Consultants and AI: Towards Streamlining Expenses in 2023

Companies Reassess Their AI Spending

Many companies, along with the consulting firms that support them, are reevaluating their approach to spending related to artificial intelligence. The era of unlimited spending in this field may be coming to an end. Consulting firms, just like their clients, are reassessing the amounts invested in AI.

Business leaders are becoming aware that there is a threshold beyond which AI spending becomes excessive. With skyrocketing costs associated with AI tools, strategies are being adjusted. Amazon, for example, recently decided to eliminate a leaderboard designed by its employees to monitor the use of AI tokens, as it encouraged disproportionate spending. For its part, Walmart, which developed a mood coding tool for its employees, has also implemented restrictions on token usage. Andrew MacDonald, Chief Operating Officer at Uber, expressed doubts about the justification for the amounts invested by his company in AI. Similarly, Jeetu Patel, Chief Product Officer at Cisco, questioned the cost of tokens at a recent event, highlighting that the price was "well above the actual value these tokens generate at scale."

The Impact of AI on the Consulting Industry

For consulting firms, the rise of AI has represented an almost existential threat. At first glance, chatbots and other AI tools could accomplish much of the work traditionally done by consultants, especially those early in their careers. In response, most firms have rushed to attract clients needing help integrating this technology into their operations while quickly adopting it themselves.

KPMG, for example, has set up a dashboard to track the use of AI tools by its employees in the consulting division in the United States, as part of an effort to move from basic adoption to more advanced usage. McKinsey, on the other hand, plans to go even further. Its CEO, Bob Sternfels, announced in January that the company uses about 25,000 AI agents in addition to its 40,000 human employees, hoping that one or more agents will eventually support each employee.

Strategic Spending or the Need to Keep Up with Trends?

The increase in AI spending raises a crucial question: are companies investing strategically or simply to avoid being left behind? This is a question that consulting firms are trying to answer, both for their clients and for themselves.

For now, the trend seems to be to continue investing, but in a more thoughtful manner. A recent report from the Boston Consulting Group on corporate investment in AI revealed that companies plan to more than double their spending by 2026, rising from about 0.8% of their revenues to around 1.7%. For large companies, this represents billions of dollars invested in AI strategies that often remain experimental and difficult to evaluate.

Towards More Measured Management of AI Investments

Russell Fradin, CEO and co-founder of Larridin, a platform that helps companies, including large consulting firms, measure the returns on AI usage, stated that this spending trend will continue. "We haven't seen anyone talk about spending less on AI next year," he told Business Insider. "They are simply talking about instrumenting to understand where this is going." According to Fradin, companies agree that they "cannot multiply their spending by ten each year indefinitely."