Clients increasingly expect consultants to be AI-powered, but also believe pricing must adapt

28 October 2024 Consultancy.uk

As consultants continue to evangelise the potential of artificial intelligence, more and more clients expect to see it as part of the services offered by professional service firms themselves. More than eight-in-ten consulting buyers are actively looking for consultants who augment their offering with AI – but this also comes with expectations of reduced costs, at a time when many firms are already suffering a slowdown in growth.

Automation has been on the agenda of every sector over the last decade – amid a continued drive to invest in ‘digitisation’ of business processes. Consulting firms have constantly insisted to clients over that period that they must invest in technologies such as Internet of Things, blockchain, the metaverse and – most recently – AI, or ‘be left behind’.

Now, however, it seems that the shoe is on the other foot – as that latest wave of innovation has left clients imploring consultants to practice what they preach. According to a new poll from IBM Consulting, a majority of 86% of consulting buyers are now actively looking for advisory services that incorporate AI and technology assets. Meanwhile, an even higher 89% simply expect that consulting services of any kind should incorporate AI for improved productivity and quality.

Clients increasingly expect consultants to be AI-powered, but also believe pricing must adapt

Source: IBM, Consulting reimagined, powered by AI

Speaking on the findings, Mohamad Ali Senior Vice President IBM Consulting, explained, “We are embarking on one of the most significant transformations of our time as a result of AI, across nearly every industry and profession. Consulting is no different – in fact, it is likely to be one of the most disrupted, given the labour-based business at its core. We are on the cusp of a new era of consulting, one where science and technology are being combined with skills and expertise to create extraordinary value faster. Business models are changing as the consulting and client relationship evolves to deliver new forms of value creation.”

Looking back on previous eras of disruption, IBM’s researchers sought to uncover specifically how the consulting industry might be disrupted by these changes. Contrasting the Generative AI moment with the 2010s shift to Cloud, and 2000s Globalisation, the researchers suggest that one of the key expectations during any epoch of technological change is for services to become cheaper.

In the 2000s, that saw firms lower labour costs by offshoring to low-wage economies such as India; in the 2010s, the costs of technical development and deployment sank. In the current window, however, the change might be most disruptive of all, as consultants’ own painting of GenAI as enabling everyone to do more with less means many of their clients expect the cost of service delivery from AI-assisting consultants to fall.

Clients increasingly expect consultants to be AI-powered, but also believe pricing must adapt

Source: IBM, Consulting reimagined, powered by AI

This has been a bone of contention among consultants for years. Traditionally, advisors charge according to the amount of time they work with a client – the famous billable hours model – but looking ahead, if the hype is to be believed, machinery which can improve speed and accuracy may result in work being completed more rapidly. At the same time, the fact that human labour would no longer be the only key part of such an engagement would see clients unwilling to simply agree to hourly rates being hiked.

In response to this, consultants may need to consider transforming their business models entirely. In particular, they may need to consider increasing the number of ‘partnerships’, either through pricing tied to outcomes, or by shouldering some of the risk a client faces in return for a share of the resulting profits.

The researchers noted, “As consulting shifts from solely people-based to a blend of human expertise and technology assets, pricing will begin to reflect the value a partnership delivers—not just the time it takes to get a specific job done. Outcome-based pricing will become more important, as will value realization tracking and the incorporation of asset licenses into consulting fee structures. Already, 73% of consulting buyers say they want new pricing models.”

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