'AI Sets Up Kodak Moment For Global Consultants' (reuters.com) 16
An anonymous reader shares a column: 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.
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.
Same same (Score:5, Interesting)
Professional fall guys (Score:2)
Neither AI nor consultants back their product with any guarantee on reliability or correctness. Take the cheaper one.
Except that isn't what you're paying for with a lot of consultant work. For many business people, the idea behind hiring consultants is that if the project works then you proclaim yourself a business genius, and if it doesn't you blame the consultants. If you hadn't hired the consultants and the project didn't work out then you would have to take the blame. This is what you're paying for.
Just consider things like the EV transition. I bet you across the world, there are boards going 'why are we having to piv
Consulting is mostly* a scam! (Score:4, Interesting)
I've known people who worked at Accenture, the daily cost you had to pay Accenture to hire them was 5k+. What did they do that could possibly justify that? I don't know, but 5k / day would be $625 / hour. Did they value add $625 / hour? No, hell, they didn't add $100 / hour, I would be hard-pressed to say they added $50 / hour of value. Let's assume $50 / hour of value add, if Accenture charges double, $100 / hour, that would be $800 / day, or with extras, $1k / day. Where did the other $4k / day go?
Have you tried to hire a consultant to manage IT, or Cybersecurity? My company recently hired consultants to build training and cybersecurity documents, why? The cost for them to build a CS training module, and host it was something outrageous, $20k+. ChatGPT can generate a suitable CS training course, and if you host that with Moodle, on a VPS for $5 / month, what does it really cost to make CS training, let assume $100 / hour, for a suitable employee, $800? Where did the other $19k come from? The other training was something you could produce internally, so another $800, they were knowingly overbilling us by $18k, and that was reasonable!
IT consultants? You want me to pay $200+ / hour for you to assign me an Office 365 license, or add a VM in Azure / AWS? If you're in critical industry, maybe, like Government where security should (but doesn't) matter? Okay, let's get 1 or 2 IT consultants, but for 99% of companies, that's not required.
If consultants are worried due to AI, they should be! Think of where consultants are really required, can you defend most of them?
Re: (Score:2)
Matches my experience. A lot of consulting work, especially by big names is so bad that "AI", dumb and incapable as it may be, can do better.
Re: (Score:2)
> The cost for them to build a CS training module, and host it ...
What I'd say is that if I was going to host something for you, I'd put a lot of margin on it. That's to cover you calling me up and asking me stupid questions and generally complaining about things which I have no control over. It also insulates me from my costs going up and down mid-contract. If you don't want that level of service, then sure, go use someone else to host it for you. You can call up their crappy customer support when the s
Re: (Score:2)
What I'd say is that if I was going to host something for you, I'd put a lot of margin on it. That's to cover you calling me up and asking me stupid questions and generally complaining about things which I have no control over. It also insulates me from my costs going up and down mid-contract. If you don't want that level of service, then sure, go use someone else to host it for you. You can call up their crappy customer support when the site goes down due to some mistake on their part.
Okay, but, the problem isn't that we're some cluless "head-in-ass" style company, I'm in charge of IT, and I'm more then competient enough to standup the service. I told them that, and offered the server to them. I didn't want them hosting it, they insisted, but, couldn't explain why it was required to be hosteed by them.
I have worked for a 'big' consultancy, and yes, they charged me out at a lot of money - many times more than I was costing them. The customer could absolutely have gone to the open market and hired a contractor with similar skills for a fraction of the money - BUT they'd have had to spend the time doing that (and hiring people can take a lot of time - especially if you're hiring for a role you personally don't understand). Instead, when the consultancy tried to field a couple of flunkies, the customer just said "no thanks" and a few days later, some new people showed up. When the customer said "we need a person", the consultancy found such a person and put them on the project. Likewise, when I left the project (and the consultancy), the consultancy found someone to replace me. All that convenience costs money, and whilst you can definitely argue that the consultancies over charge, they *do* provide a service.
That's a fine argument, that you can get your turn over covered quickly, but is the quality present? Going back to the example of the training, there was no need for them to host it.
If the AI messes up, you are to blame (Score:3)
If the consultancy messes up, they are to blame.
Mind you, they will try to deflect the blame, but even them they will have to share it.
That has a price, you know?
Has consulting companies EVER been cheaper? (Score:2)
Re: (Score:2)
It depends entirely on what the consulting is.
Usually you use consultants for one-time or infrequently needed services that would make little sense to maintain staff for. Architecture and engineering services, legal consultation, and advertising are all easy examples of things a business might need but not often enough to have that manpower in-house. Some professional services also carry liability insurance requirements which, if you hire a consultant, you don't have to pay for either.
If you want to talk ab
For variable values of "can do"... (Score:2)
What I have seen in work from the "Big Four" universally sucked. Better spend that higher cost of doing it with competent people...
Nice explanation of the problem (basically applies to tech work by the Big Four as well and I also have seen it from IBM): https://www.youtube.com/watch?... [youtube.com]
I really hope this is not the future. (Score:1)
Right now these consulting firms are mission-critical strategic partners that leverage cross-functional expertise to drive transformational impact and unlock scalable value across the enterprise ecosystem. They empower organizations to operationalize synergies, optimize stakeholder alignment, and accelerate digital transformation through data-driven insights and agile execution frameworks.
Replacing them with AI will be a paradigm shift for the worse.
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And since AI can string buzzwords together more cheaply, why use consultants.
We pay (Score:2)
My company pays MANY millions of dollars per year to consultants. A lot of those projects fail too.
One project that really stands out to me cost somewhere in the $50M range. The whole thing was a miserable failure, nothing was implemented and everything was "undone" (except the fees, of course).
My company is about a $20B company, so maybe a few hundred million per year in consultant fees does not matter much in the overall scheme of things. But if that is the case, why is it always bitching about how it op
Get back to me when AI can look an exec in the eye (Score:2)
Top flight management consulting (McKinsey, Bain, BCG, Booz) involves large amounts of persuading clients to do stuff that they are often reluctant to do. You don't do that simply through a compelling argument, you build relationships that last for years, sometimes decades. You become a trusted advisor. AI just cannot do all of that. It can provide trustable advice, but that isn't the same thing, at all.
I once worked on a study that involved improving access to primary care clinics across an impoverished pa
Consultants have always been a grift (Score:2)
I haven't been on one project that was improved by hiring a consultant.
One company hired a consultant for $7M and their best advice was to skin the app black. $7M.