How AI and Gen AI will transform the consulting industry

31 January 2025 Consultancy-me.com

As artificial intelligence and other new technologies transform industries, consulting is likely to be one of the most impacted due to its labor-led business model. Bill Farrell, Managing Partner for IBM Consulting in the Middle East & Africa, outlines how AI and Gen AI will transform the consulting industry.

By 2026, executives expect consulting spend to exceed 4% of total revenue, but spend is not the only factor that is growing; so are client expectations. In a recent study by IBM, 86% of consulting buyers say they are actively looking for services that incorporate AI and technology assets.

Frankly, today’s consulting business models are not enough for the challenges of tomorrow. Consultants must develop new delivery approaches leveraging AI to meet evolving client expectations, or risk being outpaced by competitors. With 66% of consulting buyers saying that they will stop working with consulting organizations that don’t incorporate AI into their services, reinventing the consulting operating model is essential for both organizations and their clients.

Keeping pace with change

The traditional consulting model is opinion-led and time-intensive – not to mention project knowledge can be siloed. As technology continues to advance, companies must be able to drive more certainty of outcomes and move fast on new opportunities to stay ahead, which means adapting processes as well as building, testing, and releasing new solutions and services quickly.

Traditional consulting is simply not agile enough to achieve this acceleration at scale. By leveraging AI and automation, consultants can unlock insights, deliver value faster, eliminate time-consuming manual tasks, and focus more on creating value for their clients.

At IBM, we have supercharged the expertise of our global team of 160,000 consultants with IBM Consulting Advantage, our AI-powered delivery platform, offering a library of software assets and methods, including AI agents and applications, as well as the training to leverage the technology effectively.

How AI and Gen AI will transform the consulting industry

IBM’s consulting division has over 160,000 consultants worldwide.

Igniting innovation with people-powered AI

In this new era of consulting, consultants must be aware of five dominant trends to help their clients gain a competitive edge this year:

Agentic AI has the power to transform businesses – but first they must reskill their people. AI can amplify the expertise of consultants, taking on highly manual or repetitive tasks and freeing up time for them to focus on what they do best – solving complex, often mission-critical problems using creativity and strategic thinking.

However, AI is only valuable if consultants have the skills and capabilities to use the technology effectively. Training and hands-on experience is crucial to prepare consultants for new ways of working. In 2024, global CEOs estimated that 35% of the workforce needed to be reskilled, which translates to more than a billion workers worldwide.

Despite efforts to slow its growth, technical debt continues to increase. The enterprise of tomorrow won’t run well with today’s infrastructure. That’s because next-gen apps and software don’t tend to work optimally with traditional systems. Only 25% of executives strongly agree that their organization’s IT infrastructure can support scaling AI across the enterprise.

But the workarounds that accelerate technological transformation in the short term often create technical debt that limits long-term innovation and growth. To scale AI systems and incorporate agentic AI without compounding technical debt, organizations must incentivize teams to modernize traditional systems and change the way they develop new solutions.

In the age of AI, location is everything. As enterprises seek out the talent, data ecosystems, and infrastructure needed to scale AI effectively, they’re moving operations to places they believe will provide the greatest strategic advantage. Two-thirds of executives say their organization’s use of AI changed where it operated in 2024, and 93% expect AI to impact their location strategy in 2026.

The rapid pivot to AI has upended IT budgets, but self-funding is imminent. Leaders know they need to invest in generative AI to keep up with the competition, but these solutions have yet to deliver production-level return on investment (ROI). Nearly all executives (95%) say generative AI will be at least partially self-funded by 2026.

AI product and service innovation is the #1 CEO goal, yet business models aren’t keeping up. A vast majority of executives (85%) say AI will enable business model innovation, and 89% say it will drive product and service innovation over the next three years.

To make the most of AI’s potential to supercharge innovation, enterprises need to center business models on the careful design of human-machine interaction, build strong supporting governance frameworks, and rethink organizational structures and workflows.

Leading the way in the new era of consulting

AI is transforming the consulting industry, disrupting the traditional labor-led business model. By empowering people, redefining processes, and revolutionizing delivery with AI, consulting organizations can become the strategic partners clients need to fuel growth in the age of artificial intelligence.

Last month, another top leader at IBM Consulting, Jonathan Wright, warned consultants over in Europe that large language models and Gen AI will become the new norm for management consultants.

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