The Use of AI Is Changing the Project Business

The consulting market has been under enormous pressure in recent years: the shortage of skilled workers slowed business development in many areas, while demand for consulting services in numerous segments significantly exceeded the available supply. Project business flourished in particular, driven by the digital transformation that companies were keen to push forward. The SAP market experienced a special boom triggered by the migration to S/4 Hana.

This development led to fierce competition among consulting firms, which poached experts from each other in order to meet growing customer demand. As a result, personnel costs rose significantly—and with them the fees for consulting services. Despite intensive efforts by service providers to make project work more efficient, flexible, scalable, and repeatable with the help of tools, templates, and methods, success remained limited.

The old dogma of the industry – „Consulting is people business“ – remained valid. This was also acceptable as long as the demand for the digitalization of business models in a booming economy ensured comfortable capacity utilization for consulting firms.

But the situation has changed fundamentally. The economic situation, especially in Germany, is tense. Companies are being forced to cut costs, and for the first time in many years, IT service providers are having to seriously consider how to utilize their consultants.

Is AI the hope for project momentum?

In this new reality, artificial intelligence is coming into focus. The demand for AI solutions is providing at least a little hope for new project momentum. However, according to PAC analyses, the effect on consulting firms' capacity utilization has been limited so far, as many places are only initiating smaller projects that also require specific consultant profiles.

The use of AI in consulting firms' own business processes is more exciting. In service delivery, for example in application management (AM), software development, and testing, the use of AI is already well advanced.

What is new and particularly interesting is the use of AI in the early stages of project business: in processing RFIs and RFPs, defining scope, conducting market analyses, and scenario planning. Until now, junior consultants have been used in these areas to gain initial project experience and familiarize themselves with consulting work. Now, AI is set to take over their work.

AI is still only functioning moderately well in these areas. But that is not the key point, because the models are continuously improving and the technology is maturing. The prospect of savings in personnel costs and accelerated processes has already led large consulting firms in particular to systematically promote the use of AI across all project phases.

Short-term savings on personnel

In the short term, the industry can hope for relief in personnel costs as soon as AI is ready for use in the consulting fields mentioned. However, experienced consultants with in-depth industry knowledge and good customer access will remain indispensable even in the age of AI. For the time being, it is likely to be more difficult for junior consultants who were introduced to consulting through the jobs that AI is now set to take over.

However, if fewer juniors are involved in project work in the short term, there is a risk of a shortage of experienced consultants in the long term. AI can therefore only alleviate the shortage of skilled workers temporarily at best—unless it actually develops so rapidly and becomes so powerful that it can replace experienced consultants in the long term.

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