As pure knowledge businesses that make money in billable hours worked, service providers are on the front lines of generative AI-powered disruption. GenAI-powered digital assistants supplement people’s work, augmenting their knowledge, skills, and experience as well as automating their tasks. The impact is more work completed in less time with fewer people.
Over the next five years, service providers of all kinds — systems integrators, business process outsourcers, management consultancies, marketing agencies, tax advisors, financial auditors, lawyers, and more — must respond. Previous waves of service industry disruption — offshore labor and cloud computing — lowered costs and unlocked more demand for technology and for services. Will the same happen again? Only if service providers reinvent their business models as asset-based, solution-driven, and outcome-oriented.
To compete and establish a new long-term value proposition, providers must cannibalize their existing time-and-materials commercial models, riding the cost curve down and reskilling their workforce while reinventing their offerings and business models for the era of AI computing (see figure below). Providers with scale and strong balance sheets will thrive and reinvent themselves as post-AI service providers, reconstructed to thrive in the AI computing era; smaller or less nimble providers will struggle.
What Tech Executives Should Do To Take Advantage Of AI-Powered Services
As a technology executive, you might be able to negotiate lower rates, but that isn’t going to be the endgame for how genAI will change the role of providers in your success. Instead of scratching out discounts, focus instead on a stream of potential benefits that a provider can bring: projects delivered faster at lower cost, co-investment in IP that benefits you, new managed services, and help navigating the disruptive shift to an AI-powered enterprise. The key word is “ongoing.” You want to take advantage of providers’ investments today, and you want providers to keep investing to bring even more genAI benefits.
