Deloitte Predicts End of Hourly Billing by 2035

Deloitte anticipates the end of hourly billing by 2035

A Deloitte executive has warned internally that AI will significantly reduce the classic hourly billing model in the consulting sector. By 2035, it is expected that AI agents will take over the majority of the market, raising concerns among staff about being replaced by robots.

The industry is evolving towards fixed-price and outcome-based models out of necessity, but this transition carries serious financial risks.

An internal meeting at Deloitte has sparked frustration among the company's consultants. The management's message: the classic hourly billing model is under massive pressure in the age of AI.

According to a report from the Wall Street Journal, Jason Manstof, a leader in Deloitte's public sector consulting division in the United States, presented a chart last month projecting the decline of hourly-based consulting work by 2035. The green bar at the bottom, representing the core of the industry, shrinks to a thin slice of the total market.

"The bad news is that this type of work, while still a significant share in 2035, will only be part of the overall picture," Manstof said during the webinar, which the WSJ was able to review. AI agents, still in their infancy, are expected to grow exponentially and make up the majority of the expanding professional services market by 2035.

A Deloitte consultant summarized the event for the WSJ: "They strongly implied that our model is doomed to disappear. We are essentially being replaced by robots." A spokesperson for Deloitte stated that the company is making "significant investments to lead this human-centered, AI-driven transition for our industry."

Abandoning hourly billing is not so simple

The consulting industry is trying to reinvent itself by acting more like a software or product company. Instead of renting human labor by the hour, firms want to sell fixed-price subscriptions or flat-rate solutions. But the change is difficult. When projects take longer than expected, companies absorb the costs. Payments become unpredictable. Cash flow issues loom. Disputes over subjective success metrics can ruin client relationships.

McKinsey and the Boston Consulting Group are pushing harder towards outcome-based pricing models. More than 30% of McKinsey's global fees already come from such models, according to senior partner Shelley Stewart III, the WSJ reports. Pat Petitti, CEO of the AI consulting platform Catalant, does not see this as a philosophical choice. He describes it as an "existential race" for new revenue models: "AI is destroying their business model."