"McKinsey is under pressure from clients to tie its fees to outcomes achieved — such as lower costs, higher profits or increased market share — rather than to the hours its consultants spend concocting advice designed to achieve those ends. Charging for results delivered rather than work done makes revenue less reliable, which helps explain why the firm will shunt a bigger share of partners’ pay into equity and husband more cash.
The drive to tie fees to outcomes partly reflects the way billable hours are becoming less useful as a yardstick, thanks to consultants’ own usage of AI for tasks such as data analysis and diagnosis. Other AI-exposed professional services such as lawyers and auditors have also come under pressure to pass on their cost savings.
More broadly, clients are questioning the value of advice while also growing more accustomed to tariffs based on successful task completion. Fin, a maker of AI agents, charges 99 cents for each customer case resolved by its eponymous bot; iDenfy bills £1 per identity verification. Salesforce lets customers pay per task for activities such as updating customer records. Budgeting predictability — for both Salesforce and client — is afforded by bulk-buying credits for these tasks upfront.
Some industries are old hands at this form of billing: think “no win, no fee” legal ambulance chasers or hired assassins. Even consultancies have history on this front. Alvarez & Marsal used similar pricing when working on Rolls-Royce’s 2018 restructuring. The engine maker’s own “power by the hour” programme, charging fixed maintenance and replacement costs for each hour flown, was an early precursor."
https://www.ft.com/content/8318a754-7b63-4f1f-8978-7691e7ed3511
#AI #GenerativeAI #McKinsey #LLMs #Consulting
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