Consulting firms including KPMG are confronting fundamental changes to their business model as artificial intelligence makes traditional advisory services obsolete. Svilena Tzekova, KPMG's London-based global head of consulting, stated that advice-based revenue streams have become 'literally nonexistent' as clients can now rapidly access information that consultancies previously delivered over extended timeframes. The industry's traditional pricing structure, built on billable hours and time-and-materials contracts, faces pressure as AI automates entry-level tasks while introducing new cost factors including computing power and text processing fees.
Consulting Firms Struggle With Outcome-Based Pricing Models
The consulting industry has not resolved how to charge for AI-enabled work. Tzekova told CNBC that clients increasingly request outcome-based pricing, but procurement departments continue comparing consultancies on headcount and hourly rates. AI introduces new cost variables that firms must incorporate into pricing models, including computing power and fees AI providers charge based on text processing volume, alongside traditional employment costs. Tzekova stated it is 'very difficult to be able to arrive at a commercially sensible outcome-based pricing model' and that firms are still working out the equation.
AI-Native Consultancies Challenge Big Four Dominance
Smaller AI-native consultancies position themselves as better equipped for the AI era than established firms. Emiko Caerlewy-Smith, head of investor relations at London-based Elixirr, stated that her firm never billed clients on a time-and-materials basis. Caerlewy-Smith told CNBC that 'clients will pay for fixed deliverables, fixed outcomes and value. They really shouldn't be caring about the amount of time it takes to create the inputs to create the outcome.' She cited a recent project where Elixirr helped a global insurer build an AI-based motor insurance platform. Elixirr took six months to format its data for full AI model utilization, and Caerlewy-Smith questioned how long the same process would take at firms employing tens of thousands of people.
Graduate Recruitment Pipeline Faces Automation Pressure
The consulting industry's graduate recruitment model is under scrutiny as AI automates entry-level tasks. The industry traditionally hires thousands of graduates annually for roles beginning with research, data analysis, and presentation production. Claire Trachet, founder of London-based advisory firm Trachet, told CNBC that AI helps junior employees complete work faster but questioned how they would gain experience needed for advancement if they no longer perform foundational work themselves. Paul Goodhew, EY's London-based global assurance innovation and digital leader, stated that AI is already changing work traditionally done by junior auditors, such as checking figures against source documents. EY is developing new roles including data delivery professionals who prepare data for audit teams, product managers who help develop technology platforms, and specialists who understand clients' technology strategies and risks. KPMG's Tzekova stated that junior consultants will need to take on more responsibility earlier in their careers as the traditional structure of consulting firms evolves.
FAQ
What did KPMG say about advice-based consulting revenue?
Svilena Tzekova, KPMG's global head of consulting, stated that the advice-based portion of consulting business is 'literally nonexistent anymore' because clients can now quickly access information that consultancies previously delivered over extended periods.
How are AI-native consultancies different from traditional firms?
AI-native consultancies like Elixirr never billed clients on a time-and-materials basis and focus on fixed deliverables and outcomes rather than hours spent. Elixirr's head of investor relations stated they took six months to format data for AI models and positioned smaller firms as more nimble than large consultancies employing tens of thousands of people.
What new roles is EY creating in response to AI?
EY is developing new roles including data delivery professionals who prepare data for audit teams, product managers who help develop technology platforms, and specialists who understand clients' technology strategies and risks, according to Paul Goodhew, EY's global assurance innovation and digital leader.
