In today's rapidly evolving technological landscape, enterprises face a stark reality: partnering with consulting firms has become essential for harnessing the full potential of artificial intelligence (AI). But here's where it gets controversial—do companies truly recognize the critical role these partnerships play, or do they believe they can go it alone? The truth is, the journey toward effective AI integration is complex and often fraught with challenges.
IBM's senior vice-president of IBM Consulting, Mohamad Ali, emphasizes that consulting firms are not just an optional extra; they are pivotal to IBM’s overall growth. According to IBM’s 2024 annual report, a hefty 80 percent of the company's AI-related bookings stem from their consulting division. In 2024, this segment generated revenue of approximately $20.69 billion. However, like many industries, the consulting sector is experiencing slower growth due to broader macroeconomic uncertainties. Despite this slowdown, Ali remains optimistic, asserting that AI will ultimately have a "net positive" impact, even as demand temporarily dips.
In a recent interview with Shivani Shinde, Ali shared insights about how AI is reshaping consulting, highlighting both its opportunities and the disruptions to expect along the way.
How AI Is Reshaping the Consulting World
Ali explains that AI’s influence extends beyond individual companies—it has significant implications for the entire global economy. He notes that the consulting industry has been somewhat subdued even before the recent AI surge, but he believes that in the long run, AI will be fundamentally beneficial, despite the upheaval during the transition. Drawing from history, Ali points out that technological breakthroughs—especially those that reduce production costs—have historically driven GDP growth substantially. This pattern, he suggests, will repeat itself.
For instance, he reminds us that traditional technology consulting often centered on developing large-scale enterprise applications like SAP or Oracle. Then, the advent of mobile technology revolutionized this approach, leading to a surge in mobile app development—an example of how technological shifts create new demand. IBM Consulting was actively involved here, developing popular applications such as Yono for the State Bank of India, which now boasts hundreds of millions of users.
Ali notes that today, AI-powered agents and virtual assistants—such as those based on generative AI (GenAI)—are serialized software capable of serving billions of users. The challenge then becomes: who will build these expansive systems? The answer, he argues, is consulting firms like IBM.
While he remains positive about the consulting industry's future, Ali admits the transition will be disruptive and unpredictable. It’s a period of experimentation, and success isn't guaranteed for everyone.
Are Companies Underestimating AI’s Potential?
Some critics argue that only about 5 percent of companies have truly reaped substantial value from AI, and Ali acknowledges a study from MIT suggesting that 95 percent of GenAI projects are falling short of delivering promised returns. However, he stresses that this statistic shouldn't overshadow the significant successes some organizations have achieved.
About three years ago, when ChatGPT popularized generative AI, IBM took the threat seriously. Despite their longstanding involvement in AI since 1957, IBM didn't immediately produce a blockbuster application akin to ChatGPT. Consequently, they shifted focus from trying to commercialize such a breakthrough to becoming the most prolific internal users of GenAI within the company.
Under the leadership of Arvind Krishna, IBM launched an initiative to embed AI assistants into their workflows. Initially, they developed around 220 AI assistants across various business processes—roughly four per workflow—and now boast around 3,000 deployed assistants. The result? Significant cost savings, with IBM reporting a remarkable $3.5 billion in savings in 2024. A considerable portion of these savings—about two-thirds—was reinvested into R&D, increasing investment from 9 to 12 percent, fueling further innovation.
IBM served as a testing ground, using itself as "client zero," before extending these solutions to over 100 clients globally, including Vodafone India. These implementations demonstrate paths to AI-driven value that most of the 95 percent failing projects are missing.
Why Are Partnerships Critical for Successful AI Adoption?
Ali believes that the ongoing experimentation — many failures along the way — underscores the importance of strategic alliances between enterprises and consulting experts. Experience shows that companies often initially want full control over AI deployment but, after trial and error, realize that collaborating with specialized partners—consulting firms, hyperscalers, or software vendors—is often the more effective route.
Is the Industry Moving Toward 'Services-as-Software'?
Ali envisions a future where services evolve into software-based offerings, a concept he has championed for years. Drawing from his extensive background in software development, he notes that IBM has been building capabilities around deploying digital workers—software assistants or agents—at a large scale. Currently, IBM's platform, IBM Consulting Advantage, hosts approximately 3,000 unique digital workers, with around 10,000 active at any given moment, supporting various client projects. For example, at some client sites, hundreds of employees are working alongside hundreds of these digital assistants, showing how integrated and widespread this approach has become.
This model, blending human expertise with digital automation, is already reality. Many competitors have merely purchased licenses for AI tools, hoping for productivity gains. IBM, however, has taken a comprehensive approach—developing a platform, integrating multiple large language models (LLMs), and incorporating domain-specific capabilities such as finance reconciliation.
The Outlook for the Consulting Sector Amid Market Softness
Predicting economic trends is inherently difficult, Ali admits. External factors like trade policies heavily influence the overall economic climate, making it uncertain when global GDP will rebound. However, he foresees that companies will prioritize their AI initiatives over other investments, leading to a shift in how consulting services are valued. While overall market activity might slow down, AI-related projects constitute about one-third of IBM’s business—markedly higher than competitors—highlighting the growing importance of this field.
India’s Growing Role
India holds a critical position in IBM’s global strategy. The country is a major source of talent and innovation, with specialized centers focused on hybrid cloud, AI, cybersecurity, and quantum computing. For instance, a new hybrid cloud hub and a dedicated cybersecurity center in Bengaluru exemplify IBM's investment in India’s talent ecosystem. Furthermore, plans are underway to establish a quantum computing center later this year in India—further cementing the nation's strategic importance.
Impact of AI and Automation on Employment—Is a Workforce Revolution Coming?
With the rise of agentic AI—intelligent digital assistants embedded deeply into business processes—many wonder about the future impact on employment. Mohamad Ali addresses this by stating that workforce adjustments are part of business rebalancing but emphasize that these are typically small shifts. He highlights IBM’s proactive approach: extensive re-skilling programs, training millions globally in AI competencies, and creating opportunities for employees to develop new skills.
He believes that, ultimately, AI will bring more jobs as the economy expands, but the nature of jobs will evolve. Some roles will diminish, but new categories—such as AI-enabled financial reconciliation—will open up. His message to employees is clear: continuous learning and adaptation will be essential in this new era of work.
Is the Future Bright or Troubled?
While optimism prevails concerning AI's transformative power, the path is likely to involve bumps and uncertainties. The question remains: Are we ready for this new wave of digital transformation, or will resistance and unforeseen challenges slow progress? And more provocatively—do companies risk falling behind if they delay embracing these innovations? Some might argue that delaying adoption could mean missing out on the productivity gains, yet others contend rushing prematurely might lead to costly failures. What are your thoughts? Are we prepared for this AI-driven future or is the industry underestimating the risks involved?
