Consulting firms resist AI-driven shift away from hourly billing
Source: The Wall Street Journal (paywall)
The consulting industry's margin structure—built on staffing multiples and billable hours—creates perverse incentives to resist the automation that AI enables. As generative AI compresses project timelines and reduces headcount needs, the hourly model breaks down economically, forcing firms like McKinsey and Deloitte toward fixed-fee contracts that require them to absorb efficiency gains rather than pass them to clients. The slow transition shows that AI adoption in services isn't primarily a capability problem; it's a business model problem, where incumbents face real short-term revenue risk even as AI threatens their long-term relevance.