The Last Days of the Old Guard: Why Consulting Must Evolve in the Age of AI

For decades, consulting has served as the shadow government of the corporate world, called upon in times of crisis, transformation, implementation, or indecision. What began as a way to access specialized expertise has, in most cases, devolved into little more than glorified staff augmentation. The formula was simple: consulting firms deployed armies of young, often inexperienced but intelligent analysts. They showed up to struggling companies or government organizations armed with their MBA degrees and slide decks to diagnose problems, deliver insights, implement IT solutions, and recommend strategies. It was a highly lucrative business.

However, in many instances, consultants are not even hired to solve problems. Instead, they are brought in to legitimize decisions executives have already made or to deflect accountability when things go wrong. Consulting has shifted from a focus on innovation to one on insurance: a third party that rubber-stamps leadership's choices, ensuring that if failure ensues, the blame won’t fall on them. The old adage, “No one ever got fired for hiring IBM,” has come to define the industry—emphasizing appearances and risk aversion over meaningful transformation.

But what if there were another way?

AI is poised to expose the cracks in consulting’s business-as-usual approach. These firms have long thrived on inefficiency, billing for hours and bodies rather than outcomes. Critics like Mariana Mazzucato, in the book The Big Con, argue that consulting has not just stifled innovation but actively weakened institutions and infantilized governments, creating dependency rather than capability. Governments outsource critical thinking and execution, allowing consultancies to inflate problems, obfuscate solutions, and maintain their foothold. But AI, with its relentless efficiency and precision, has no patience for such theatrics. The consulting model, which once appeared indispensable, is beginning to feel like a relic of a slower, more input vs. outcome-centered age.

The cracks are already visible. A 2024 Forbes article on AI and consulting revealed that a large amount of tasks performed by consultants are repetitive and data-driven—the exact type of work AI excels at. Think about it: hundreds of hours spent gathering and analyzing data, constructing reports, and presenting “insights” can now be automated. A single AI agent, given access to a company’s operational data via ontology, can sift through millions of lines, identify inefficiencies, and generate actionable recommendations in minutes. Where does that leave the consultant, whose business card once promised solutions to problems too big for machines to solve?

Consider this shift in the context of the Department of Defense, where service contracts account for about half of total contract obligations. According to the Government Accountability Office (GAO), obligations on these contracts ranged from $184 billion to $226 billion annually from fiscal year 2017 through 2022. This vast expenditure includes administrative and technical support—precisely the kinds of services ripe for disruption by AI. While spending peaked in 2020, it has since declined, signaling increased scrutiny and a growing demand for efficiency. Consulting firms that rely on traditional labor-intensive models will find it increasingly difficult to justify their costs as AI demonstrates its ability to deliver faster, cheaper, and better outcomes.

Imagine the evolution of consulting as a shift from craftsmen to engineers. Traditional consulting firms are the craftsmen—artisanal in their methods, reliant on human skill and time. The new wave, powered by AI, is more akin to engineering: scalable, efficient, and precise. This isn’t just about tools; it’s about a complete rethinking of what consulting means. AI doesn’t just enhance; it replaces many of the foundational tasks that once defined the industry.

Picture this: A manufacturing company wants to optimize its supply chain. In the old model, the consultants arrive, spend weeks conducting interviews, gathering data, and building models. Months later, they deliver recommendations—often theoretical, sometimes actionable, always expensive. In the new model, AI systems ingest operational data in real-time, identify bottlenecks, run simulations, and recommend solutions. The consultant’s role shifts from execution to strategy, from data wrangling to decision advising. It’s faster, cheaper, and delivers measurable outcomes. No more vague promises; no more endless hours billed.

This transition doesn’t just challenge the old guard; it creates opportunities for new players. Smaller consulting firms, once relegated to niche markets, can now punch far above their weight. A lean team with powerful AI tools can tackle projects that once required an army of MBAs. This is the promise of "Service-as-Software"—a fundamental shift from selling human hours to delivering automated solutions at scale. It’s a democratization of consulting, where the size of your team matters less than the sophistication of your tools.

The analogy to Tesla’s disruption of the auto industry is instructive. Tesla didn’t just build electric cars; it reimagined the car itself, integrating software and automation in ways that legacy automakers couldn’t match. Similarly, consulting firms that embrace AI aren’t just adding new tools; they’re reinventing their business model. This shift also changes the economics. By moving to outcome-based pricing—where clients pay for results rather than hours—firms can unlock new revenue streams and vastly improve margins. AI reduces the variability and risk that traditional cost-plus contracts rely on, making firm-fixed-price agreements not just viable but preferable.

But there’s an even greater opportunity here—one that consulting firms are uniquely positioned to seize. Unlike tech companies, which build software but often lack deep industry knowledge, consulting firms possess decades of institutional expertise. They understand not just how industries operate but why decisions are made. If they are willing to embrace AI and partner with commercial software companies, they can turn this expertise into a superpower. Imagine a consulting firm that combines its strategic insights with the speed and scalability of cutting-edge AI platforms. By embedding their knowledge into these systems, they could automate entire layers of decision-making while retaining the human touch where it matters most.

This requires humility—a recognition that commercial software companies have already built the infrastructure to scale AI. Rather than trying to build competing solutions from scratch, consulting firms must leverage existing commercial platforms to augment their offerings. This is a win-win scenario. By integrating AI-powered tools into their processes, consulting firms can deliver better results faster and at a lower cost. Clients get more value, and the consulting firms themselves can expand their market reach, moving beyond the limits of human labor. The firms that adapt will not just survive—they’ll thrive, increasing their margins and capturing new revenue streams that were previously unimaginable.

Governments and corporations alike have a role to play. They must stop rewarding inefficiency with cost-plus contracts, which incentivize waste and overbilling. Instead, they should demand firm-fixed-price contracts tied to measurable outcomes. For instance, instead of hiring consultants to “improve supply chain efficiency” and paying for their hours over a 12-month engagement, a firm-fixed-price contract could specify a measurable outcome, such as reducing supply chain costs by 15% within six months or cutting delivery times by 20% across key geographies. The consulting firm would then be accountable for delivering those results, with payment tied directly to meeting those specific benchmarks.

For the consulting firm, this combination of reduced risk, lower resource utilization, and faster delivery translates into improved profit margins. With AI automating repetitive tasks and handling complex data analysis, firms can focus their human resources on high-value strategic decision-making, allowing them to deliver more value to clients while increasing their operational efficiency. Ultimately, this shift makes outcome-based contracts not only feasible but also highly profitable for firms willing to embrace the change.

The consulting industry is at a crossroads. On one path lies obsolescence—a future where AI renders traditional consulting irrelevant. On the other lies reinvention—a future where consulting firms use AI to transform not only themselves but also the organizations they serve. For the firms willing to embrace this change, the rewards will be transformative. They will not just adapt to the AI era—they will define it, delivering better results, scaling their impact, and creating more value for their clients than ever before.

The old consulting model is dying, but something far more exciting is being born. The firms that thrive in this new era won’t just survive—they’ll lead a transformation that reshapes not just their industry but the entire economy. AI is the catalyst, but the real story is about reinvention. The consulting firms of tomorrow won’t look anything like the firms of today—and that’s exactly why they’ll win.