Shifting customer behavior and stronger partner competition drive GSI share of total IT opportunity below 9%

As partners continue to emphasize the ecosystem services approach, competition for services dollars continues to become ever more intense. Acquisitions by VARs such as Insight and CDW point to the emphasis being placed on value beyond procurement, which is critical to delivering long-term value to customers, particularly at the enterprise level. Competition at this level has been steadily increasing but has been accelerated by AI. While this has been a clear opportunity across the partner ecosystem, added competition has diversified where customers are focusing their services spend, while Canalys IT opportunity data shows that spend on IT through systems integrators (SIs) in 2024 was US$863.8 billion, up from US$829.5 billion in 2023. Notably, the share of this spend through the top 20 global SIs, while still the majority at US$448.7 billion, has fallen from 52.9% to 51.9%. This is the fifth successive market share decline that GSIs have seen in the SI market. As a result, the overall total market share of the GSIs has fallen from 9.9% of total IT spend in 2019, to 8.9% in total IT spend in 2024.

For the second time in five years, the top 20 GSIs have had a slower growth rate than the overall SI market. While the post-pandemic years favored GSIs because of their large-scale transformation capabilities across enterprise clients, particularly when it came to cloud, Generative AI has caused a notable shift in customer buying behavior. With 61% of partners reporting last year that they saw little or no shift from the proof-of-concept stage to production when it came to their Generative AI projects, in-depth expertise can often be the point of difference in securing the support of key stakeholders. Cloud-native and industry specialist SIs are more effectively positioned to leverage the additional expertise they hold in specific areas, whether it be technology depth or industry depth. The jack of all trades model is no longer palatable to customers, and the complexity of GSI matrix structures means that the same level of expertise is much slower to mobilize in these firms than their leaner, more agile competitors.

Customer risk tolerance starting to break the traditional time and materials model

The competitive advantage stretches beyond agility and speed of mobilization, however, and raises a more fundamental question around the go-to-market and pricing model as a whole. In the era of large-scale cloud transformation, the traditional time and materials model functioned well, particularly when considering longer timelines that are accepted in a shift to public cloud. Increased customer caution in the AI era comes not only from safety and security concerns, but caution around investing money without a clear return. Any investment in the current climate must answer one fundamental question: what does this spend do for my balance sheet?

One area in which this has become clear has been the US federal sector. This market has historically been a consistent growth opportunity, with the GSIs dominating due to their capacity and setup for long-term support at a significant scale. While political shifts have caused ripple effects across multiple sectors, Elon Musk’s “efficiency” drive at the Department of Government Efficiency (DOGE) has targeted large contracts for quick savings, and there are no contracts larger than those federal contracts with the GSIs. Accenture, for example, generates around 8% of its total global fees from its US federal business, and even has a separate entity focused solely on this. On talking to investors uncertain about DOGE-related cuts in its most recent quarterly earnings call, Accenture saw a 7% share decline in one day. Competitor Deloitte has arguably been hit harder, with more than 100 contracts cut or reduced with an immediate announcement of layoffs as a result, specific to Deloitte’s US federal business.

The federal government is not alone, however: many consulting and professional services customers have always, to some extent, had reservations about the time and materials model. And agentic and Generative AI has been the last straw. Customers are unwilling to shoulder the risk of experimentation with this new technology. They are insisting on seeing results. It is this caution that means many GSIs are seeing even lower conversion rates on their Generative AI proofs of concept compared with their ecosystem peers, with some GSIs seeing conversion rates below 3%, across thousands of use cases and after committed spend on Generative AI projects and investments of billions of dollars.

While some GSIs have begun to shift to fixed-based pricing and even incentive-based pricing, this has not rapidly spread across all of the top 20 GSIs, as it ironically requires enterprise transformation of their own business models first. Staffing models are such that, even with effective near- and offshoring, these firms cannot profitably rely on outcome-based pricing, particularly with technology that is still relatively experimental, such as Agentic AI. As the top 20 GSIs look to develop the capabilities to shift away from their traditional models, and aim to focus on product-led growth and successful project case studies that will allow for predictable revenue from any form of incentive-based pricing, they will need to prioritize other high-growth areas.

Where to win in 2025

In 2025, these areas of focus are clear to see and are twofold. Firstly, focusing on expanding accounts via managed services. Canalys predicts that managed services via the channel will grow 13% year on year to reach a total value of US$595 billion. Historically, some GSIs, particularly the traditional big four, have not looked to actively expand their offerings in this area, but there has been a notable shift in strategic emphasis. Market leader Accenture in its most recent quarterly results, saw an 11% year-on-year increase in its managed services revenue, a growth rate of almost double that of its consulting revenue. Accenture CEO Julie Sweet has highlighted this as a deliberate strategy in previous earnings calls, highlighting the importance of expanding opportunities within existing customers. This consistent revenue not only provides short-term growth, it also provides these firms with increased access and the ability to more effectively leverage iterative approaches to Agentic and Generative AI while managing some of the risks inherent in these outcome- or fixed-based approaches.

Another fundamental growth focus will be cybersecurity, which is predicted to grow by 11.9% in 2025 according to the Canalys IT opportunity data. Delivery of cybersecurity services through SIs is expected to match the overall market with an 11.9% growth rate and see US$27.2 billion flow through this channel, representing 28% of the overall cybersecurity market. While uncertainty and caution plague many enterprise buyers, cybersecurity is the one non-negotiable area, and as threats continue to expand rapidly because of AI, enterprises require more significant support, often beyond their own internal capabilities. Again, strength in cybersecurity will also allow increased legitimacy and trust-building for larger-scale opportunities. If companies feel they are secure, they will be more willing to expand their digital transformation strategies to be genuinely scaled and AI-ready.