Top consulting firms are being hit by an AI reckoning

Management consulting firms are turning to AI to navigate a turbulent business environment and pullback from major clients. While new technology is saving them hours, it’s also slowly eroding parts of their business.

The AI-driven shift comes as major consulting giants—many of which are heavily focused on the U.S.—face steep cuts in government contracts. Under President Donald Trump’s sweeping overhaul led by Elon Musk’s Department of Governmental Efficiency (DOGE), companies now must justify their billion-dollar contracts and submit the savings they bring the government.

In Canada, Prime Minister Mark Carney campaigned on “significantly reducing reliance on external consultants” and boosting internal expertise, and asked ministers to carry out the biggest cost-cutting drive since the 1990s ahead of the fall budget. From 2023 to 2024, Ottawa spent $832.4 million on management consultants across all departments and agencies, a 60.5 per cent increase in spending from 10 years prior.

While the full impact of government cuts remains to be seen, new bookings at Accenture fell six per cent in its third quarter to US$19.7 billion. Chief executive Julie Sweet said in the consulting and outsourcing firm’s most recent earnings call that it continues to see a “significantly elevated level of uncertainty in the global economic and geopolitical environment as compared to calendar year 2024.”

Companies’ interests in building out digital strategies will still prop up demand for Accenture’s contracts, Sweet maintained. Asked by analysts about AI-related savings and the slowing growth of external demand for its GenAI products, Sweet said “GenAI is just being more and more embedded into everything we do.” 

Accenture has made US$4.1 billion in generative AI revenue for the fiscal year 2025 to date, David Morgenstern, Canada Managing Director wrote in a statement. “It’s fueling our growth at a pace we’ve never seen,” he added. The company did not respond to questions about pullback from clients or changes to hiring quotas.

Most of the consulting firms The Logic spoke to claim they got a jump on AI before the others. KPMG was an “early adopter.” PwC has been “bold from the outset.” EY was doing it before it was “mainstream.” Many have developed internal agentic AI chatbots—advanced generative AI that can autonomously solve problems based on decades of data—and have tools to assist in PowerPoint creation.

Despite this, PwC has experienced a pullback in contracts from some clients who are replacing the work of “consultants of yesterday” with AI, PwC Canada chief digital officer Chris Dulny told The Logic in an interview. Dulny acknowledged that certain consulting tasks—especially those involving simple, cookie-cutter solutions—can now be handled directly by clients using AI. But consulting evolves, he said, and “the opportunity far outshines the downside” of that trade-off.

As the “price of intelligence” goes down, consultants have to get “smarter and better,” said Boston Consulting Group Partner and Managing Director Scott Wilder. Ninety per cent of the company’s employees use AI regularly, and around 45 to 50 per cent of the firm’s workforce are frequent, habitual users relying on AI for various functions on a daily basis, Wilder said. Such AI usage among Canadian employees at BCG exceeds the North American average, he added. 

“The bar is raising for everything we do,” Wilder said. Consultants can’t just do a quick deep research query, but AI models can. Wilder says he’s not concerned for the consultancy field because a large portion of the business is in strategy execution and AI will just free up more time to meet with clients. “We don’t get paid to write slides. We get paid to create insight and drive value,” Wilder said.

At McKinsey, Canada managing partner Richard Luft’s teams are saving up to six hours per week using the company’s proprietary AI platform Lilli, which relies on almost 100 years of the company’s data. The consulting firm has a partnership with Toronto’s AI firm Cohere to increase its tech expertise, according to Luft. 

Entire business lines could be taken over by AI, independent consultant and professor emeritus at the Rotman School of Management Roger L. Martin said in an interview. The technology will get you to the answer of a problem faster and cheaper than humans, he said, and that is what allows it to execute repetitive tasks effectively. 

Other firms are much more dismissive of the idea that AI will replace consultants. It’s “one big myth,” maintains EY Canada’s chief technology officer Biren Agnihotri. AI programs will become outdated without constant development by actual people, he said in an interview. Yet Agnihotri still acknowledged they’re already seeing some cannibalization and have been changing their business models to adapt. 

KPMG hasn’t noticed any pullback from clients in their advisory or tax practices, Stephanie Terrill, KPMG Canada’s managing partner of digital, said in an interview. 

Entry-level hiring is another key focus for KPMG executives and is a “big debate,” Terrill said. KPMG has “not looked at significantly decreasing” the amount they hire from universities and in entry-level positions, she said. Younger employees especially are very willing to adopt AI, with new grads showing a readiness to use “the newest and latest AI tool.” 

But the way the company hires is changing, she said. Now, there is a heightened emphasis on hiring employees that are AI-savvy, she said. “If you don’t adopt AI, you might not have a place at KPMG,” she said. “That’s very different than scaling back hiring.” 

Some major firms are paring back their workforce. Data from job-search firm Indeed shows overall consulting job postings in Canada in February 2025 were down 44 per cent from the same time in early 2022. Non-senior consulting roles on Indeed in Canada fell 40 per cent over the same span to a five-year low. McKinsey shed about 10 per cent of its global staff in the past year and a half, PwC cut 1,500 jobs in the U.S. in May and EY delayed start dates for new recruits hired by its U.S. strategy and deal advisory business for the third straight year, citing “uncertain and evolving market conditions.”

Boutique B.C.-based consulting firm SME Strategy is slowing hiring due to AI adoption, CEO Anthony Taylor said in an interview. Its appetite for adding headcount has “decreased overall, because we’re kind of meeting our output targets with the same amount of staff.” 

Cutting back on entry-level hiring could create long-term talent pipeline problems for many firms, Martin warned. There’s a risk, he said, that firms act with “arrogance” and slash junior roles “to the bone.” Many consulting executives say they’re keeping entry-level hiring stable for exactly that reason, including EY’s Agnihotri.

It’s too soon to see the actual effects of AI in consulting, and none of the big companies are doing anything “extraordinarily different already,” Martin said. But five years from now—that’s a completely different story, he added.

With files from Laura Osman

Editor’s note: This story has been corrected to state that Accenture made US$4.1 billion in generative AI revenue for the fiscal year 2025 to date.