Last week, we issued our analysis of the Q4 2023 earnings announcements of large public technology service providers. Our takeaways? First, tech service providers grew much slower in 2023 than in 2022, signaling a belt tightening in technology spend. But providers project faster growth in 2024 fueled by core transformations and investments in AI. While providers want to talk about their AI strategies, the real story is that the importance of technology continues to rise.

On average, across the public providers we track — Accenture, Cognizant, Infosys, Tata Consultancy Services (TCS), and Wipro — growth was flat. But their bookings signaling future revenue are way up, particularly for large deals, the kind of co-innovation relationships that are the future of services. For example, in their latest earnings announcements, TCS reported its trailing 12-month order book growing 13.3% year over year (YoY); Accenture reported $18.4 billion in bookings, a 13.5% increase; and Wipro reported a 13.5% rise in YoY bookings.

Providers made announcements that signal their optimism about increased demand in 2024 and reinforce their pivot to support high-performance IT — a strategy to continuously improve business with technology. In particular, the role that strategic partners play through co-innovation and AI underpins the announcements. Providers’ public remarks on artificial intelligence carry three lessons for technology executives:

  1. As providers ramp up their internal use of generative AI (genAI) and automation, ask what benefits it brings to you. Our current advice is to not squeeze them too hard on price at this point — they can’t yet reliably predict how much value AI and automation can deliver.
  2. Providers are learning the hard lessons of implementing and using genAI to automate knowledge tasks and improve processes. You can learn from their experiences to improve your delivery and value capture.
  3. Providers are responding to your needs for AI assistance. Align your AI needs with their competencies, which could be in technology provider relationships they’ve developed, foundation models they build or train, the skills they’ve invested in, or their ability to build applications with control systems around these probabilistic computing engines. Look for experience in your regulatory environment and an agnostic view of the language models.

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