Deloitte tells its own consultants: AI is coming for the billable hour
Quick Answer
Deloitte warns its consultants that the traditional hourly billing model is under threat from AI, projecting a significant decline in hours-based consulting work by 2035.
Quick Take
Deloitte warns its consultants that the traditional hourly billing model is under threat from AI, projecting a significant decline in hours-based consulting work by 2035. The firm is investing heavily in AI to adapt, while competitors like McKinsey are shifting towards outcome-based pricing, with over 30% of their fees already derived from this model.
Key Points
- Deloitte predicts hours-based consulting will shrink to a small fraction by 2035.
- AI agents are expected to dominate the professional services market in the coming years.
- McKinsey already derives over 30% of its fees from outcome-based pricing models.
- Consultants express concern that their roles may be replaced by AI technologies.
- Transitioning from hourly billing to fixed-price models poses significant challenges.
📖 Reader Mode
~2 min readAn internal town hall at Deloitte stirred up frustration among the firm's own consultants. Management's message: the classic hourly billing model is under massive pressure in the age of AI.
According to a Wall Street Journal report, Jason Manstof, a leader in Deloitte's US public sector consulting division, showed a chart last month projecting the decline of hours-based consulting work through 2035. The green bar at the bottom, representing the industry's bread and butter, shrinks to a thin sliver of the total market.
"The not-so-great news is that type of work, even though still a significant part in 2035, will only be a part of the overall picture," Manstof said during the webcast, which the WSJ was able to review. AI agents, still in their early stages, would grow exponentially and make up the majority of the expanding professional services market by 2035.
One Deloitte consultant summed up the event for the WSJ: "They heavily implied our model is toast. We're basically getting replaced by robots." A Deloitte spokesperson said the company is making "significant investments to lead this human-led, AI-powered shift for our industry."
Letting go of the billable hour is easier said than done
The consulting industry is trying to reinvent itself by acting more like a software or product business. Instead of renting out human labor by the hour, firms want to sell fixed-price subscriptions or flat-rate solutions. But the shift is bumpy. When projects run longer than planned, firms eat the costs. Payments get unpredictable. Cash flow problems loom. Disputes over subjective success metrics can wreck client relationships.
McKinsey and Boston Consulting Group are pushing harder toward outcome-based pricing models. More than 30 percent of McKinsey's global fees already come from such models, according to senior partner Shelley Stewart III, the WSJ reports. Pat Petitti, CEO of AI consulting platform Catalant, doesn't see this as a philosophical choice, though. He calls it an "existential scramble" for new revenue models: "AI is destroying their business model."
— Originally published at the-decoder.com
Want this in your inbox every morning?
Daily brief at your local 8am — bilingual EN/中文, free.
More from The Decoder
See more →
An AI model programmed nonstop for 19 days on a single MirrorCode task that cost $2,600 to run
Epoch AI's MirrorCode benchmark reveals Claude Opus 4.7 as the leader with a 56% solve rate, reconstructing a 16,000-line toolkit in 14 hours. Despite this, all models tested struggle with the most complex tasks, highlighting limitations in current AI capabilities. The single task consumed $2,600 over 19 days, raising questions about cost-effectiveness in AI development.
