Artificial intelligence is challenging the fabric of the consulting industry, from the fees companies charge their clients to the corps of graduates who traditionally underpin their business models.
Svirena Tsekova, KPMG’s London-based global head of consulting, agreed that the industry is changing. Client expectations are higher than ever, he said, as the intellectual property and knowledge that once formed the basis of consulting work is becoming increasingly accessible.
We were making good money providing advice. I think parts of our business literally don’t exist anymore.
“Anyone can join and we can reach the level of advice that we used to provide very quickly, sometimes in days or even months,” Tsekova told CNBC. “We were making good money giving advice. I think part of our business literally doesn’t exist anymore.”
price model
But the industry has yet to decide exactly how to charge for this new type of work. Although clients are increasingly saying they want to pay for results, Tsekova said procurement departments still tend to compare consultancies by the number of people assigned to a project and hourly rates.
AI also introduces new costs that companies need to factor into their pricing models, he said. This includes the traditional costs of computing power and hiring people, as well as fees charged by AI providers based on the amount of text their models process.
“It’s very difficult to arrive at a commercially reasonable outcome-based pricing model,” Tsekova said. Most companies are still figuring out the equation, but it will take time, he said.
AI native consulting company
Small, AI-native consultancies are hoping to gain a competitive advantage as the likes of the big four professional services giants Deloitte, PwC, EY and KPMG modernize the game.
KPMG’s offices are located at 15 Canada Square, Canary Wharf, London, United Kingdom.
Jack Taylor | Getty Images News | Getty Images
Emiko Carwie-Smith, head of investor relations at London-based challenger consultancy Elixir, argued that companies like hers are well-positioned in the age of AI. She said she had never billed customers based on time and materials, meaning she billed her staff for the time they spent on a project.
“AI is amplifying and exaggerating the way we were already trying to show up in the market,” Karlewy-Smith told CNBC. “Clients pay for fixed deliverables, fixed results, and value. They shouldn’t really care about how long it takes to create the inputs that produce the results.”
He says customers are now looking for consultants who can help them build solutions, not just advise them on what to do. In one recent project, Elixir helped a global insurance company build an AI-based auto insurance platform, Karlewi-Smith said.
Another advantage that smaller consulting firms may have is the speed with which they can implement AI in-house. Carlewi-Smith said it took Elixir six months to get the data into a format that could be fully used by its AI models, and questioned how long the same process would take for a company that employs tens of thousands of people.
“The problem they have is they’re huge and we’re nimble,” she says.
Change in new graduate recruitment
Another element of the consulting business model is being questioned: the graduate hiring pipeline.
The industry traditionally hires thousands of university graduates each year and puts them on the career ladder, often starting with entry-level tasks that can now be largely automated, such as research, data analysis, and presentation creation.
The traditional view of auditors, especially junior auditors entering the profession, has been that they are people who spend much of their time doing manual “checking and typing” on the job.
Claire Trachet, a former mergers and acquisitions banker at Deutsche Bank and now founder of London-based advisory firm Trachet, told CNBC that AI is helping junior employees work faster. But she wondered how they would gain the experience they needed to progress once they no longer had to do the basic work themselves.
Some people wonder why they would spend so much time on a task that an AI can complete with the click of a button.
“The problem is that you can’t form your own judgment or intuition,” Trachet said. “Sound professional judgment is built on reputation. It’s a craft. Those who stand out later are those who make it their own.”
Large, long-established companies are responding by rethinking the way they train human resources. Paul Goodhue, global assurance innovation and digital leader at London-based EY, said AI was already transforming tasks traditionally performed by junior auditors, such as checking numbers against source documents.
“The traditional view of auditors, especially junior auditors entering the profession, was someone who spent a lot of their time doing manual ‘checking and typing’ on the job,” Goodhue told CNBC, referring to the process of verifying numbers.
“Today, AI offers the possibility of actually doing the initial preparation for that work on behalf of audit professionals.”
EY is also developing new roles, such as data delivery specialists who prepare data for audit teams, product managers who help develop technology platforms, and experts who understand clients’ technology strategies and risks, Goodhue said.
KPMG’s Tsekova said the answer for companies is not to completely eliminate graduate recruitment. Instead, as the traditional form of consulting firms evolves, junior consultants will need to take on more responsibility much earlier in their careers. She said KPMG’s graduates and junior employees already include some of the best talent in driving the company’s new ways of working.
But traditional consulting firms need to quickly redeploy employees to other roles, Carlewi-Smith said.
“We just want them to do other things, otherwise the pyramid model economics won’t work anymore,” she says.
