Ali told the Financial Times that the consulting industry needed a radical rethink as technology firms muscle in on their territory and clients grow increasingly sceptical about paying hefty fees for PowerPoint decks and management buzzwords.
Returning to Big Blue two years ago, Ali was tasked with turning IBM’s consulting arm into what he calls a “service as a software” business. The plan involves building thousands of semi-autonomous digital “agents” that handle repetitive corporate work with minimal human meddling.
Ali said: “The future of consulting is going to be a hybrid of people plus software, like, a lot of software. I think that consulting companies that can’t do that are going to fall away.”
Consultants have long made their money by drawing up restructuring plans, managing software rollouts or parachuting in specialists to handle crises like cybersecurity breaches. But with generative AI now capable of automating much of that grunt work, the big question for firms like Deloitte, KPMG and McKinsey is whether to build agentic platforms or risk becoming irrelevant.
“The software companies are going to get into this business as well and are going to be delivering digitally through agents. So our strategy here is to run as fast as possible to deliver as much of this through these agents as possible and convert a big part of our business into a software business,” he said.
IBM’s consulting division has been struggling to grow. It has flatlined this year, while hardware revenue rose five per cent and software jumped nine per cent. Ali blames clients’ heavy in-house AI spending, an uncertain economy and tight-fisted policies from the US government for dampening demand.
“Companies are spending a ton of money to figure out how to build this up,” Ali said.
Ali points to an MIT study showing that 95 per cent of generative AI projects have failed to deliver financial returns. When corporate leaders realise that AI rollouts are harder than they look, he believes they will call the consultants back.
However, not everyone agrees. Some business chiefs think it is cheaper and faster to handle AI strategy internally, and investors are twitchy about the sector’s future.
Shares in IBM rival Accenture have fallen 30 per cent this year as investors fret over the impact of AI on its managed services business. Accenture chief executive Julie Sweet recently said the company would retrain or cut staff who cannot adapt to the AI age.
Ali’s credentials stretch across Silicon Valley’s tech landscape. He spent more than a decade at IBM, led Hewlett-Packard’s strategy unit, and ran both a tech research outfit and a cloud software company before returning to IBM as chief operating officer of consulting in 2023. He has been running the division since July last year.
He said that IBM has saved $3.5 billion over two years by automating almost 500 internal functions. Ali argues that the real money lies not in building massive language models, which are rapidly becoming commodities, but in crafting the applications that sit on top.
If Ali is right, the next few years could see the consulting world turn from human-heavy hand-holding to algorithmic autopilot. For the suits who built their careers on billable hours, that sounds less like transformation and more like extinction with better branding.