The rapid evolution of AI is fundamentally altering corporate IT spending, and the dominant business models of the world's largest consulting firms are facing unprecedented disruption.

This year, shares of Capgemini have fallen 31%, while Accenture PLC shares are down 27% — with the latter experiencing a sharp single-day decline in June after some clients postponed large-scale IT transformation projects. Investors are clearly signaling their belief that the implementation-focused revenue these consulting giants rely on will shrink significantly.

At the same time, companies ranging from pharmaceutical heavyweights like Bayer and Bristol Myers Squibb to consumer goods firm SharkNinja are leveraging AI tools to cut their reliance on external advisors, demand lower fee rates, or bring work in-house.

Where the pressure originates

The central friction lies in the fact that the decades-long "bread and butter" of the IT consulting industry — implementation work that helps clients integrate new platforms with legacy systems — is being rapidly replaced by AI. SAP Chief Financial Officer Dominik Asam has stated that AI will "massively replace" parts of the consulting function, and the software giant claims its system modernization plans will help clients reduce external consulting costs by as much as 50%.

Market research firm Source Global estimates that client spending on technology consulting will reach $420 billion this year, up 8% year-over-year. However, the growth stems mainly from emerging AI-related consulting demand, while the larger implementation segment, valued at $236 billion, is under structural pressure.

Clients push back with fee cuts, internalization, and contract renegotiations

Global enterprises are reexamining their relationships with consulting firms with unprecedented assertiveness.

Greg Meyers, Chief Digital and Technology Officer at Bristol Myers Squibb, notes that the cost of managed services from consultancies is "collapsing." He points out that in cybersecurity, which previously relied heavily on third-party monitoring, "AI now handles a large portion of the monitoring work, and those contracts are disappearing." The company has pressured external advisors to lower rates or shift from hourly billing to fixed-price or performance-linked contracts.

"As long as we share in the cost reductions, I'm perfectly fine with it being margin expansion for them. If we're not satisfied, bringing work back in-house has never been easier," Meyers said.

He also highlights a structural flaw in the consulting industry: partner incentive mechanisms often drive advisors to sell more, and more expensive, services year after year. As a result, BMS has pushed consultancies to replace account teams.

"When a new person takes over the account, everything is possible — they seek outcome-based contracts and different pricing models."

Mark Barrocas, CEO of appliance maker SharkNinja, likewise says his company's consulting spending is "definitely decreasing." The firm, which generated $6.4 billion in revenue last year, recently completed a sales promotion and media spend analysis project using Palantir technology in just eight weeks. It has also deployed AI-driven demand forecasting systems and collaborated with Amazon Web Services on media analytics tools.

"We've found that working with these technology partners and internal leaders who know the business is far more effective than bringing in third-party advisors who don't understand the context."

Software platforms squeeze demand at the source

Pressure on consultancies is not just coming from the client side but also from core software partners.

SAP is embedding AI and other components directly into its systems, allowing consulting firms to complete work faster, bill fewer hours, or even bypass advisors altogether. CFO Dominik Asam predicts AI will "massively replace" certain consulting functions and claims related system overhauls will help customers reduce external consulting costs by up to 50%.

A key example is Bayer, which is undertaking a six-year SAP transformation. Jochen Kamp, who leads the project, reports that 30 AI agents already support coding and testing, with a goal to "significantly reduce" the number of consultants involved during the deployment phase.

"Consulting resources will fundamentally change in both quantity and skills. Traditional consultants definitely have to adapt, and fewer will be needed."

This trend is equally visible in banking. Commerzbank plans to invest €600 million in AI by 2030, expecting annual savings of €500 million, some of which will come from trimmed consulting bills.

Oliver Dörler, the bank's AI lead, says tasks that previously required external vendors months to analyze source code and log files "I can now have AI complete in days." He adds that the bank "often finds advisors learn more from us than we learn from them," and internalization helps maintain competitive advantage.

Meanwhile, UniCredit reduced its external consulting spending by 24% in the first half of this year, and Société Générale cut it by 9%.

Consulting firms defend themselves: transformation, not extinction

Despite the gloomy outlook, consulting executives reject the notion of an industry "doomsday."

Aiman Ezzat, CEO of Capgemini, dismisses SAP's "50% savings" claim as "ambitious," saying, "We don't see 50%, but we have indeed redesigned the way we deploy SAP to lower implementation costs and speed things up."

He argues that cost compression in IT consulting is a normal part of the industry. "We've become more productive, more industrialized, and we moved to an offshore model. If I still worked the way I did 20 years ago, I would need three to four times as many people."

Ezzat also emphasizes that Capgemini's specialized engineering consulting for sectors like aerospace and automotive manufacturing, where work cannot be entirely handed over to AI, remains strong. "We don't just live off IT budgets," he says.

Market data suggests the consulting industry is still growing overall. Source Global estimates client spending on technology consulting will hit $420 billion this year, up 8%, with AI-related consulting demand ($140 billion) serving as a key driver, covering areas like AI software selection, cybersecurity responses, and "change management" consulting to help employees use AI effectively.

However, client satisfaction data is concerning. A recent Source Global survey shows only one-third of clients rate IT transformation projects led by external advisors as "fully successful." The Big Four accounting firms — Deloitte, EY, PwC, and KPMG — score even lower on satisfaction than IT specialists like Accenture PLC.

Restructuring and outsourcing still provide a moat

Despite the significant pressures, consultancies have not lost everything — some traditional demand remains robust.

Large corporations planning sweeping layoffs and cost-cutting programs still rely heavily on external advisors.

British American Tobacco says external consultants are "more important" in its three-year AI-driven cost reduction plan, which has already eliminated 5,500 jobs and outsourced another 3,500 positions to firms including Accenture PLC.

Volkswagen, recently evaluating plans to cut up to 100,000 jobs and close four German plants, also turned to Boston Consulting Group and McKinsey for support.

At the same time, AI itself is creating new demand entry points for consultancies. Procter & Gamble CFO Andre Schulten says AI tools are boosting productivity, speed, and quality in content creation, and the company is exploring combining AI with specialized advisors like advertising agencies.

Nicholas Jotischky, Source Global's market trends lead, notes that despite intensifying competition, 55% of clients at the Big Four still say they will increase usage over the next 12 months — though that's down sharply from 80% a year ago. "Competition is heating up," he says.

The view from Jacob Thaysen, CEO of gene sequencing company Illumina, may point to the industry's future direction: AI allows enterprises to push further on their own before seeking help from large implementation firms. "The future of consulting must focus more on providing strategic advice to leaders."