As Wall Street smells blood in the water, what’s ailing consulting and research?

Headwinds have been brewing in the consulting and services spaces for the last year or two. Clients see AI as a sometimes cheaper, faster resource compared to management, process and tech consultants. AI is disrupting what consultants sell, how they price services, how they apprentice junior staff, how big their pyramids should be, how they develop deliverables and more. AI is a change agent that is disrupting consultancies from the inside out.

You don’t have to be a financial wizard to look at this stock price chart and see that something’s amiss. Accenture’s stock closed at $398.25 per share on February 5, 2025 and then closed at $245.71 on 8/13/2025. It lost $152.54/share in about six months’ time. That’s about a 38% drop in value.

I also looked at the stock performance of several other large services firms. They showed similar erosion patterns in stock price declines this year.

You can also see a similar chart on IT research firm Gartner (ticker IT). Their stock was priced at $547.80 on February 3 this year and closed August 13, 2025 at 242.50. That’s a $305/share price drop per share (or almost a 56% drop in per share value).

All of which begs this question: “Why are these firms’ share prices taking such big stock price hits?”

Current events re: Services industry

Much has been written recently about AI’s potential impact on the consulting industry. Some of these articles included:

• In January, there was a diginomica piece that defined the state of the consulting space then. It noted:

AI tools can also tackle a number of tasks that have been the purview of others that call themselves consultants. This can include outsourcers, software implementers, managed service providers, etc. These tools are capable of taking over large aspects of work activities such as: 

• Package software configurations, setup and upgrades

• Software selections
• Application software testing
• Performance monitoring
• Data cleanup
• Report development
• Identifying anomalous transactions
• Improving systems security
• Robotic process automation

And more.

• Fast Company had a solid story early this year. This soundbite really stands out as it goes to the heart of what consultants and research firms offer:

Answers are the new commodities and immediate access to insights are table stakes.

• An April 2025 diginomica story noted this:

I recently spoke with Casey Foss, Chief Commercial Officer with consultancy West Monroe to get her perspectives on this. She indicated that consultants will be more important than ever as clients will want access to a true, trusted advisor. Most AI answers (except hallucinated responses) aren’t that novel and the results could be less than trustworthy. Clients might not want a probabilistic AI answer or suggestion.  Clients will want access to subject matter experts (SMEs) – the consultants who possess real-world industry expertise and deep functional, prior expertise in similar matters. Foss summed it up well when she said, 'The real work starts when the mundane tasks are done'.

Services buyers are rational entities. They don’t want to spend their hard-earned cash on expensive consultants if they can find more cost-effective solutions for some or all of that potential work. Seriously, who would consciously and materially overpay?

What’s going on is that the services space is being hit with several structural changes and AI is on the spear tip for these changes. While AI is triggering business model reexaminations, the speed with which buyers of consulting services are adjusting their spend in an increasingly AI-powered business environment is giving Wall Street pause.

Forgotten talents/seduced in side businesses

Some of what’s troubling consultancies, integrators and other service firms is that they lost their way and drifted from their learned roots. When consultancies were all about providing ‘independent advice and counsel’, they approached each potential client uniquely. Every client was given deep personal attention and their guidance was tailored specifically for that client.

Starting in the 1990s, some consultancies shifted gears. They saw that offering repeatable projects (e.g., ERP implementations) threw off huge fees and permitted great reuse of their intellectual property. Independence and objectivity soon got cast to the curb as the selling of pre-defined/packaged ‘solutions’ became the new raison d'être of consultancies. Consulting services were relegated to a second-class status in many firms as consultancies became ‘integrators’ that pitched pre-configured vertical or horizontal solutions to businesses. In fact, services buyers were no longer ‘clients’. They were ‘customers’ or ‘users’ who were being sold things like outsourcing services, advertising services, integration services and much, much more.

The evolution took an even darker turn when service firms started taking monies from technology providers. Service firms that referred or sold a client a vendor’s software or hardware might get a commission or benefit from co-marketing funds paid by a vendor upon the reaching of a pre-determined product sales target.

What a lot of consultants failed to appreciate is that clients have been aware of these side deals and wonder if a consultant has the ethical backbone to own up to these monies before tendering a services proposal. For many service firms, they bury this disclosure in some very small type language in their master services agreement boilerplate materials. These ‘consultants’ don’t even pretend to offer prospective customers anything custom, unique or designed specifically for the prospect’s business. No, objectivity and counsel were replaced by one-sized-fits-all solutions and the requisite commissions/rebates/etc. they can throw off for the services firm.

Clients generally know that these service firms are not fiduciaries. They suspect that service firms will operate in their own self-interest. They aren’t going to put the client’s interest ahead of their own. And, publicly traded or private-equity owned service firms might be the most challenged here.

What happened over time is that many service professionals and firms changed and maybe not for the betterment of the client. But these changes are also damning for a very different reason. This evolution caused consultancies to focus on large pyramid, repeatable projects. They didn’t possess people with excellent business, strategy and market knowledge – the key skills consultants should possess in spades. Nope – they evolved into firms with lots of interchangeable, lower cost drones who are only good in a very limited range of tasks. Some might have program management skills, some might understand the configuration options of a particular software vendor’s financial software module, etc.

But, are these the people who can radically reimagine how a modern process should work/be designed? Are these persons market and economic experts? Are their educational backgrounds even in key business disciplines? What is their real market value outside of repeatable systems work and sales? Answer: not much and less so if AI can provide/regurgitate much of the same information.

This is what Wall Street suspects today and this is one reason they are discounting the future revenue and earnings potential of some professional services firms.

Research firms may face a bigger problem

The glory days of research firms may have been when only the research firms possessed the data, reports, skilled market experts and customer insights that software buyers were hungry for.

Businesses have been paying annual subscriptions to market research firms for decades to get access to this data. A subscriber could get timely access to current market knowledge via reports and/or phone consultations with a researcher. This information could save a business weeks or months of research on their own. And the business’ own findings might lack a lot of the context that a researcher (who covers this space intensely for years) possesses.

Unfortunately for research firms, AI tools can scour the internet and other published sources to amass a considerable amount of data about a given technology. AI can also summarize the data, format it into a great looking presentation and perform other relevant services for next to nothing cost-wise and in a matter of minutes.

These AI tools may be replicating much of the content that a subscriber used to get. If the results are close enough, the customer might not see the value in paying a lot for subscriptions. Additionally, AI tools could also do more than summarize technology product and feature information. AI could also look for contracting and pricing data and suggest these to users. It could also offer up negotiating strategies and possibly suggest alternate contract verbiage. And, AI can also scan the internet looking for product reviews about specific technologies and summarizing them.

AI, whose strength is in replaying previously recorded data, could really hurt research firms given the potential similarities in products.

The key survival mechanism for research firms may lie in their analysts and what analysts see/hear anecdotally from research clients. Researchers can sense whether a tech customer is really frustrated or angry (versus just mildly irritated (e.g., by some new vendor pricing mechanism)) but AI can’t. AI might aspire to have great IQ but its EQ is non-existent.

Wall Street likely sees downward pressure forming on research firm revenues and profits.

Marin Ivezic’s perspective

Marin Ivezic recently noted in LinkedIn that research firms felt that they had sufficient protection from AI due to ‘trust’ concerns re: AI. His LinkedIn post notes:

For years, analysts, analyst relations pros, strategy consultants were arguing that clients “trust Gartner/IDC/Forrester/McKinsey/...” far more than any AI system, especially with AI hallucinations. Their jobs, they believed, are safe for quite a while because of the "trust factor" and "personal touch".

Over the last 12 months, I had the impression that confidence in AI has been moving faster than expected. And discussions over the last few days strongly confirmed it - it's still just anecdotal evidence, but in my own network, every single consultant and buyer I chatted with say that for the majority of the usual analyst and strategy work, they now "trust AI more than Gartners". And they’re asking why they should also pay for large research subscriptions or generic advisory.

That rapid perception change, more than any current AI capability, hits the business model. When CFOs believe “AI is good enough,” spend gets cut. And once trust migrates, it rarely snaps back.
 

I posted a response to Marin’s piece. Bob Turek liked two of my responses:

AI is “creating an identity crisis for consultancies.” If they truly are providing great forward-looking, independent guidance for clients, they've little to fear from AI.

AI is dis-aggregating services

Turek also reacted to my comment that AI was disaggregating the services space. Specifically, I noted:

What AI is really doing is to disaggregate aspects of the consulting business model (much like the airlines have done to the flying experience). Now, some parts of a consulting assignment will be done by AI, others by the consultant, etc. For example, AI can do some of the research, prepare the guts of tech presentations, compare products, etc. but AI won't do it all.

Consultants need to focus on the tasks that AI doesn’t do or do well. That’s a short but powerful statement as it requires consultancies to get (re-)focused on what great value-adding capabilities they can provide and figure out what to do with the tasks and services that AI will relegate to irrelevance.

On the more upbeat side…

Like with any challenge we face, first we need to recognize there’s a problem and then take the time to ideate and implement changes/solutions. From interviews I’ve done, I know consulting leaders are looking at how AI-driven change is impacting their industry. Some are only taking baby steps while others are clearly thinking in a more transformative manner.

One of those executives looking at this issue is Arun Shastri of consulting and technology firm ZS. ZS. He’s also their AI practice global lead. ZS executives reminded me of Microsoft Excel (and possibly Lotus 1-2-3 before that) and how that technology didn’t make accountants disappear. But Excel did make accountants work differently and achieve a modicum of scale and improved accuracy/efficiency. AI’s insertion into consulting and other service markets may trigger more than a modicum of change. Smart services leaders are evaluating this potential impact on their hiring plans, skills requirements, billing mechanisms, sales efforts and more.

ZS is already ensuring AI is embedded in our workflows and processes. Like the spreadsheet example, it is helping ZS consultants solve more complex problems quicker and, as Arun and I discussed, helps them deliver value to clients much more quickly. We also discussed how letting AI do many of the tedious aspects of consulting project work can enable staffers to refocus energies on matters that can make a real difference to clients. That new focus could have an energizing effect on staffers. Why? No one who pursued a B-School education wants to spend the next few years of their career photocopying, formatting spreadsheets and building presentations. They got into the consulting space to help clients succeed (Arun and I discussed how real value doesn’t come from having expensive staffers grinding away on data collection, data cleansing, data formatting, data tabulation and other low-value added consulting tasks.) As such, consultants want client experiences that rapidly expand their business and vertical market knowledge. AI frees them to do this.

But, if AI is used this way, does the modern consulting firm change how it bills clients? Absolutely. We discussed how AI will certainly challenge the time and materials mode of client work/billing as these reduced hours don’t compensate for the rapid value delivered by fewer consultants. Consultants must pivot to a value billing model and it must clarify how each consultant creates value for their firm and the client.

ZS is also changing the kinds of people it wants to hire. The firm wants to hire more ‘learners and adapters’ who are “driven to re-imagine business processes from scratch.”

This journey/transformation story is likely what Wall Street needs to hear. If it is on-target then it should resonate with investors.

My take

Stock prices often reflect investors’ expectations as to a firm’s future earnings potential. You can’t fault investors for having some real doubts re: the future of consulting/services and research. AI is a technology that will be used by service firms, individuals and clients. It’s a low-cost tool that democratizes access to knowledge. Those impacted by AI have no choice but to rethink their business model to align with modern technology realities.

In a late-night call last week, one services executive shared that decades of selling ‘industry solutions’ instead of insightful consulting experiences have left a painful skill deficiency in their executive ranks. Specifically, they don’t have senior executives who know how to sell one-off consulting deals. Their executives are skilled in selling repeatable non-AI powered work (e.g., software implementations). In fact, she noted that there’s no difference between a bag-carrying software salesperson and a professional services executive.

AI will impact repeatable work but consulting work will require creativity, time, lots of EQ and a commitment to really understand the unique issues facing a client. That’s a different skill set for both the people selling this work and the people delivering it.