AI’s Impact: Is the Consulting Industry Next?
Whenever artificial intelligence (AI) is discussed, the question of job displacement inevitably arises. With the recent advancements in AI, many are concerned about how this technology will impact their professions.
Experts anticipated that jobs involving repetition—like customer service, telemarketing, and data entry—would be among the first to be automated. Before the emergence of AI chatbots, the retail sector was already eliminating cashier positions through self-checkout systems.
However, a significant shift may be on the horizon, potentially impacting a powerful industry known for its high salaries. And Elon Musk may be the catalyst for this change.
Musk’s Influence and the Consulting World
Since assuming his role as head of the U.S. Department of Government Efficiency (DOGE), Musk seems more focused on reducing federal spending than on managing Tesla (TSLA) , SpaceX, or his other companies. His DOGE team has emphasized reducing the federal workforce. While many experts view Musk’s Silicon Valley-inspired, “move fast and break things” approach as unlikely to generate positive results in the federal government, his actions may have further ramifications in the private sector.
For decades, consulting firms have benefited substantially from government contracts. Major players such as McKinsey, Deloitte, and Booz Allen Hamilton (BAH) have been significant beneficiaries. Reports suggest that Musk’s DOGE team is likely to cut the amount the government spends on these firms annually.
According to data from The Economist, this could affect companies such as BAH and Accenture, which have profited from lucrative public sector agreements. The publication also suggests that Musk might believe consulting firms are ineffective and not a good use of federal resources, driving him to redirect funds toward companies within his orbit.
This shift could favor Palantir Technologies (PLTR) , a data analytics company with a strong presence as a defense contractor. Musk recently appointed Palantir’s former Head of Intelligence & Investigations to a senior position within the U.S. Office of Management and Budget (OMB).
“Unlike most other software providers, Palantir embeds teams of engineers with its clients to help them make use of its technology,” The Economist reports. “For now, it works on many projects alongside firms such as Accenture and Deloitte. But some also view it as a potential competitor to the big consultancies, particularly when it comes to AI.”
Peter Thiel, one of Palantir’s founders and a former colleague of Musk, has criticized the consulting industry, labeling McKinsey a “total racket.” Musk’s perspective may align with this view, especially as his appointees have discussed implementing an “AI-first strategy” in government offices.
The Future of High-Level Consulting
Given Musk’s focus on cutting excessive federal spending and using technology to replace workers, a reduction in the federal budget for consulting services seems probable. The primary uncertainty lies in the magnitude and potential complete elimination of these services.
To understand how AI might enable the government to depend less on consultants, TheStreet consulted Yersultan Sapar, a former Apple (AAPL) engineer and now co-founder and CTO of Perceptis AI, a workflow automation startup.
Sapar, an expert in both AI and consulting, believes that while AI is transforming the industry, not all changes will be negative for human consultants.
“The future of consulting is evolving towards greater fragmentation and specialization,” he states. “While industry giants like McKinsey, Accenture (ACN) , and Deloitte will remain key players, the majority of industry growth is coming from smaller, highly specialized firms.”
This could mean new opportunities for companies like Palantir at the expense of traditional consulting firms. However, Sapar adds that integration of AI could lead to superior results for consulting firms.
“This symbiosis will outperform either human consultants or AI alone, giving consulting firms time to adapt and embrace AI. Although AI poses a long-term threat to traditional consulting, the best defense is to integrate AI into their operations,” he predicts.
