Business

Deloitte Warns AI Threatens Billable Hour Model

Deloitte's internal report projects AI will dominate consulting by 2035, shrinking the billable hour model.

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Deloitte has warned its consultants that artificial intelligence is set to disrupt the traditional billable hour model. A Deloitte manager highlighted in internal discussions that AI agents are expected to take over most of the market by 2035, raising concerns among employees about potential job displacement. The shift is forcing the industry to consider alternative billing methods, such as fixed-price and outcome-based models, though the transition poses significant financial risks. The firm's internal town hall discussions sparked frustration among consultants, with one describing the message as implying their current model is 'toast' and that they are 'basically getting replaced by robots.'

According to a Wall Street Journal report, Jason Manstof, a leader in Deloitte's US public sector consulting division, presented a chart projecting the decline of hours-based consulting work through 2035. The chart showed the green bar, representing the industry's main revenue source, shrinking to a thin sliver of the total market. Manstof noted during a webcast that even though the model will still be significant in 2035, it will only be a part of the overall picture. AI agents, which are still in their early stages, are expected to grow exponentially and make up the majority of the expanding professional services market by 2035.

Deloitte's spokesperson stated the company is making 'significant investments to lead this human-led, AI-powered shift for our industry.' However, the transition from the billable hour model to alternative pricing structures is proving difficult. Consulting firms are trying to act more like software or product businesses by offering fixed-price subscriptions or flat-rate solutions. Yet, this shift is fraught with challenges, including unpredictable payments, cash flow issues, and disputes over success metrics. McKinsey and Boston Consulting Group are pushing toward outcome-based pricing, with over 30 percent of McKinsey's global fees already coming from such models, according to senior partner Shelley Stewart III.

Source: thedecoder

Key points

Deloitte manager warned internally that AI will drastically shrink the classic hourly billing model in consulting.
By 2035, AI agents are expected to take over most of the market, fueling fears among staff of being replaced by robots.
The industry is shifting to fixed-price and outcome-based models out of necessity, but the transition carries serious financial risks.
Jason Manstof showed a chart projecting the decline of hours-based consulting work through 2035.
AI agents, still in their early stages, would grow exponentially and make up the majority of the expanding professional services market by 2035.
A Deloitte consultant summed up the event for the WSJ: 'They heavily implied our model is toast. We're basically getting replaced by robots.'

Source: The Decoder Read the original →

WRITTEN BY

Marcus Feld

AI Business & Markets

Marcus reports on AI funding, acquisitions, partnerships, and the business behind the technology.