking about investment, talking about long term, talking about the way that, cloud maybe was a necessary investment and a cost saver initially and at some point it hit an inflection point. You also said a couple things that we never talk about in technology. Leaps of faith, like that does not often happen. And then also, I love the idea of a gray area on return on investment because I think that’s what we’ve seen more than anything else where a lot of companies have been looking for. What’s the percentage of productivity improvement that I’m going to get? What’s the percentage of cost savings I’m going to see? And early on, those use cases at scale, at least they’re not proving that out.
Cloud vendors’ future GenAI investment
But all of that skepticism aside, or maybe, thinking even through all of that skepticism. In the report, you make the case that the cloud vendors themselves are continuing to invest very heavily. They see the future of GenAI, perhaps better than their enterprise customers do. Is there is there a particular reason for that, or is it just simply that’s the big bet that they’ve all made?
Allan: I mean, I think that’s the big bet that they feel is going to be the future of growth in the cloud market. When you think about net new workloads, you know, we’ve been through a lot of enterprises have moved what they feel like is an appropriate workload into cloud already. So, there’s some growth in terms of additional usage, as you know, there’s more data, there’s more transactions. However, you know, you get addicted to that big bump of, the next SAP environment, the next big workload. There’s a dearth of those now, and so GenAI is one big workload that the cloud providers can monetize. And it matches well with the scale of what they can make in terms of investments because there’s different data centers, different environments, very expensive processors and infrastructure that need to go in to support that. And so, they’re on a scale where they can do that, a lot of the even large enterprises, it’s a big commitment from them. Certainly, for the SMB and smaller customers, you know, they’re just never going to be hosting their own GenAI model doing the training and everything that they need to do to do it themselves. So, it will drive demand for hosted services from the cloud providers, to kind of GenAI capabilities out there in mass to the entire market.
Patrick: So, they can see that demand coming, so they’re willing now to invest, to invest heavily in things like infrastructure to the point of, you know, nuclear power plants and stuff like that. I mean, it’s kind of shocking the way that that part of the market has changed in the last couple of years. We did not three years ago talk about Microsoft and AWS and Google like building their own little mini nuclear power plants. But that’s where we are now.
Allan: Yeah. I mean, it’s pointed out the bottleneck in the supply or for how to deliver this at scale. Energy is a huge factor. There’s all of the commitments around carbon reduction and meeting those commitments environmentally that it’s causing stress to. So, I think it forces vendors to get creative and nuclear certainly is part of that.
Microsoft and AWS
Patrick: So, another thing you point out, one of the big predictions in the report is about Microsoft and AWS. And you make the case that Microsoft will surpass AWS in revenue in 2027. So, my question reading that is then, okay, Microsoft will surpass AWS in 2027 unless AWS does, fill in that blank, does what?
Allan: I think changes the landscape for the GenAI portion of the market. If they can, you know, capitalize- so, instead of being as beholden and partnered with OpenAI, they’ve been doing a lot with their own innovation with being open to multiple model providers. So that’s been their best strategy to date. Microsoft had an early advantage with their partnership and investment in OpenAI, and so that’s propelled them to some degree.
They were already growing faster than AWS.
Patrick: Yeah.
Allan: I think it’s, you know, part of their kind of broader set of capabilities around the, Software as a Service side of the market, being able to leverage that from a go-to-market model. The partner distribution has been part of their strong suit for the entirety of their business, and so that portion of the go to market is really caught up and is propelling them a little bit faster than AWS. We do expect to see kind of a refocusing of the sales strategy from AWS as they’ve had a change in leadership and really start to look at driving a go-to-market model that relies on an ecosystem, and is really pragmatic about where they’re investing rather than just, you know, growing because they were the earliest cloud platform in the cloud space.
Corporate cultural shift
Patrick: Right. How much of that is a culture change? And I’m asking that question knowing full well that here at TBR we’re all about the data, we’re all about looking at the numbers. We’re all about looking at the financial performance, and we’re all about looking at, you know, analyzing in a- not in a wishy-washy way, but in an analytical way. And yet when you talk about culture, sometimes corporate culture, sometimes you get into something that’s a little hard to measure. But is there going to need to be a cultural shift in AWS for them to either maintain their lead or at least not get surpassed in a meaningful way?
Allan: Yeah, and I think we’ve already seen that. I think a slowdown in growth will cause you to look inward pretty quickly. And so culture is going to be something that is adjusted as they look to, you know, optimize their financial performance and they can’t keep with the same sales and marketing strategy that was good for them, you know, for the early onset. There needs to be a shift. And so, I think the performance is causing them to take a look and start, you know, you already see it with the leadership.
Patrick: Yeah.
Allan: Looking at, someone who’s focused on sales and marketing rather than innovation or just being, you know, part of the retail side of the business. So, it is a fresh perspective.
Repatriation
Patrick: So, I’m going to go a little bit out, away from what we normally talk about when we’re talking about cloud and hyperscalers and all that, except it’s a question that comes up on the services side in particular, where the question is, what kind of workloads are going to get repatriated back to on prem, and in the predictions report you mentioned that briefly and you basically dismiss it. And I’m curious, is that where you think it’s going to go? There’s never going to be like significant portion of the workloads that get repatriated back to on prem, based on everything you’ve talked about, especially when you when you mentioned sort of the vast investments the cloud companies have to make in terms of being able to provide for SMBs and others that aren’t going to have it. If the option is, instead of going with Azure and putting it, putting- running your GenAI miles on the cloud, is repatriation a real issue or is it just going to remain a tiny percentage?
Allan: I think it’s going to be a small percentage. I think the situations where it makes sense, a lot of times it has somewhat to do with the workloads. If there’s a stable workload that you believe isn’t going to change over the next 5 to 10 years so the environment can remain consistent. You can run it. And if the focus is on cost, and you have the internal IT resources and team to feel like something that you can manage and deploy on prem, you can do it cheaper.
Patrick: Yeah.
Allan: And so, for organizations where that’s important or for things that are big enough that makes a big impact in terms of the overall level of spending, I think that’s where you’ll see it. I also think that in most cases, those are the workloads that wouldn’t have gone to the cloud in the first place. So, part of it could be you go back to culture, if there was a cultural shift. Cloud first, cloud, everything. If you know, as that changes and you get new leadership that takes more of a financial or a traditional look at the IT strategy. Yeah.
Patrick: Okay.
Allan: We will see that, but I think it’ll be, you know, in the single digits.
Use cases
Patrick: Yeah, it’ll remain small on that, and that’s important. If you’ve sort of made the mistake of sending something to the cloud that then you realize you need to bring it back, but you need to bring it back under the right conditions, where like you said, you have the you have the infrastructure in place and you also have the people in place to be able to handle it.’
All right, last question, and to get back to sort of the big GenAI picture, one thing we hear again and again- the question is always what are the use cases that are resonating with clients? Whatever, it depends on the client. It depends on their industry. It depends on their size. Blah blah blah.
The other thing that I think is more interesting, are what are the use cases that you have heard about, maybe at a pilot level or maybe even a, you know, just proof of concept level that you think, okay, in 2025, these are the use cases- this use case is going to explode because it’s truly innovative. It truly addresses a business problem in a way that AI hasn’t addressed before. Or it just sounds cool. Like what are the- what’s a use case that has kind of has jumped out at you in the last couple months that you think will be significant, that people will be talking about by the end of 2025. Allan: Sure. Yeah. So, I think there’s a lot- it gets very nuanced. So, it gets focused down on the industry. One thing that was kind of interesting that I just heard about is automated vehicle inspections. So, in New Hampshire we go through a physical inspection of the vehicle every year.
Patrick: Right.
Allan: With a mechanic and every garage does them for a certain fee. This uses, computer vision, so a combination of a visual inspection as well as mining the data from the vehicle to not just do a “well, you need to fix this or that” to kind of do a holistic view of the state of the vehicle. So, that was kind of an interesting thing. And I think there’s a lot of other- you could go into real estate and other ways of combining different inputs, data, visuals, could be temperature. So much data could be mined. And then to have- a little bit novel. So, what’s the return on that? It’s a bit difficult to tell, but, things like that where it gets really down into the specific industry, are some of the things where there will be markets. And so being able to provide a solution that can be used by the entire industry and having that scale, I think, provides some of the promise for not just, a novel solution, but something that can really be a standard across multiple different markets and actually have a viable business model.
Patrick: And it all depends on the data, to get back to the sort of data is messy and then certain enterprises are not prepared to cope with that. And then the data has to go somewhere, be stored somewhere, or be analyzed somewhere, spit back out somewhere. And that requires again, we’re back to the nucelar power plant.
Allan: Yeah. Right. All those things.
Final thoughts
Patrick: Alan, thank you very much for coming in. Really appreciate it. We will chat again I’m sure in a few months.
Allan: Sounds great. Thanks.
Patrick: Next week I’ll be speaking with TBR SVP Dan Demers about TBR 2025 predictions for Generative AI. Don’t forget to send us your key intelligence questions on business strategy, ecosystems, and management consulting through the form in the show notes below. Visit tbri.com to learn how we help tech companies large and small, answer these questions with the research, data and analysis my guests bring to this conversation every week.
Once again, I’m your host, Patrick Heffernan, Principal Analyst at TBR, thanks for joining us and see you next week.
TBR Talks: Decoding Strategies and Ecosystems of the Globe’s Top Tech Firms
Join TBR Principal Analyst Patrick Heffernan weekly for conversations on disruptions in the broader technology ecosystem and answers to key intelligence questions TBR analysts hear from executives and business unit leaders among top IT professional services firms, IT vendors, and telecom vendors and operators.
“TBR Talks” is available on all major podcast platforms. Subscribe today!
https://tbri.com/wp-content/uploads/2025/04/cloud-workload-predictions-for-2025-cover-scaled.jpg25602560TBRhttps://tbri.com/wp-content/uploads/2021/09/TBR-Insight-Center-Logo.pngTBR2025-04-04 10:40:212025-04-04 10:40:24Cloud Workload Predictions for 2025
From post-proof of concept use cases of generative AI and adoption rates of fixed wireless access to missed ROI opportunities of 5G and the vision of 6G, in this episode of “TBR Talks” Telecom Principal Analyst Chris Antlitz joins Patrick to highlight his top takeaways from Mobile World Congress 2025.
Chris considers the implications for the global telecom market and how the market must change. Additionally, he discusses the foundational challenges of global telecom operators and traditional telecom vendors, where governments must interview, and what role hyperscalers will play.
TBR Talks is produced by Technology Business Research, Inc.
Edited by Haley Demers
Music by Burty Sounds via Pixabay
Art by Amanda Hamilton Sy
The Telecom Market Must Change: Mobile World Congress 2025 Recap, Featuring Telecom Principal Analyst Chris Antlitz
TBR Talks Host Patrick Heffernan: Welcome to TBR Talks: Decoding Strategies and Ecosystems of the Globe’s Top Tech Firms, where we talk business model disruption in the broad technology ecosystem from management consultancies to systems integrators, hyperscalers to independent software vendors, telecom operators to network and infrastructure vendors and chip manufacturers to value added resellers. We’ll be answering some of the key intelligence questions we’ve heard from executives and business unit leaders among the leading professional IT services and telecom vendors.
I’m Patrick Heffernan, Principal Analyst, and today we’ll be talking about this year’s Mobile World Congress with Chris Antlitz, Principal Analyst for TBR’s Telecom Practice.
The good news from MWC 2025
You’ve been many, many times now. How many is it, Chris?
Chris Antlitz, TBR Principal Analyst: This was the fifth.
Patrick: The fifth time. So, let’s start with the good news. What did you hear, what did you see that was exciting about what’s happening in the telco space right now?
Chris: Yeah. So, the good news is the event was well attended. It was, in some cases they had record high levels of certain metrics. Second highest attendance ever in the show’s history, so that’s really good.
Patrick: Right.
Chris: From a content standpoint, there were two things that really stood out to me that were good. One is that, for AI, I noticed there’s meat on the bone this time, this time around. Last year when I saw demos and heard people talk about AI, it was more conceptual, more theoretical. This year it started to- some of that started to transition to we’re actually doing some of this with live traffic, like we’re testing some of these things with actual customers that are on telecom networks. And were starting to see outcomes coming from that in terms of KPI improvement, how people are interacting with these things. So, I definitely saw progress over the last year in AI.
Patrick: Okay.
Chris: The second thing that I saw that was good is around fixed wireless access, FWA, and this is about wireless fiber and bringing that to, as a broadband option to, people and businesses, to households and businesses. And it’s a much faster time to market. You don’t have to dig up the ground to put fiber in the ground.
Patrick: Right.
Chris: It’s not as good as fiber, but price for value and the time to market advantage makes fixed wireless access an incredible opportunity for the telcos. And we continue to hear about, you know, adoption rates. We hear about technologies that make FWA better, addresses some of the limitations that the technology originally had and just makes it a much better value proposition all around.
Network API, edge computing, and network slicing opportunities
Patrick: Right. I’m glad you brought up both fixed wireless access and AI, because those are two areas I want to go in detail here. And I think I want to dive kind of into the weeds on some of this based on what you wrote in the special report that was released just recently coming after the event. So, I want to talk about those two things. I want to talk about sort of where things are headed next. But let’s start with one thing that caught me in the write up that you did, and it was talking about network APIs, edge computing, network slicing and some other technology areas where the expectation was that there was going to be growth, there was going to be revenue growth, and it hasn’t been what was expected. And a lot of that revenue you described as cosmetic, that is, it isn’t at scale and it’s not a great margin. Is that- are those areas going to change at all? Do you see where networks slicing, where edge compute, where network APIs is going to become a substantial revenue stream for these companies or no?
Chris: I think it will, but I personally believe that the hyperscalers are going to take those opportunities and they’re going to run with it. So, I’ll give you an example. Cloud computing, right? The cloud as we know it today is centralized computing. You have mega data centers that are doing the processing. That is evolving to distributed computing. Everything from the mega data center all the way out to the device, the endpoint device, and everything in between. Who’s going to own that aspect, that full architecture, right? That framework.
Patrick: Right.
Chris: And it’s highly likely that that’s going to be a full hyperscale game. The telcos might have some opportunities here and there, but from large scale opportunity where it’s generating good margin and growth for the telcos, I’m not convinced.
Patrick: Not going to see it. So, is there a reason why the expectation was different a few years ago where companies thought they were going to actually get significant revenue growth or significant revenues out of those areas, or was it just- did they miss time in the market, or did the hyperscalers, I guess, maybe better time the market?
Chris: So, if we go back in time to the beginning of LTE in the 2010’s, that time frame, this is a recurring theme in the telecom industry, that they find a new thing, that they want a new shiny thing that they want to sell and they’re going to grow from. And the telcos don’t wind up realizing that opportunity. It’s someone else. And it’s usually the hyperscalers that realize it. So, what we’re seeing is history repeating itself yet again now, with all these technologies, edge computing being one example, where this is a hyperscaler game and we are seeing we actually we cover this in my group, we have research on this like, where the telcos are at in this market opportunity and where the hyperscalers are at and where they’re thinking down the road.
Patrick: Right.
Chris: It’s also where this is going.
Patrick: Right.
Chris: And everything that we see suggests that this is a hyperscale game. They’re going to get the vast majority of the benefit from the enabling technologies of these types of things like network slicing, edge computing, etc. APIs.
Patrick: Right.
Chris: And the telcos will participate in the opportunity, but their portion of that value chain is very small relative to what others are taking.
The bright spot of GenAI
Patrick: I’m glad you framed it up as both a historical trend and also the bright shiny thing, because that’s the second thing I wanted to get at, which was artificial intelligence and GenAI in particular. So, in your write up, you talk about where you are seeing, and you mentioned at the beginning, sort of the bright spot of these applications, I like the way you put it, there’s sort of actual meat on those bones where we’re now year three into the GenAI hype cycle, and return on investment, like actual contribution to revenue growth, business growth, is finally starting to come around. We’re starting to see things at scale. But across not just the telco space, but across all of the applications of AI, we see that sort of low hanging fruit of, you know, customer service, and sales and marketing. Those are things that sort of everybody is doing. So encouraging to see the telcos are doing it as well. Were there any examples of things where you sort of took a step back and said, wow I had not thought of an AI application there, an AI solution- enabled solution there? And this is an area where maybe AI is going to make a difference for some of these telcos?
Chris: So, for RAN, there will be a lot of transformation in that domain. But not yet. It’s going to take some time. Right now, we see AI being applied for energy management, energy optimization, sustainability at the radio layer. The RAN is the biggest hog of electricity from a telco network standpoint. There are ways to mitigate that. You know, I’ve seen some- in some cases telcos can get up to 15% energy reduction in the network. That’s a lot if you think about scale.
Patrick: Yeah.
Chris: So, but that’s what I consider to be a preliminary AI use case for that domain. But I heard about some things for like RAN planning, propagation analysis, Ray tracing, simulation analysis like using like meta data, like heavy duty modeling, where you can really drive incremental improvement, but incremental at-
Patrick: A massive scale.
Chris: At a massive scale, it becomes meaningful.
Patrick: Right.
Chris: So that’s the domain, I would say. But from a telco perspective, a lot of them are talking about AI and other domains. But like you said, it’s mostly- what they’re actually doing at a-where there’s the meat on the bone, if you will, is in the call center and the OSS BSS domains.
Data readiness for AI
Patrick: So, in all of the other industries that we cover, the sort of- everyone is ready for AI accept their data. Like that is always the- and for every single enterprise, that’s the biggest stumbling block. It’s not the business case, it’s not the cost, it’s not the lack of capability, and it’s not the lack of people to do it. It’s the data. Is that true in telcos too, or do they have a better data story?
Chris: They might have the worst. *laughs*
Patrick: *laughs*
Chris: So- well, maybe the government, maybe the government.
Patrick: Did not expect that, okay.
Chris: The telcos are very siloed. And they say they have data lakes. But the reality is they are very siloed.
Patrick: Yeah
Chris: Almost all of them. And they- where things get interesting is the idea of agentic AI and the orchestration of agents.
Patrick: Right.
Chris: Because it’s okay to have those silos if you have an overlay, if you have an agent model assigned to that silo.
Patrick: Right.
Chris: But if that agent is able to talk to another data silo agent and they can talk together, you’re actually breaking down the silo in a way, because you’re getting the outcome that you want, even though you internally are set up where you have data silos. So, like when I talk about the interconnection between call center OSS and BSS, you could have a variety of agents inter playing in that mix depending on the chain that you need to do, like what the customer needs in that call. There’s some vendors that are doing a lot of work around this stuff and yeah, I saw some really advanced like sophisticated stuff that is being worked on, and it’s come a long way. The telcos usually move slow on this stuff. So, this time around I’m seeing speed on the call center OSS and BSS areas specifically.
Patrick: Yeah, yeah. Well it’s fascinating too because the silos are- what we found early on is that the silos are super helpful when you want to try and cleanse a limited amount of data and then do something with it, be able to actually use an AI enabled solution to generate some sort of return on that investment. It’s easier when it’s siloed, but it also doesn’t scale across the enterprise. And that’s where the agentic part comes in.
Fixed wireless access
I want to pivot to fixed wireless access, because you talked about it in your piece as being an area where the CSP’s in particular have sort of misunderstood the opportunity that’s there. And you said that the industry as a whole is going to change the way it thinks about fixed wireless access, FWA, and that it’ll be an important component of the broader picture going forward. So, does that- is what you’re saying that the CSP’s have misunderstood the opportunity and will continue to miss out on the opportunity going forward? Or is there way for them to sort of play catch up and pivot their own strategies to be able to take advantage of what you’re describing is going to happen with FWA?
Chris: Yeah. So, there are some telcos in the world that are- have taken that opportunity and they’ve been running with it. T-Mobile, Verizon, the India telcos are probably the poster children for doing that at very large scale.
Patrick: Really.
Chris: There has been- so, T-Mobile was a thought leader here. They were one of the first to say we see that opportunity and we are going full speed ahead. And they did it. And they’ve been very successful with this. A lot of the- most of the industry, this is five years ago, most of the industry said ain’t going to happen. It’s going to be fiber. It’s going to be DOCSIS. And they just didn’t believe it. They didn’t believe it. And they said there’s this problem, there’s that problem, there’s this problem. But they failed to see the solutions that were being developed. There is tremendous innovation across the technology stack to do, on the spectrum side, on the radio side, on the backhaul side, to do these things at scale and to dramatically reduce or completely eliminate some of the original challenges that were around to actually do that technology. So, T-Mobile saw that early on. I give them a lot of credit for this.
Patrick: Right.
Chris: We are seeing gradually other telcos are also waking up and they’re saying, wait a minute, we need to relook at FWA. And we are at, we’re seeing this now, we see this in our research. We see telcos now, that just a few years ago they said, absolutely not. We’re not going to do FWA, we don’t need to, because everything is going to be fiber. Everything is not going to be fiber. It is cost prohibitive.
Patrick: Right.
Chris: It doesn’t make logical sense to have everybody wired with fiber. And for whatever reason, it could be societal reasons, there could be topography reasons, like you might have a house at the top of a mountain. How are you going to get the fiber up there? Like it- just things like that
Patrick: Cost alone. Yeah, just the cost
Chris: Yeah, the cost. And it’s like there needs to be a rethink and a reassessment. Yes, there’s going to be a lot of fiber connecting a lot of premises, but it’s going to be- a portion is going to be fiber, and you’re going to have other portions that are other broadband technologies that are fiber-like and that provide more than enough broadband speed and bandwidth and everything else to the end users, latency as well.
Satellite
Patrick: Right. Okay. And then I’ve got to- just because of everything you just said, I need to ask one more question before we wrap. And that’s in that piece about- in your in your comments about FWA in the piece and then you mentioned it briefly here, there’s still- there’s satellite, there’s a term for it like non terrestrial network. So, and I know our colleague, Boz, has been talking about the space opportunities here for quite some time now. What’s your sense- is that going to be something that the CSP’s and others treat the same way they treated FWA? That is, they don’t see the opportunity that’s going to be there, that’s coming right around the corner, because the sense is that that’s coming really fast, right?
Chris: Yeah. So, this is a similar idea because if we go back in time 5 or 6 years or so, probably like right around the time Starlink was really starting to get the satellites in the sky. Tremendous skepticism. “Satellite aint going to work. You can only send text messages. You can’t do calls through satellite on a regular smartphone. Will never happen.” I can’t tell you how many people have told me that.
Patrick: Right.
Chris: And these are like people that have been in the industry for a long time. And they fail to see that there is tremendous innovation. Things are not the same as it used to be. Huge breakthroughs in like Doppler radar and how they do interstellar lasers, where they use lasers to interconnect the- to bounce signals between the satellites.
Patrick: Right.
Chris: The coordination of the birds in the sky, like it’s they just- and then the capacity load that you can put in these systems, with software upgrades Starlink can double the capacity of their systems by doing things in a more optimal way, or putting more satellite stuff and re-interconnecting the mesh.
Patrick: Right.
Chris: And here again, we see now there’s this wake up. “Oh, wait a minute. Satellite’s actually legitimate.”
Patrick: Yeah.
Chris: They can actually do more than just text messages through it. Now we can do- voice is coming and data is coming. Soon you’re going to be maybe even watching some low-resolution video over satellite at some point in the not-too-distant future. This is coming.
Patrick: Yeah.
Chris: And you know, the telcos, some of them are partnering. They’re being proactive. Some of them are going to be facing another competitive dimension now.
Patrick: Right. Right.
Chris: That they weren’t expecting.
Patrick: Right.
Chris: And yeah, it’s NTN is very much here to stay. And it’s going to be very impactful.
Patrick: Yeah. And that that innovation speed that people that are maybe too in the weeds of what they’re doing, don’t see the innovation that’s happening right outside their door.
Chris: Yeah.
Industry reset
Patrick: That’s going to have an impact on them. So, let’s- I want to end with your last comment in your piece that was basically, the telco space is unhealthy and deteriorating. Can’t end on a bad note. So, you’ve got to spin it for us Chris, and tell us how is it that we’re going to go from unhealthy and deteriorating in five years to where we’ve got a robust segment again and growth in the top of the space?
Chris: Yeah. So, there needs to be a reset in the industry. There needs to be a reset of scale and regulation. Those are probably the two big things.
Patrick: okay.
Chis: So, from a scale perspective there needs- telecom is a scale game. You have to have a lot of scale to have margins that are competitive and to invest in your business at the appropriate level. And there’s a lot of countries still in the world, many of which are in Europe, that are subscale. You have tiny telcos, you know, a small fraction of the size of the ones we have in our country, like a 10th of the size or even smaller of an AT&T. Like they don’t have the scale to do some of the things that they want to do, and then regulation holds them back, whatever they would be able to do. So, they don’t want to invest. There’s disincentives to invest. Those things need to be addressed at a high level. And-
Patrick: Let me- just to clarify, what is the regulatory component that holds them back? Is it because they can’t merge? Is it because they can’t- so, it’s like an anti-competitive regulatory environment that’s keeping them from getting bigger.
Chris: Yeah. So for example, like in the EU you have the member states, but they don’t want the telcos to cross marry.
Patrick: Right.
Chris: Because they don’t want to have those combinations. They want to have national telcos in each country. So, you have subscale countries there that have a population of less than 10 million people. And then they have three telcos, three or four telcos there. They don’t have scale, versus an AT&T or Verizon, they have over 100 million subscribers each.
Patrick: Right.
Chris: Right. It’s a completely different ballgame. And that needs to change. If Europe is a union, show it. Show us the union.
Patrick: Yeah.
Chris: Not just the currency, but at a more local level and at an industry level. Show us the unity and then you can start to have a healthier, more sustainable ecosystem, especially in Europe. Europe needs the most work, I would say, of the major economic blocs, Europe needs the most work.
Patrick: And so, if Europe gets its act together, then in five years we can be saying this industry as a whole is growing and is healthy.
Chris: I think from a margin level it’ll be healthier, like from a sustainability standpoint, managing the debt, managing the cost of keeping up with innovation will be healthier. The growth side, I don’t know. AI is going to give a cost efficiency gain, opportunity for the telcos to drive more cost out of the business.
Patrick: Right.
Chris: On the revenue side, if- this is still a hyperscaler game. Even if they get that stuff figured out, it’s still a hyperscale game for the really big picture transformational stuff. And I’ll loop in things like AR/VR and some of these- these are going to be huge things in the not too distant future.
Patrick: Right.
Chris: Who’s going to generate the majority of the money from those technologies?
Patrick: Connectivity in the data that’s required for that. So yeah, absolutely. Absolutely.
Big picture takeaway from MWC 2025
So, we didn’t- we got into Europe, but we didn’t really get into a lot of the other things I know that you’re interested in, which is sort of the opportunities that are going to come on the defense side spending, and what that will mean for the telcos. It’s something we can go into in another session. But any last kind of wrap ups, like as you think about five years worth of going to Mobile World Congress, any sort of this is the biggest picture I take away from- this is the biggest trend.
Chris: There’s a chance that this might be the peak of the event. We might see some challenges going forward. And I think that part of that might be driven by, you know, when I’m talking about the five years out, like there needs to be a lot of consolidation, a lot of fundamental changes, that create tremendous volatility and uncertainty.
Patrick: Right, right.
Chris: And in those situations, you’re going to have a lot of changes in how this industry has been for the last, you know, last few decades. It’s going to change a lot. Things are going to change a lot in the next five years, I think.
Patrick: Well as analysts it’s great, change is always good for us.
Chris: Yeah,
Patrick: It gives us a lot to talk about.
Chris: I think the silver lining in it though is, yeah, there’s going to be a lot of maybe not so good things happening. But if you look at the long term, this kind of needs to happen. And this kind of happens to every industry where you have a rationalization phase and then whatever’s left can continue on in a more healthy state. Over the long term, I think this is actually a good thing for the industry to go through this phase.
Patrick: Yeah, I have to ask because what you just said that, you know, every industry kind of goes to this, but the regulatory component, to come back to that for a second. It’s not just the industry that needs to change. It really is the regulatory environment and maybe the regulatory mindset within Europe that needs to change as well.
Chris: Yeah. And this was talked about a lot at the event.
Patrick: Yeah.
Chris: I think that- and this is the, part of the topic of the write up that we did.
Patrick: Yeah.
Chris: Trump is changing everything.
Patrick: Yeah.
Chris: Everything is on the table and it is subject to change.
Patrick: Right.
Chris: And this could be a silver lining in the sense that, from a Europe perspective, in that they’re waking up. And they’re realizing we need to make these fundamental changes.
Patrick: Yeah.
Chris: And if that’s what it took, if it took Trump to get Europe back to moving again.
Patrick: Yeah.
Chris: And improving and progressing, that might not be such a bad thing. That’s actually good for the whole world
Patrick: Yeah.
Chris: if Europe is back.
Patrick: Well, if you want to rearrange the furniture you roll a grenade across the floor. It’s not such a bad tactic. So yeah. You don’t know what you’re going to get in the end. But at least your furniture is going to be rearranged.
Final thoughts
So excellent Chris, thank you so much for coming in. Please look for Chris’s Special Report on the website and there’s a ton of Special Reports that have been done over the years on Mobile World Congress. We’ve also recorded a few more of these episodes in previous years. Look for those. And of course, look to the podcast for additional research around telcos and around everything else that TBR covers. Thank you.
Next week we’ll be back to our prediction series speaking with TBR Principal Analyst Allan Krans, about his 2025 predictions for cloud market share. Don’t forget to send us your key intelligence questions on business strategy, ecosystems, and management consulting through the form in the show notes below. Visit tbri.com to learn how we help tech companies large and small answer these questions with the research, data and analysis my guests bring to this conversation every week.
Once again, I’m your host Patrick Heffernan, Principal Analyst at TBR. Thanks for joining us and see you next week.
TBR Talks: Decoding Strategies and Ecosystems of the Globe’s Top Tech Firms
Join TBR Principal Analyst Patrick Heffernan weekly for conversations on disruptions in the broader technology ecosystem and answers to key intelligence questions TBR analysts hear from executives and business unit leaders among top IT professional services firms, IT vendors, and telecom vendors and operators.
“TBR Talks” is available on all major podcast platforms. Subscribe today!
https://tbri.com/wp-content/uploads/2025/03/doge-disruption-in-us-federal-it-services-cover-scaled.jpg25602560TBRhttps://tbri.com/wp-content/uploads/2021/09/TBR-Insight-Center-Logo.pngTBR2025-03-28 16:35:512025-03-28 16:35:53The Telecom Market Must Change: Mobile World Congress 2025 Recap, Featuring Telecom Principal Analyst Chris Antlitz
Senior Analyst John Caucis and Analyst James Wichert, of TBR’s U.S. Public Sector Professional Services research team, share key challenges our clients in the space — including four of the top six federal systems integrators — and their partners face amid uncertainty in funding as the Trump Administration implements funding reviews and contract cancellations stemming from the work of Elon Musk’s Department of Government Efficiency (DOGE).
John and James also discuss what these disruptions mean as well as how many federal IT services vendors are using this time to enhance their partner ecosystems, positioning themselves for the inevitable workloads and IT modernization spend to come.
TBR Talks is produced by Technology Business Research, Inc.
Edited by Haley Demers
Music by Burty Sounds via Pixabay
Art by Amanda Hamilton Sy
DOGE Disruption in U.S. Federal IT Services
TBR Talks Host Patrick Heffernan: Welcome to TBR Talks: Decoding Strategies and Ecosystems of the Globe’s Top Tech Firms, where we talk business model disruption in the broad technology ecosystem, from management consultancies to systems integrators, hyperscalers to independent software vendors, telecom operators to network and infrastructure vendors and chip manufacturers to value added resellers. We’ll be answering some of the key intelligence questions we’ve heard from executives and business unit leaders among the leading professional IT services and telecom vendors. I’m Patrick Heffernan, Principal Analyst, and today we’ll be talking about the current state of the federal market with John Caucis, Senior Analyst for TBR’s Federal IT Services Practice, and James Wichert, Analyst for TBR’s Federal IT Services Practice. John Caucis, James Wichert, welcome back to the TBR Talks podcast, season 3. You guys were on at least twice so far, probably four times now. Probably twice each season I would guess right?
John Caucis, TBR Senior Analyst: Yeah, that sounds right.
Patrick: Okay. All right. I’m not going to hold you to it, I just thought, you know. Start off with that. Well, we want to talk about today. You guys cover the fed sector, federal IT in particular. You look at a range of companies, we’re going to talk about all of them, I’m sure, over the course of the next 20, 25 minutes or so. It is obviously a really hot topic these days, a lot more than it was a year ago. Probably the hottest it’s been for a long time because of everything that’s been happening since the inauguration back in January. So, we’re going to cover a lot of ground. If there’s certain things that I forget to ask about, jump in and add them. And at the end, I definitely want to get your take on sort of where things are going to end up, what are we going to be saying a year from now.
Current state of chaos
But right now, let’s just start with sort of the current apparent chaos across the federal government. Is it going to hurt or is it going to help the federal IT services vendors? Because IT after all, it’s a utility and you need to keep the lights on, unless you shutter an entire agency or department, in which case, I guess you don’t need to keep their lights on. And the DOGE guys are supposedly all about tech enabled efficiencies, so that should be a sweet spot for the federal IT services integrators. Yes. No? I know there were there was a lot in there, but sort of current state of play and is it a plus or minus for the companies that you cover? John. You go first.
John: I think it’s really going to vary by company. In the short, short term, I think there’s going to be pain for everyone. Because everyone to one degree or another, every one of the major contractors, especially the major contractors given their scale, given their breadth, given their exposure to the federal market, they’re going to be hit. You know, if, for example, I know that Deloitte, had a large north of $200 millions worth of contracts on the books with USAID. Obviously, if those come off the books, that is going to move their needle to the left significantly. IBM signed a $90 million contract with USAID, I think it was last, third or fourth quarter of 2024. That’s on the block, obviously. The contractors that have a larger footprint with the DoD will probably be more insulated from the disruption in the market. Although, Secretary Hegseth has indicated, about a month ago or so that the Trump administration is planning to reduce the defense budget by 8%. I know they dropped the dollar figure, and I think they said it would be something like $50 or $60 billion, whether that’s per budget cycle or over the next five years in total, that’s not clear. And we’ll come back to the issue of lack of clarity, because that’s one thing that is hitting all of the vendors equally. Just what are the- what is DOGE doing? What’s their strategy? How are they going about doing this? You know, the lack of clarity there is going to hit everyone equally. So, in the near- in the very near term and, oh, by the way, keep an eye on SAIC releases their earnings on Monday the 17th. They’re really going to be the first of the major FSIs to give us an in-depth take, I’m hoping, an in-depth take on how they’re being impacted by DOGE, although their discussion is going to focus exclusively on 2024, which is their fiscal 25. After that, keep an eye on what Accenture says. They’re releasing their earnings shortly after that. And I’m sure that with Accenture Federal Services being roughly 8% of their total business globally, they will be discussing the impact that they have seen thus far. Then after that, it’s really, wait a month until the federal earnings season really kicks in around the second or third week of April, right through the end of May, the beginning of June, when we have Booz Allen and SAIC. But in a nutshell, I think it’s going to vary from contractor to contractor depending on their exposure. The contractors that have a larger civil business or larger civil exposure, I think they’re going to be hit hardest initially. And then we’ll see how it plays out in the DoD. And at this point, I haven’t heard anything about how the intelligence community could be impacted. It sounds like more of the mission critical work that the Trump administration has underlined as being priorities, reside on the DoD and the intelligence community side. So, in a very large nutshell, I hope that provides some insight. James you may have some additional comments.
James Wichert, TBR Analyst: I mean, yeah, the simple answer is this hurts them in the short term. All this chaos, all this uncertainty, it’s just not good. It’s funny to say that, as you know, in consulting these tumultuous times where people want insights, you know, consultants tend to do well. But at least on the federal side, there’s not much of a focus on that in the short term. And I mean, in theory, you’re right that DOGE are after tech enabled efficiencies. But right now, I would say we’re seeing parallels to when we saw Musk take this “move fast and break things” approach when he was forced to take over Twitter a couple of years ago. Broad cuts in spending were quickly implemented, they delay payments on contracts, on rent, fired large chunks of people, and then they just rehired individuals that they realized were essential later on. And there was a lot of chaos, and it just did not lead to an efficient few months. And while FSIs have expressed interest in working with DOGE on pinpointing ways to increase efficiency and to make tactical changes, I mean, Musk doesn’t seem interested in switching up from his sledgehammer approach, at least in the short term. I mean, consultants would want to be more meticulous. They’d add costs to his short term. He feels confident that he can just repeat the approach he took with Twitter and apply that to the federal government with the end goal cutting something like $2 trillion in spending and I mean, now looking at what DOGE and the Trump administration have been trying to cut spending on. They’re loudly going after any contracts related to DEI, strategic communication, executive coaching and these other areas that they deem to be superfluous. Well, you know, technology modernization and operational efficiency are still seemingly priorities, but I mean, even then, contracts pertaining to that are getting caught up in all this chaos. We’ve seen, the 18F consulting unit of the General Services Administration has been shut down. Their roughly 100-person workforce was responsible for handling the IRS’s tax filing service, helping develop government agencies websites, helping them procure new technology. I mean consulting engagements; they’re another big thing they seem to be after. And you know, John and I have been talking about this with the press lately, but the issue with going after consulting services is they haven’t really outlined what they are and like where does the line stop between consulting and technology modernization. A lot of advisory services are embedded into larger IT services contracts. So, it’s going to be hard to identify. And we’re going to get a lot of chaos in the in between as vendors and agencies go into increasingly granular detail on what they do. And, you know, it’s not just like the types of work, you know, DOGE and the Trump administration are targeting, it’s certain agencies in their crosshairs as well, like the Department of Education, National Oceanic and Atmospheric Administration, the IRS, the VA, USAID, whereas there’s a little more job security for those FSIs helping enable border security and working with the DoD. I just think, yeah, in the short term this is all pretty rough for vendors. We’re already seeing efforts being made by companies to trim their headcount, reduce their billable staff. I do think there’s some long-term opportunities though, particularly for the vendors that go after employees with security clearances and skilled in emerging technologies. Eventually, the federal government is going to have to rebuild from this slash and burn approach and whether that’s with, you know, DOGE or the next administration. Especially since these headcount reductions at agencies will lead to them needing to increasingly rely on vendors while these systems are modernizing. They still do need to modernized. And looking at consultants, while they’re a private sector solution to bureaucratic gridlock and where the government can pay them per project versus salary in perpetuity and there’s less red tape, so, there’s always going to be a place for them. You know, especially in a world with less federal employees, like the VA’s headcount is expected to be- it’s like culled by like more than 80,000. And that’s just the VA. I think the IRS is expected to half their headcount. Eventually there are going to be contracts for FSIs to try and mitigate the chaos. And yeah, they’re going to need a lot of people for that and optimized infrastructures.
IT infrastructure modernization
Patrick: I wanted to just touch on something you said about the IT infrastructure, the need for that modernization. If I’m not mistaken, a lot of why the federal IT needs to be modernized is because some systems are still running on Cobalt and like the most, you know, I mean, I know it’s not great big IBM servers taking up an entire warehouse, but it’s not that far off from it. Is there the rationale is there the argument sort of that the sooner we just break all that, it’ll be easier to rebuild? Because part of those big contracts for the modernization was the slow migration. Not slow intentionally, but you know, deliberate, but also, like you know, secure, like all that kind of all of that IT modernization had to happen in a government secure, accountable way. Now it’s sort of, we’re just going to break the whole system. And so, when we go to rebuild, we don’t need those Cobalt engineers because we’re just not- we’re going to build something brand new. Is that crazy to say that or is that a potential that that’s what’s going to happen here.
John: Well, you’re right when you say that there’s a lot of antiquated technology that is still at the heart of federal IT infrastructures. There’s no doubt about that. And a lot of it is still running on Cobalt. They’re still using old mainframe type systems. And that has to change. The first major accelerator, because as you may have heard this adage, but, you know, things in the government tend to move in a glacial pace,
Patrick: Right.
John: and, and modernization-
Patrick: Right, well I was with the government so, I know how- I know exactly how it moves so-
John: Exactly, and in the lead up to the pandemic five years ago now, modernization was happening. There was- nobody would try to make the argument that we don’t need to modernize, we don’t need to start moving towards digital infrastructures, cloud-based infrastructures. And now on top of that, AI and automation and then quantum in the near future as well. No one would say we don’t need to do those things. But, everything was moving, they said the government, the federal government tends to be 3 to 5 to 7 years behind the commercial space in terms of its technology maturity.
Patrick: Right.
John: The pandemic did accelerate that because it really put the spotlight on the inadequacies of most federal IT infrastructures. And it was mostly on the civilian side because the DoD and the intelligence community, because of the core nature of their missions, had to stay ahead, technologically ahead of our nation state rivals, Russia, China, etc. who continue to accelerate their investment to IT enable their own military infrastructures. So, it was mostly on the civilian side. So, we do have kind of an example of how to do it from the DoD, but we have- there’s still a bunch of modernization work that still has to happen despite the Covid related acceleration five years ago. The bull market in IT spend that was, you know, really initiated by the Biden administration with a heavy emphasis on security, with an increasing emphasis on AI. But it has still- the pace has increased. You know, and this is one area where I’m kind of hopeful about the, you know, once DOGE gets past the Hulk smash approach, which is
Patrick: It’s what we’re in now.
John: It’s what we’re in now. And frankly, I think it’s somewhat reckless. And, you know, once they perhaps take a step back and take a more graduated, more moderate, a more judicious approach to doing this, and, oh, by the way, they really need to engage industry more. I’ll call out a couple of examples here. The CEO of SAIC, Toni Townes-Whitley. The CEO of L3 Harris, immediately in December, I think, reached out to the DOGE advisory board, reached out to the Trump administration and said, we’re here. I mean, it’s almost like if you remember back to the 70s or 80s, The Six Million Man program, where they have the intro and they would say, we have the technology, we can rebuild it. Well, you know, the CEOs of these companies, in particular, L3 Harris and SAIC, we have the technology. We can do this, engage with us. And they’re still waiting for that. It’s now the middle of March.
Patrick: Yeah.
John: And to my knowledge, there hasn’t been a more aggressive, a more active outreach on behalf of the DOGE advisory board to do that, to engage with industry. It’s just been, as I termed it, Hulk smash.
Patrick: Yeah.
John: Which doesn’t work. So, there’s going to have to be some pullback. You know, like I said earlier, keep an eye on the earnings, you know, to see just what the fiscal value of the disruption has been.
Patrick: Yeah, that’s the other observation from what you said earlier John, is because one of the characteristics among the, you know, Hulk smash is one aspect of what’s been happening, it’s also been a lack of transparency and a lack of clarity and accountability into what’s going on. That can happen- that has happened in the absence of any clear, defined metrics of the impacts beyond sort of the layoffs. What we’re going to see with SAIC, what we’re going to see with Accenture, what we’re going to see with all the other earnings is, this is the actual not just the market reacting and the market’s fickle. Who knows why the market goes up or down. Right. But a company’s earnings are pretty clear. Like there’s no getting around like what happened here. I mean when- Deloitte doesn’t report its earnings, but like you said, Deloitte $200 million contract with USAID gone. That’s going to hurt Deloitte. And there’s no, like there’s no fudging that, the same thing is going to be true with SAIC and the others. And so, where you can sort of claim to have saved a billion here and a billion there and then not be exactly held accountable for what that savings was. You can’t say that to an SAIC that can actually just say, look, you know, we’ve got shareholders. We got to put numbers on, you know, we’ve got- we’re being audited. We can’t just say we saved or we, you know, we did this.
FSI mega trends for 2025: lack of M&A, new partnerships, and contract structures
All right. Let’s step away from the chaos in DC for a second. What are some of the other mega longitudinal trends that the FSIs are facing this year? Are there going to be mergers? Are there going to be blockbuster acquisitions. Is it going to be more private equity encroachment on the space. What’s next John?
John: I would say, well, in terms of mergers and acquisitions, if I’m a member of the C-suite at any of the federal systems integrators, the FSIs, I’m pumping the brakes on that.
Patrick: Full stop
John: Yeah, full stop. And not because valuations are out of control like they were the last several years, which was one of the primary demotivators of acquisition activity, things were just too expensive. Valuations have come down but it’s not a strategic priority. Right now the strategic priority is trying to figure out how to navigate the chaos.
Patrick: Yeah.
John: And they don’t have enough guidance from- you know, because of lack of transparency, because of lack of engagement with the DOGE advisory board, they don’t have what they need to craft a one year strategic window, let alone a 3-to-5-year strategic window, which is the kind of thing that happens at the C-suite level. They just can’t plan for these things. So, as far as you know, all the nice to have things, which would be nice, you know, for somebody who’s trying to expand their cloud capabilities. It would be nice to acquire some cloud capabilities or consultancies with ServiceNow expertise or AWS expertise. Who knows what’s going to happen a year from now, maybe, you know, maybe AWS, even though they’ve been one of the leading hyperscalers in the market, especially in the intelligence community, you know, maybe their business is impacted- their top line, not just the bottom line, not just down the P&L, but at the top lines are going to be shaved by 10%, 20%, 30%. And that work’s just not going to be available.
John: So, M&A activity I think is off the table, maybe in lieu of that, the focus might be enhance and strengthen your partnership ecosystems. Because eventually when things stabilize, you’re going to need to be able to bring the right team to the table the first time, because all your competitors are going to be doing that. And the competitors like Booz Allen and Leidos and Accenture that have been the most proactive and have the best run partnership ecosystems, the best managed partnership ecosystems, will have an advantage. Others have been catching up. SAIC has done a great job of enhancing their relationships with AWS and the other hyperscalers. And we’ve been following the partnership related activities of the FSIs very closely. And we’ve seen others like General Dynamics Information Technology doing the same.
So, enhancing your partnership ecosystems, I think is going to be key. But just trying to protect what you have, I think even more of a priority than that will be absolutely optimize communications with your counterparts on the agency side. When you pick up the phone and you want to talk to the procurement official, the procurement counterpart on the other side, they have to, first of all, be available. But you need you need to optimize those relationships, A. B, there has to be a very clear-cut business case, particularly with what would fall under the auspices of consulting services.
Patrick: Right, right.
John: Okay. Those are going to have to be tied much more directly. And oh, by the way, one of the challenges there, is that there isn’t a universal set of job codes in contract to define all the different types of consulting. It’s just in many cases, you know, under one job code or one title and there’s hundreds, at least I would imagine, of different types of consulting, and you just can’t parse them out. So, the vendors are going to be, you know, their procurement teams, their bid and proposal teams, their price to win teams, are going to be under tremendous pressure to be very clear, to have optimal communications with their counterparts in the agencies, and to clearly establish the link between, you know, how they’re going to generate ROI, how are they going to generate your real transformation and do it in a cost effective way.
My fear is that we get pushed back to the environment about 10/12 years ago, the LPTA or lowest price technically acceptable contracting environment. Although some of the executives, at the FSIs have indicated that this is a slightly different environment. We were not going back to sequestration. You know, we’re not just doing what we can for the lowest price. We are trying to advance the technology maturity of agency. So very long-winded answer.
Patrick: The IDIQ days are definitely gone right? The indefinite duration, indefinite quantity. I mean, those bids were fantastic, or those contracts were fantastic for the FSIs when they existed.
John: Yeah, yeah. IDIQ might, be diminishing as a contracting approach.
Patrick: Yeah.
John: What I’ve also heard is that there’s going to be a greater shift. At least SAIC was expecting this from cost plus type contracting structures to fixed- firm fixed pricing.
Patrick: Yeah.
John: Because that puts the risk, all the onus on the contractor to deliver. So those contractors like SAIC, Leidos, etc. who have been optimizing, and Leidos is the best example of this, have been optimizing contract performance. They’re already ahead of the game.
Patrick: So, in the commercial space, you go from cost plus contract, and then you have fixed price contracts and then you have outcomes based. So, the difference between fixed price and outcomes based, being fixed price is here’s the job, go do it, here’s what you can charge for it. Outcomes based is, I’m only going to pay you if I get this outcome. But for the contractor, for the services contractor, the result is basically the same, which is you’re getting paid a certain amount of money. You can say, all right, I’m going to book $1 million here because that’s what I’m going to get, because I know I’m going to hit the outcomes. I know I’m going to get the million dollars. I know you’re going to pay me this fixed price of $1 million. The challenge though, is, you know, in a fixed price, the concern is, wait a minute, are you going to be able to do this project the way I think you’re going to do it, which is you’re going to charge me $1 million, put you’re only going to make 250, you know, you know, you’re going to make your margin, but not a lot more, or you’re going to be able to apply a lot of AI and automation and all that. And so all of a sudden I as the buyer, am overpaying, even though I’m paying you a fixed price, I’m actually overpaying because I didn’t realize you were going to be able to do this faster than that. And the same thing with outcomes based where it’s like, wait a minute, if you can get to that outcome and you can do it in, you know, much cheaper in your own- So, there’s always been a reluctance to accept those kinds of contracts from the buyers because they’re afraid that they’re going to be overpaying when the cost plus- And so it comes back to like the procurement mindset of I’d rather just do cost plus, and I’m never in trouble for having overpaid.
James: Or you end up with the situation from the first Trump administration where you’re, you know, you’re Boeing, you’re Boeing Defense, Space & Security, and you make a bid for Air Force One. You wind up horrifically made in your margins-
Patrick: Right.
James: You mess up the bid, you didn’t anticipate these costs to ramp up significantly.
Patrick: Right. Right. Yeah. There’s definitely the risks on the services contract or the supplier side. And that’s always been like everyone always defaults to the lowest risk commercial arrangement, which I guess makes sense. At the end of the day, it’s still humans that are signing contracts, and it’s human nature. But, James. Sorry, I went off on a tangent there, but I couldn’t help myself. James, some thoughts on the megatrends in the space.
James: I mean, I think John hit on M&A really well there. I think my view on it is all the FSIs valuations have cratered on Wall Street. I think everyone’s down between 25% and 50% from their November highs last I checked. I think ICF might have been like over 50% for like one brief window, like for all these companies together that’s like, I don’t know, over $30 billion in market cap just gone. And then I mean, that’s part of why I don’t think you’re going to see much M&A activity in the short term. It’s just going to be harder to get financing with all this uncertainty. And vendors are just going to be wary of splurging on M&A when they need to focus on, you know, surviving at least the next six months, even 12 months. They’re not sure if the Trump administration is going to just change course and, you know, those that will consider M&A will wait until the slash and burn has started slowing down and long-term definitive goals are actually outlined, like no one’s thinking they should spring for a business that does heavy work with USAID right now, even if the price is like probably as low as it’s going to get, they’re going to wait just because they don’t know what’s going to happen.
I guess you might see, and we did notice this in the last few years. You have vendors with venture capital arms like Maximus making more targeted strategic investments. And you might see an uptick in that activity. I know Maximus recently made their first ever investment via their venture capital arm. Yeah. Collaboration from partners would accelerate. Vendors are going to really push on redeploying their free cash flow into ensuring their businesses are still standing, come this time next year. I think, you know, we’ll see most vendors accelerate their investments in emerging technologies and develop meaningful proofs of concepts. And I mean, yeah, no, I think John really, you know, hit on that one really well.
John: If I could. Just one quick comment on the contract structuring, the trend. We have been hearing the term “outcomes”
Patrick: Right
John: being dropped more in the last 40/50 days
Patrick: That’s good.
John: as DOGE has taken- has this gone to gone to the federal space with the sledgehammer.
Patrick: Yeah.
John: So, I think we are actually moving in that direction. And we may go beyond, you know, many of the contractors actually break out their revenues and they will give you an itemization of, this is the proportion of our revenue that’s from fixed price, cost plus time and materials. I’m getting the sense that there’s going to be much more focus on outcomes over the next- at least the next four years of the Trump administration.
James: Do see that carrying over into the civilian space though? I know defense has always had more of a say in outcome-based contracting, they’re more technical, they have that more experience out of federal civilian, especially with all the cuts going on. Do you see that really picking up volume there, like gaining traction?
John: Well, I think there’s more opportunity in the civilian side to apply, we mentioned this earlier, some of the metrics, you know, where you can, you know, you can manage what you can measure. Okay. There are established metrics for measuring citizen engagement already in place. And Booz Allen has been developing, and Accenture and others that are more out in front in terms of AI, they’ve been developing those metrics and they’ve been using that to sell their capabilities. You know, this is how we, whatever those metrics are, you’d have to talk to an AI expert. But, so some of that, the ability to measure, is already in place. So, I would say yes from that perspective. But you’re absolutely right. The maturity of the DoD and the intelligence community is greater in other areas simply because of the nature of what they do or what they need technology to do for them.
Possible acquisitions
Patrick: Yeah. So, one thing, James, I want to come back to. You said, because John mentioned and I had to write this down because I’m going to use this a lot “when things stabilize, bring the right team to the table the first time.” But what you said was, if we’re going to see acquisitions, it’s going to be picking up those skills with your technology partners. Right. Did I hear that right?
James: I would view this more so as like during this like lull in M&A activity, you see pivoting into their partner networks and leaning on them more. So, collaborating together on proofs of concepts, you know, working in R&D labs together.
Patrick: Right.
James: I know GDIT has been expanding their presence across the US, so they can work on site with partners and clients.
Patrick: Right. So, then when we get to that, when things stabilize, if they’ve done all that sort of- laid all that foundation, done that groundwork, then they’re going to be able to bring the right team to the table the first time.
James: Yes.
Patrick: Right?
James: Yes.
Patrick: Right?
James: Yes.
Patrick: Yeah. Excellent.
John: Something just occurred to me, and this is thinking way outside the box here. But one area where we might see acquisitions, because the initial round of Hulk smash DOGE cuts have fallen disproportionately on small to medium, in many cases, disadvantaged, minority owned or veteran owned businesses. And in many cases, those businesses are so small that they only have one client, one agency as their client. And that business has disappeared overnight. But many of these companies have developed very specific niche capabilities and technologies that could still be of value to the larger FSIs, you know, to their larger peers. And many of these FSIs, James mentioned a couple, Leidos and Booz Allen for example, they came off of the four-year bull market in federal IT with enormous cash flows. One of the ways they can plow that money back into the company is to maybe step up and say, because they’re already partnering with a lot of these small to medium contractors, say we’ll bail you out. You know, we can keep you from going under, you know, by making an investment in your company, bringing you on board, you know, holding your hand, walking you through this period of tumult, and oh, by the way, then, you know, we have access to those technologies. I mean, it all depends on what they bring to the table. I would expect to see more in the AI and perhaps in the quantum and security areas.
Patrick: There could be some kind of creative partnering, creative investing that goes on
John: There may have to be.
Patrick: You know, almost like angel investor.
John: Yeah.
Who is set up to succeed and who is not
Patrick: Yeah, yeah. All right, let’s wrap it up. The last thing we want to talk about here, because, well, I was going to say at TBR, we always talk about specific companies. We’ve already mentioned a bunch so far. At TBR, we increasingly talk about ecosystems and I’m going to come back to what you said. You know, the right team to the table the first time. I think that’s going to be super important to keep in mind. And as our research continues to evolve around how these companies partner in the ecosystem, I think that’s something we’ll all be keeping in mind. And I know we have a lot of research coming out around the FSIs and the hyperscalers and the rest. But let’s, each of you pick one company and say, okay, when we get to the other side of this maelstrom, this company is going to be, and, I guess, make your choice. Do you want to say this company is going to be completely swallowed by the black hole and gone, or this company is going to be, you know, standing tall and proud and going forward. James, I will put it on you first.
James: Yeah. Okay. Well. I don’t think it’s going to be ICF in the best position for sure.
And even just ignoring all the DOGE craziness, GDT is still struggling with the lack of synergy between GDIT and mission systems. So, I mean, honestly, ManTech is probably my dark horse candidate which-
Patrick: I like it
James: which feels really crazy to say. I think they’re probably just in the least volatile long-term position. They’ve been making progress in the federal civilian market, but their bookings have always remained concentrated within the defense and intelligence market which is where their roots are. Like in 4Q we saw ManTech win $1.4 billion contracts to develop cyber platforms that support ICON objectives. You know, the defense intelligence clients, they’ve been seemingly less impacted by DOGE’s crackdown on mission critical spending. The real reason I’m picking ManTech is like, they’re private. And I think that leaves them in the safest spot. Basically, while all their FSI peers are racing the quarterly earnings clock during all this chaos, ManTech can take their time and wait for the Trump administration to clearly define spending priorities. And once, you know, they’ve identified that, they have the Carlyle Group’s financial backing at their disposal to build out what they need to do and, you know, they’re not going public any time soon.
Patrick: Right.
James: Certainly not on valuations right now. And so, they can focus on the fundamentals, you know, people and permission digital consulting practice. They can get displaced employees from AFS and Deloitte and they can recruit employees from federal agencies with security clearances or really niche skill sets.
There’s a lot of opportunities. And, of course, they’ve also been making a lot of organizational changes recently, like creating the Chief Acceleration Officer position, which, I mean, we had never seen a company do that before in the Federal IT Services Benchmark. They’ve added federal civilian and federal defense advisory boards to give them better insight into those client markets. They’ve launched the mission readiness and enablement practice. They’ve made an insane amount of appointments in like the last few months. I think right now they’re my dark horse-
Patrick: Yeah.
James: The least impacted at the very least, the most potential.
Patrick: It is a surprising one, that’s for sure. All right, John, what do you got?
John: Well, in this case, bigger isn’t always better, but in the current market, in the current environment, bigger might be better and no surprise then, I would have to nominate Leidos. But for a couple of real reasons beyond just their scale, they are well diversified across the federal market, about half of their business comes from the DoD space and the intelligence community. The remainder, the bulk of the remaining comes from the civil space. They do have a very large health IT business, which could expose them. I know that there’s been indications that some of the cost cutting activity may fall disproportionately in the health IT space, but there’s still a lot of monetization integration work that has to happen there.
Leidos is also fairly well diversified geographically relative to their federal FSI peers.
They have about 10% or 15% of the revenue coming from overseas, the UK and Australia primarily, and they have been doing well there. So that could offset some of the impact to their top line. They have a contract, an order book, that is chock full of multi-year, long tail, multi-billion-dollar strategic programs. For example, the $11.5 billion Defense Enclave Services award, which is ongoing, which is fully ramped up. And also, those contracts and their go to market model is really IT focused. They have a limited exposure, they don’t talk about any advisory capabilities they have. I know they have them. But they aren’t, and now this is a good gear shift over to the vendor that I think is the most venerable but also the most vulnerable, which would be Booz Allen.
Patrick: Right.
John: Booz Allen is, when they report their fiscal 25 earnings and their performance at the roughly around the Memorial Day time frame. Their fiscal year wraps up on March 31st. I fully expect that they’re going to have surpassed over $11 billion in annual revenue, three straight years of double-digit growth on the second or third largest revenue base within the sphere of the contractors that we track, just had an amazing run the last 3 or 4 years. It’s over.
Patrick: Yeah.
John: Because they are more akin to a traditional management consulting firm. If you go back to what they look like, how they were operating, how they were structured prior to their IPO in 2010/2011, whenever it was. They were mentioned in the same breath as McKinsey, BCG, Bain.
Patrick: Yeah
John: You know, they had a world commercial business and world technology business, which was their federal business. They separated from the commercial, focused on federal. And then in about, 2016, 2017, 2018, 2018 particularly, they started to take on more technically complex work. So, they have diversified their portfolio and their go to market a bit more, but they’re still advisory led.
Patrick: Yep.
John: How much, what proportion of their business? It’s really hard to tell. But they’re going to be hit the hardest. And I think that the same factors impacting Booz Allen are going to have a negative impact on Accenture Federal Services. We have heard early on that there has been some restructuring there, some workforce rebalancing. That would also impact CGI Federal, who has made some acquisitions to become more consulting focused, although they still have more of an IT focus as well. And then, because of their small size, because of how nascent they are, IBM Consulting’s federal group, they made a strategic acquisition, strategic to their size at the time, it was two years ago roughly, they acquired a company called Octo Consulting obviously to expand their advisory capabilities. And they’re just starting to get off the ground with that. And now, you know, that could be derailed, at least temporarily. But the grandest negative impact is probably going to be Booz Allen Hamilton.
Patrick: Yeah.
John: But I see Leidos as coming out of this. They’re already the best positioned, strong cash flow, strong profitability, diverse model, more technically focused. With one area that I’ll call out before we move on. It’s still unclear as to in the DoD how much of the 8% budget cuts or the DOGE related actions are going to impact research and development. And Leidos does have their R&D subsidiary, Dynetics, which they acquired in 2020, which generates, estimates vary, but between $1 and $2 billion, you know, that’s roughly 6% to 7% of their revenue base. I know that hypersonics, for example, is still a strategic focus of the Trump administration. But all that is underpinned with R&D. If those cuts fall disproportionately on research and development, that could hit Leidos pretty hard. Beyond that though, I think they’re fairly well diversified and diversified enough just to weather the storm.
James: And for the listeners to this, keep an eye out on TBR’s social media channels for an upcoming special report from John and I, we’ll be going into each individual vendor on our benchmark and what the impact of DOGE will be in the short term for them and how they might face that. Also, I might suggest reading the Financial Times article that John got a quote in, excellent read, great quote.
Final thoughts
Patrick: Yeah. Thank you for saying that, James. So, yeah, the special report, the Financial Times article. And I think those, those two things, plus this podcast are going to be a really good marker for us because we’ll meet again in six months here in the studio. And we’ll talk about how much we got wrong, how much we got right, how much we never saw coming. Because I feel like if we had done this six months ago, we did not anticipate what we were talking about today. So
John: Well, the volume and the pace of change right now is so high we might have to get together in a month.
Patrick: Yeah, it’s a good point
John: Because we do have the federal earnings season coming up as I mentioned earlier, it’ll run through late April through the beginning of June.
Patrick: Yeah.
John: You know, so maybe we reconvene in two months or so, because then we’ll have a full picture.
Patrick: Right. Well, I mean, a full picture of chaos is still a picture of chaos.
John: Yeah.
Patrick: Gentlemen, thank you so much for coming in. We will do this again very soon. Thanks.
John: Very good. Thank you.
Patrick: Next week I’ll be speaking with TBR Principal Analyst Chris Antlitz about Mobile World Congress 2025. Don’t forget to send us your key intelligence questions on business strategy, ecosystems, and management consulting through the form in the show notes below. Visit tbri.com to learn how we help tech companies large and small answer these questions with the research, data and analysis my guests bring to this conversation every week.
Once again, I’m your host Patrick Heffernan, Principal Analyst at TBR. Thanks for joining us and see you next week.
TBR Talks: Decoding Strategies and Ecosystems of the Globe’s Top Tech Firms
Join TBR Principal Analyst Patrick Heffernan weekly for conversations on disruptions in the broader technology ecosystem and answers to key intelligence questions TBR analysts hear from executives and business unit leaders among top IT professional services firms, IT vendors, and telecom vendors and operators.
“TBR Talks” is available on all major podcast platforms. Subscribe today!
https://tbri.com/wp-content/uploads/2025/03/doge-disruption-in-us-federal-it-services-cover-scaled.jpg25602560TBRhttps://tbri.com/wp-content/uploads/2021/09/TBR-Insight-Center-Logo.pngTBR2025-03-26 09:46:302025-03-26 09:46:34DOGE Disruption in U.S. Federal IT Services
TBR Principal Analyst Chris Antlitz dives deep into the stark reality of 6G rollout and the implications of the technology for telecom operators and vendors as well as other over-the-top data and service providers. Additionally, Chris discusses the implications of these investments for consumers, enterprises, governments and IT vendors.
TBR Talks is produced by Technology Business Research, Inc.
Edited by Haley Demers
Music by Burty Sounds via Pixabay
Art by Amanda Hamilton Sy
6G Reality and the Future of the Telecom Ecosystem
TBR Talks Host Patrick Heffernan: Welcome to TBR Talks: Decoding Strategies and Ecosystems of the Globe’s Top Tech Firms, where we talk business model disruption in the broad technology ecosystem, from management consultancies to systems integrators, hyperscalers to independent software vendors, telecom operators to network and infrastructure vendors, and chip manufacturers to value added resellers. We’ll be answering some of the key intelligence questions we’ve heard from executives and business unit leaders among the leading professional IT services and telecom vendors.
I’m Patrick Heffernan, Principal Analyst and today we’ll be talking about 2025 predictions for 6G with Chris Antlitz, Principal Analyst for TBR’s Telecom Practice.
6G Capabilities
Chris, good to see you again. Thank you for coming in. A lot of fun doing these podcasts with you, because I feel like the telecom space is something that, I never stop learning about because I clearly don’t know enough about it and it’s changing- for such a huge industry it seems to be changing a lot, especially in the last couple of years. I know we’ve had some discussions after the trips you’ve taken to the big 6G summit. And I know we chatted back in November, but you since then came out with the Predictions document around 6G and talked about where you saw- where you and our colleagues here TBR saw the market going.
And one of the things you talked about was, you mentioned in the piece was, you know, will 6G, the open question of whether or not 6G will be a brand only or a legitimate set of truly differentiated features and capabilities that bring value. And I think you meant bring value for the CSPs, not for the entire market as a whole. Or did you mean for the whole market? And, do you think it’s just going to be a brand, or do you think it is going to be an actually legitimate set of truly differentiated features and capabilities?
Chris Antlitz, TBR Principal Analyst: Yeah, so that statement I made in the special report was specific to the communication service providers or CSPs. But, 6G will have capabilities that will be broadly used even beyond the telecom industry. You can think about enterprise capabilities for industries. You could think about, public sector opportunities for mission critical communications. Think about the blue light services and ambulatory and, you know, there’s defense opportunities there. And, it’s much broader than just telecom.
The evolution of connectivity
Patrick: Right. And so I was going to get to the government part later, but let’s jump into it now because I feel like within the telecom space, but then within the broader, sort of enterprise IT space, we’ve been talking about the opportunity around government services, responses around police and fire and smart cities and all that stuff, and telecom and networking and connectivity has been a piece of that. But it always feels like it’s sort of on the horizon. Is 6G what sort of brings us to where we finally get the smart cities we’ve been talking about for a long time?
Chris: So I think that connectivity is going to evolve and be transformed, but not be the lead. It’s going to be pulled forward by the major, the bigger things that are going on. AI, quantum computing, you know, electrification of the energy grid and how that evolves over time and how that’s supported, the future of transportation. These are things that are in motion, and connectivity is a fundamental ingredient for the transformation of those things. And it’s kind of going to pull it along versus connectivity leading the way or moving at the same pace as these things. So, for example, for AI, the data center, concept of a data center and how that data center interacts with this environment, like from an energy grid standpoint, what is running inside of that data center is changing, the architecture of the network fundamentally changes from a CPU based data center to a GPU based data center.
Patrick: Right.
Chris: And like right there, that is forcing the connectivity to evolve.
Patrick: Right.
Chris: It’s forcing it, but it’s coming from the AI side not being led forward by the, you know, the telcos, if you will.
Patrick: Right. But there is no there’s no data center and there’s no IoT and there’s no- there’s nothing without connectivity. So, I get where these, quantum and other technologies will be pulling through connectivity because they don’t work without it. But if the ROI on the investment in connectivity isn’t there, then how do we get the connectivity that’s going to enable those? It’s the chicken and the egg. But even more than that, it’s a really expensive one, whether you start with one or the other. But you have to have them both. So how do you see whether it’s 6G or just the telecom space generally or 5G and everything, how do you see that that struggle to get the return on investment? And maybe is that where government comes in? Is that where government has to take a more aggressive role?
The new business model
Chris: Yeah, I think government is going to take a more aggressive role. I mean, we saw some of this with 5G. We saw all kinds of stimulus and other programs that came up to facilitate 5G ecosystem development, to varying success. But I think, with regards to the ROI, the business model of telecom needs to fundamentally change. The hyperscalers have already figured out what the new business model is, and the business model revolves around the data itself, not the transmission of the data, which is the connectivity, the pipe model, the utility model.
Patrick: Right.
Chris: That’s what the telecom ecosystem is locked into, unfortunately, that’s what they’re locked into. But the OTT players, like the hyperscalers and the Netflix’s of the world and the Ubers, they are in the data business and they use the pipes to transmit the data and the value that comes through that data, so that how the connectivity is thought about in terms of the broader ROI equation, it’s much more than just the connectivity. You have to look at the entirety of the business model and what is the value of the data in that context.
Who will succeed?
Patrick: So, you mentioned Uber and Netflix, two companies that did not exist, whatever, 15, 20 years ago. But have competitors that have existed since they were founded as well. Are there companies that you are looking at now in the telecom space that you think could make that shift in their business model? Are there any companies that stand out when you look to- starting now and looking five years out, do you say these are the companies that that we have traditionally covered? And I’m not going to name names. I’ll leave that up to you. But who you think are actually going to be able to make that business model shift and succeed?
Chris: Of the telcos?
Patrick: Of the telcos, yeah.
Chris: Yeah, there’s two that come to mind. One is Rakuten who is a hyperscaler that’s trying to transform the telecom business model.
Patrick: Yeah.
Chris: And they’ve had mixed success. The telco that is a traditional telco that I actually think is going to make that jump is Reliance Jio in India.
Patrick: Hm
Chris: Yeah, they’re one of- it’s a very small list of companies I think will actually make that jump.
Patrick: What is it that Reliance Jio has that a traditional telco doesn’t have.
Chris: Well one of the things they have is very little legacy infrastructure. When they started in 2016, they started with LTE. They started with an all IP based network,
Patrick: Okay.
Chris: And most telcos in the world have years of legacy technology that have been band-aided and carried forward into new generations and re-patched together. That’s a limitation to telcos breaking free of that. Reliance Jio doesn’t have to break free from that. They’re starting from day one with basically a greenfield architecture.
Patrick: Okay, okay. And then Rakuten. And know they’re not India based where they’re based?
Chris: Japan.
Patrick: Japan, okay. Is there anything about like the investments by, for Rakuten or for Reliance Jio, are they in any way- or the investments coming from, or their success dependent on, government intervention that’s helped them out? Or have they been, sort of not as dependent on that.
Chris: So, Reliance Jio benefits from protectionist policies in India where there’s a lot of restrictions on who can play and what level they can play in the Indian market. So that is a huge help. But in terms of direct capital injection, we don’t really see that in either country.
Patrick: Yeah. So, at Mobile World Congress are you expecting sort of a full embrace of everything you’ve talked about with respect to the need to change the business model? Or is there still- out of all the people who are attending, is there still not a welcome recognition that things have got to change?
Chris: So, the urgency continues to build, and I’ve been hearing for years about how the telcos are going to change. They’re going to do this, they’re going to do that. And they tried, some of them have tried various things, but they never- they never were successful at the level they needed to be, to really make that transition.
Patrick: Yeah.
Chris: So, for example, like AT&T, they tried, they did try and they spent a lot of money trying.
Patrick: Yeah.
Chris: And they wound up undoing a lot of what they did because it wasn’t working out.
Patrick: Yeah.
Chris: So, you know, it’s not an easy situation. What I’m seeing the telcos doing is reverting back to their- what they know how to do best, and that’s connectivity.
Patrick: Yeah.
Chris: Running the pipes. Building the pipes and running the pipes.
Patrick: Right.
Chris: And they are- some telcos have changed their strategy now, some quite significantly, like AT&T, they are very much focused on that pipe. They are back to focusing on the pipe.
Patrick: Yeah. And if they can do it well and do it efficiently then there’s still money for them to be making there. It’s just not going to be the same kind of growth that they were probably anticipating a few years ago. Right?
Chris: Yeah. That limited- more limited on the growth side. More on the cost savings side and building a very profitable network. You know, AI is one of the technologies that’s going to help them achieve those goals. Like, that’s a whole step function of lower cost for them to run their business.
Patrick: Right, right.
Chris: That if you think about their shareholders like they’re looking for earnings per share growth. Yeah, they want top line too, at the end of the day they want the earnings per share.
Patrick: Right.
Chris: And that’s what the telcos can bring with these new technologies. They can invest and get cost efficiencies. And they can pass that down to the EPS line.
Ericsson, Nokia and Huawei
Patrick: So, two other companies I want to ask about before we wrap up, because these are the companies that when I think about connectivity in the telco space, are the ones that I’ve worked at the most, and that’s Ericsson or Nokia. So where do you see them in the next 3 to 4 to 5 years? How much of their story is a 6G story? How much of their story is dependent on, both of them being able to change their business models to what the realities are going to be in a few years.
Chris: So, their hand’s kind of being forced. I mean, if you look at the balance of power is shifting and RAN, for example, with Ericsson emerging as the primary RAN supplier of the entire world, and Huawei, of course, is there as well. But those companies are, in their DNA and their heritage is hardware engineering, and they do it really, really well.
Patrick: Right.
Chris: The problem is these new network- the new architect for the network, the engineering is still important for the hardware. It will always be important, but the emphasis shifts to the software, and disaggregation, virtualization, all of these, these, technology transitions are changing that business model.
Patrick: Yeah.
Chris: So, you have Ericsson and Nokia and the other hardware centric vendors like they are, you know, they’re facing kind of a crisis moment because, you know, 6G, it’s likely not going to be- it’s going to be an underwhelming CapEx cycle. And it’s going to be, honestly, a lot of it’s going to be software updates to the 5G infrastructure, to the 5G hardware, where you’re doing software updates so that you have better algorithms, you know, maybe some new antennas and, you know, some of that, of course, but it’s going to be much more emphasis on the software and the integration of software, and the cross integration of that telco software stack with other- with partner software stacks and platform providers and things. That’s where you’re going to get the value as this market moves forward.
Patrick: Right. So those are two companies though that have gone through significant business model shifts in the last 3 or 4 or 5 decades. I mean, Ericsson and Nokia have performed well enough to still be around and still be the dominant players in what they do. So, do you anticipate that they’re going to figure out the right strategy to make it through the next couple of years? Or do you think there’s going to be a real reckoning for both of those companies? And Huawei too, lets throw Huawei into the mix, although I know that’s it’s a very different business model and opportunity they have.
Chris: Yeah. So, you have the geopolitics aspect. But yeah, I mean nothing bad is going to happen to Ericsson or Nokia, you know, they’re going to be around 4 or 5 years from now. But they might look different and they might be smaller than they are today. Potentially significantly smaller through divestments, or some businesses are going to, you know, they’re going to fizzle out over time or just- those are aspects that are in play.
Patrick: Yeah. Yeah.
Chris: They’re probably not going to be significantly bigger than they are today unless there’s some big M&A events, which I know Nokia has been acquisitive lately with Infinera. But you know, situations like that, you know, that’ll change the composition of those companies as well.
Patrick: That’s a challenge too, if you don’t do acquisitions all the time, it’s harder to do acquisitions. I mean, that’s what we’ve learned over and over again from the companies that we cover. It’s a muscle memory that if you don’t exercise it, you’re not good at it. And so, for a company to sort of say, well, acquisitions is going to be our growth strategy, that can be its own set of challenges.
Chris: Yeah. And you know, with tech just building on that- with tech, you know, you’re buying into some company, you’re buying into their IP.
Patrick: Yeah.
Chris: And technology is fickle. It changes. What happens if you pick wrong.
Patrick: Yeah.
Chris: And the valuations are high. There’s a lot of risk.
Patrick: Yeah.
Chris: There’s a lot of risk.
Metaverse
Patrick: What happens if you pick wrong, for example, metaverse which we talked about 4 or 5 years ago, and it hasn’t really turned out to be- and yet 4 or 5 years ago we were not talking about a, I don’t want to say quantum that’s the wrong way to say it, but a leap in artificial intelligence that I don’t think anyone expected four years ago, or at least nobody was talking about it.
Chris: The metaverse stuff. Have you tried the Apple- the headset.
Patrick: Not yet.
Chris: You have to try it. You got to try it.
Patrick: I take that back, I was at a PwC event where they had it, and I could change- I could listen to music and change it just by talking to it, which was kind of cool, but it didn’t do anything other than that that I could tell.
Chris: So, I did the demo, the formal demo they have at the store and, the metaverse is going to happen. The question is, when is it going to happen.
Patrick: Yeah. Well, one of the quarterbacks in the playoffs, again I’m dating this by saying it, but the quarterback for the Washington Commanders has been using a VR headset to train. And he plays it at 1.5 speed so that when he’s actually playing the game physically on the field, it seems slower than it does in his training. So that might be the most compelling case. And I can understand where there’s a massive runway of opportunity for companies to come in and can say, you know, we’re going to help athletes train at that much more elite level. So- but is that a 6G opportunity? I don’t even know.
Chris: Yeah. We’ll have to see.
Final thoughts
Patrick: We’ll have to see. Chris, thank you so much, this was a lot of fun as always, appreciate it. Next week, I’ll be taking a quick break from our predictions series to speak with TBR Senior Analyst John Caucis and Analyst James Wichert about the current state of the federal market. Don’t forget to send us your key intelligence questions on business strategy, ecosystems, and management consulting through the form in the show notes below. Visit tbri.com to learn how we help tech companies large and small, answer these questions with the research, data and analysis my guests bring to this conversation every week. Once again, I’m your host, Patrick Heffernan, Principal Analyst at TBR. Thanks for joining us and see you next week.
TBR Talks: Decoding Strategies and Ecosystems of the Globe’s Top Tech Firms
Join TBR Principal Analyst Patrick Heffernan weekly for conversations on disruptions in the broader technology ecosystem and answers to key intelligence questions TBR analysts hear from executives and business unit leaders among top IT professional services firms, IT vendors, and telecom vendors and operators.
“TBR Talks” is available on all major podcast platforms. Subscribe today!
https://tbri.com/wp-content/uploads/2025/03/delivering-digital-transformation-genai-solutions-via-partners-alliances-ecosystems-predictions-for-2025-and-beyond-cover-scaled.jpg25602560TBRhttps://tbri.com/wp-content/uploads/2021/09/TBR-Insight-Center-Logo.pngTBR2025-03-26 09:19:182025-03-26 09:19:216G Reality and the Future of the Telecom Ecosystem
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