Companies in need of guidance create new opportunities for consultancy industry.
In a gold rush, you want to be the person who sells shovels. That’s not a new observation and helps explain why Nvidia, maker of artificial intelligence enabling chips, has come from nowhere to a $2.6tn market capitalisation. The next best job, it seems, is telling everyone how the shovels should be used. Enter the consultancy industry — an early beneficiary of the AI revolution.
Boston Consulting Group, for instance, reckons that a fifth of its revenues this year will come from AI-related work. On last year’s revenues of $12.3bn, that would amount to something like $2.5bn. Accenture has booked $2bn of AI-related projects year to date. There is no shortage of examples of consultants benefiting from the AI gold rush.
This reflects AI’s fundamental problem. Tech companies are building a massive infrastructure backbone. Goldman Sachs estimates that $1tn of capex will be put to work in the coming years. Barclays calculates that, by 2026, big tech will have computational capabilities for 12,000 chat-GPT equivalents.
Yet ideas for how this will be used are barely off the blocks. Concerns about accuracy, reliability and security are part of the problem. But more broadly, companies are not quite sure what to do with this new tool.
There is some movement. Service companies offering AI-enabled tools are one growth area. Datasnipper, which in February raised money at a $1bn valuation from Index Ventures, promises to reconcile data for auditors using AI, freeing up talent for more rewarding jobs. Yet industry leader OpenAI itself only makes $3.4bn in annualised revenues, highlighting the gap between investment and returns.
For companies, adopting the technology is a complex proposition. Buying off-the-shelf products or services helps contain costs and increase speed, but is available to peers as well. As take-up rises, early mover advantages in cutting costs will be transferred to consumers — especially in industries that face cut-throat competition such as telecoms or airlines. Another complexity is that HR, legal and accounting departments may be unwilling to help embed disruptive technologies that may make workers redundant.
That creates a niche for management consultants, whose job will be to redesign whole organisations so that AI becomes integral rather than an add-on. The hope is that these AI capabilities then give rise to differentiated services and new revenue streams, which allow companies to make a return on their spending.
That still looks a tough proposition but is one that the AI revolution depends on. The risk, otherwise, is a technology that undershoots its potential, destroying value for those that spent on its rollout.
Still, the consultants will doubtless remain on hand to help manage the fallout.
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