In a webcast sponsored by Sage and moderated by Consulting Magazine Director/Editor-in-Chief Michael Webb, pricing strategist John Norkus, Senior Pricing and Commercial Strategy Advisor and founder of ChiefPricingOfficer.com, and Igor Stenmark, Managing Director and Chief Research Officer at MGI Research, laid out what the AI shift means for firm economics. Here are five key takeaways.

Charging for Hours That No Longer Exist Is Untenable

The traditional proxy for consulting value, hours worked, is breaking down as AI handles tasks that once required significant human effort. "Charging for an hour that no longer exists is very tough," Norkus said. Clients are already pushing back. He cited a public Financial Times report in which KPMG Global negotiated a 14% reduction in audit fees from Grant Thornton, asserting its auditor was leveraging AI. The value of the audit hadn't changed, but the price did. That kind of repricing pressure, Norkus and Stenmark agreed, is only going to intensify.

Moving to Outcome-Based Pricing Means Overhauling the Business Model

Value- and outcome-based pricing is the logical destination, but getting there is far more than a billing tweak. Norkus compared the transition to what the software industry called "swallowing the fish": when companies moved from on-premise sales to SaaS, cash flow turned negative before it turned positive, because investment comes before revenue. The same dynamic applies here. "Unless there is a fundamental change in both the financing of the way that we think about putting together these deals and the measurement and compensation associated with the partnerships themselves, the traditional cash-based partnership will have a very hard time shifting," Norkus said. That means CFOs and managing partners need to rethink how cash is held, how partners are compensated, and how risk is shared before new pricing models can hold.

Legacy Metrics Are Distorting the Picture and Hiding Real Costs

Utilization rates and billable hours are losing their signal value. Stenmark raised a pointed question: "Are we working, or are we using AI to work?" A consultant waiting hours for a complex AI task to complete still looks "utilized" on a dashboard, but the picture is misleading. Compounding the problem, AI costs are often buried in a central IT budget rather than attributed to specific client engagements. Stenmark noted that some Wall Street portfolio management teams spend between $175,000 and $350,000 per month on AI tools alone. When those costs aren't reflected in project economics, margin calculations become fiction. "Just because you use AI doesn't make it cheaper necessarily," he said.

Most Firms Are Bolting AI On, Not Building Around It

Every firm claims to be an AI firm. Few actually are. Stenmark was direct: there is no concrete evidence yet that firms which have fully restructured around AI are generating better client outcomes or higher margins. He called a complete revolutionary overhaul "extremely complex and very highly risky" for any firm with an active book of business. The realistic path, both speakers agreed, is evolutionary, with gradual integration rather than an overnight reinvention. "Bolting on" AI is not necessarily a bad near-term strategy, Stenmark said, as long as firms understand what comes next when clients catch on and demand repricing.

Human Judgment Remains the Hardest Thing to Replace

As AI commoditizes analysis and lower-order knowledge work, the services at the top of what Stenmark called the "knowledge pyramid," including judgment, foresight and strategic counsel, remain largely beyond its reach. That is where the value of consulting will concentrate. Norkus put it simply: "Human relationships and human experience won't be replaced, at least within my lifetime." When AI makes all existing knowledge universally available, the differentiator becomes trust, wisdom and the ability to guide a client through change. That, both speakers argued, is the original promise of consulting, and AI, paradoxically, may be what brings the industry back to it.

The Bottom Line

Closing out the webcast, Webb distilled the hour into a clear takeaway: AI is not just making the work faster. It is challenging the economics of the work itself. "Firms that thrive are going to be the ones that build on it rather than bolt it on," Webb noted. "Making sure the operating models and the finances can carry the weight of the new commercial reality, that's the critical element." He thanked Norkus, Stenmark, and Sage for the discussion, calling the conversation both practical and forward-looking for firm leaders navigating the shift.

Missed the Webcast? Watch It On Demand.

The full webcast, AI Is Changing Project Economics. How Will Your Operating Model Catch Up?, is available to view on demand. Access the recording here.

When AI Compresses the Work: Key Takeaways from the Consulting Magazine Webcast

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