Why Consultants Have Emerged As Generative AI Investment Winners

Venture and other investors need to be aware that potential corporate purchasers of generative AI services do not believe they have the expertise or the budgets to make large commitments to it immediately.

They are hiring third parties to assess the opportunities, threats and costs so they do not waste money on what could be an expensive long term commitment. Investors need to understand how global IT consultants are advising the corporations who will ultimately become the ultimate drivers of this market as well as how to address the needs that the consultants are identifying. In doing so, the VCs will be able to better make their own investments in order to optimize returns. JL

Angus Loten reports in the Wall Street Journal:

Rather than commit to costly projects, corporate tech chiefs are exploring (how they) may benefit most from generative AI. Tech consultants are emerging as early beneficiaries of the generative AI boom, as companies are eager to put ChatGPT-like capabilities to work but lack the expertise to do so. Demand for outside help with generative AI is driving up the IT consulting market. In the U.S., IT consulting revenue this year is expected to grow 4% year-over-year to $665.9 billion, from 2% over the past five years. Executives say their companies are a year or more away from deploying generative AI tools, citing barriers such expertise and costs. Companies are seeking help on strategies and business cases, how and where to apply generative AI, or to get their data and digital core in shape

Technology consultants are emerging as early beneficiaries of the generative artificial-intelligence boom, as companies are eager to put ChatGPT-like capabilities to work but lack the expertise to do so on their own. 

Behind the fast-spreading curiosity about large language models most companies are taking a slow-and-steady approach, corporate tech leaders and consulting firms say. 

Shelia Anderson, chief information officer and senior vice president at insurer Aflac U.S., said she is turning to third-party consultants to get a jump on generative AI application development now, while the company builds its own in-house team and resources.“Having our own dedicated team requires investment and time to hire, train and retain skilled professionals,” Anderson said. Outside consulting firms “allow us to leverage external expertise on an as-needed basis as part of our ongoing strategy, bringing outside-in perspectives, creative mind-sets and surge capacity as necessary,” she said. 

Across industries, corporate demand for outside help with generative AI is driving up sales in the IT consulting market. In the U.S., IT consulting revenue this year is expected to grow 4% year-over-year to $665.9 billion, up from an average annual growth rate of 2% over the past five years, according to research firm IBISWorld. It identifies Dell Technologies, Tata Consultancy Services, Accenture, Booz Allen Hamilton and CGI Group as some of the market’s biggest providers.

These and other firms are positioning themselves to capture that demand. Amazon Web Services, Amazon.com’s cloud computing unit, on Thursday launched a $100 million program designed to match its AI and machine-learning experts with companies looking to develop strategies around generative AI technology, the company said. 

The move by AWS comes less than a week after Accenture, an IT consulting juggernaut, announced a $3 billion investment over three years to expand its data and AI practice, aiming to double its AI team to roughly 80,000 workers through a mix of recruiting, acquisitions and training.

Over the past eight months or so, IT consulting firms have seen a surge in interest from companies looking to implement generative AI, said Rafee Tarafdar, chief technology officer at IT consulting and outsourcing firm Infosys. Tarafdar said the technology has quickly become a boardroom-level topic, with increased pressure on business leaders to come up with a comprehensive, companywide AI strategy. 

“Most of them are looking at using generative AI to significantly improve customer service, help desk service, software engineering, business and IT operations,” he said. 

Generative AI applications, trained on massive amounts of language and other data, are designed to produce original text, images and computer code from user prompts—potentially upending multiple business operations.  

Rather than commit to costly projects out of the gate, technology chiefs are instead taking the time to explore areas that may benefit the most from generative AI apps—what Diego Tartara, chief technology officer at IT consulting firm Globant, calls a “discovery pace.” Tartara said most businesses coming to the firm want to figure out how to leverage generative AI to automate business processes but also want to ensure models are compliant with policies around data and documentation.

Though most executives surveyed by audit and consulting firm KPMG believe generative AI will have a big impact on their business, well over half say their companies are a year or more away from deploying generative AI tools, citing barriers such expertise and costs.

Joe Atkinson, vice chair and U.S. chief products and technology officer at professional-services firm PricewaterhouseCoopers, said he is hearing from businesses that are simply unsure where to start. Earlier this year, the accounting firm announced its own $1 billion investment in generative AI across its U.S. operations over the next three years, seeking to automate aspects of its tax, audit and consulting services. 

“We expect these firms will invest in generative AI capabilities as a new growth lever,” said Ignacio Rasero, vice president at Moody’s Investors Service.

“Over the past several months, generative AI has been at the center of 500-plus client conversations,” said Paul Daugherty, Accenture’s chief technology officer and technology group chief executive. 

Companies are seeking help on a range of issues, he said, such as developing strategies and business cases, how and where to apply generative AI, specifically, or to get their data and digital core in shape. “CIOs and CTOs clearly need and want our guidance.”