Breakingviews - AI sets up Kodak moment for global consultants:
Management consultants are getting closer to their Kodak moment. The likes of $155 billion Accenture made their mark by charging corporate clients way less than what they would have had to pay to provide IT, cyber protection and offshore call centres themselves. Artificial intelligence is making the industry's dynamics look problematically like that of the camera giant that famously filed for bankruptcy protection in 2012 - after having its lunch eaten by digital competition.
As the AI boom develops, consultants are in a tricky spot. The pandemic, inflation and economic uncertainty have encouraged many of their big clients to tighten expenditure. The U.S. government, one of the biggest spenders, has been cancelling multiple billion-dollar contracts in an effort to conserve cash. In March, 10 of the largest consultants including Deloitte, Accenture, Booz Allen Hamilton, IBM and Guidehouse were targeted by the Department of Government Efficiency to justify their fees. As a result, the largest listed players' shares have collapsed by up to 30% in the past two years, against the S&P 500's 50% jump.
AI is, in some respects, a boon. In September, Accenture said it had helped it cut 11,000 jobs, and CEO Julie Sweet is set to augment that with staff that cannot be retrained. Salesforce recently laid off 4000 customer support workers. Microsoft has halted hiring in its consulting business.
Unfortunately, big clients are cottoning on to the advantages too. One finance chief of a large UK company outlined the issue for Breakingviews via an illustrative example. Say an outsourced project costs the client $1 million to do themselves, and Accenture and the like have historically been able to do the same job for $200,000. With the advent of machine learning, companies can do the same work for just $10,000.
This gives clients considerable leverage. If consultants won't lower their prices to near the relevant level, the client can find one who will. Or just do the job itself.
[...] Either way, none of this will stop clients demanding knockdown prices. Kodak did emerge from bankruptcy protection in 2013 as a smaller company that is now worth around $500 million - a far cry from the $30 billion-plus it fetched in its 1990s heyday. The risk for the consultants is a similar valuation downer.
Are any of you Soylentil independent consultants feeling this pinch?
(Score: 5, Insightful) by ikanreed on Tuesday November 11, @05:02AM (1 child)
The value consultants provide a company isn't a meaningful skill, it's excuses for management to take the action they were already planning to with no one internal to blame. AI can do that too.
(Score: 5, Insightful) by PiMuNu on Tuesday November 11, @11:47AM
> excuses for management to take the action
In my experience, the situation is worse than that. Government and business hires management consultants to genuinely advise them, because they don't know what they are doing.
(Score: 4, Touché) by Anonymous Coward on Tuesday November 11, @06:06AM
> As the AI boom develops...
> As the AI bubble develops...
FTFY
(Score: 2) by turgid on Tuesday November 11, @09:43AM
Didn't AWS have a bit of an outage recently, coinciding with a large lay-off of staff replaced by AI? Or was that just speculation?
I've had a couple of AI search summaries from the likes of Duckduckgo and Google recently and I've mostly ignored them. They're usually quite simplistic and miss out some important details.
Last night, I was working late trying to make some progress on a very boring installation and I decided (while files were copying) to read Google's AI summary of the search I had just done about disk performance. It was glib, glossy, shallow and just the thing that the pointy-haired types like to read.
The bubble is going to burst and people are going to lose their shirts on the stock market. But more importantly, industries are going to grind to a halt and there is going to be an almighty mass panic and reckoning. We're going to be very busy picking up the pieces. Ladies and gentlemen, double your hourly rates and get a yacht brochure.
I refuse to engage in a battle of wits with an unarmed opponent [wikipedia.org].
(Score: 5, Interesting) by Mojibake Tengu on Tuesday November 11, @10:33AM
In a corporate world, customer support actually means customer deflect. AIs are much better than humans in that. No more burnout of expendable first line workers. This is pure cost-saving.
Delegating real problems to consultants is a second level of indirection. Expert consultants may actually solve customer problems which are out of scope for original generic product or service provider.
For example, I have a decades long experience in constructing data bridges for totally incompatible information systems. Such situations emerge often when corporations join or buy each other, globalism means clash of different technical, cultural or legalist lore or collective customary conditioning. It's clash of logical paradigms, with rare overlaps only.
Solving such impossible futile situations requires very logical approach to many subproblems at once. In my independent consultant life, I often used Prolog for building data cleaning tools or one time precise conversion tools tailored to specific divergent dirty data of both sides.
Though currently, no LLM AI out there at large is actually capable of solving logic problems. They still struggle with arithmetic ones.
Rust programming language offends both my Intelligence and my Spirit.