IBM Consulting’s head, Mohamad Ali, has important advice for consultancies. He believes consultancies must reinvent themselves as software companies to remain viable in the age of artificial intelligence (AI). In a recent interview, Ali stated that this major rethink is required due to increased competition from technology companies and growing scepticism from clients regarding traditional consulting models. He warned that firms that do not adapt will be killed by the shifting market dynamics posed by AI. Ali returned to IBM two years ago with a mandate to transform the consulting division into a “service as a software” business. This plan involves developing thousands of digital “agents” to perform tasks with limited human oversight, initially for internal use and later for clients.

IBM executive Mohamad Ali’s advice to consultancies

In an interview with The Financial Times, Ali said: “The future of consulting is going to be a hybrid of people plus software — like, a lot of software. And I think that consulting companies that can’t do that are going to fall away.”Traditionally, consultants have supported companies in improving efficiency by designing restructuring plans, implementing third-party software, or offering specialised expertise such as cybersecurity guidance. With the rise of semi-autonomous agents capable of handling many of these tasks, consulting firms now face the question of whether to develop such tools internally and how to effectively coordinate large numbers of agents. Firms such as Deloitte, KPMG, and McKinsey are currently developing agentic AI platforms, offering clients a range of tools tailored to their specific business needs.“The software companies are going to get into this business as well, and are going be delivering digitally through agents. So our strategy here is to run as fast as possible to deliver as much of this through these agents as possible and convert a big part of our business into a software business,” Ali noted.

Consulting firms are turning to AI implementation to counter the effects of more than two years of slow growth. The sector, including IBM’s consulting arm, has seen stagnant revenue as clients focus on in-house AI projects, manage economic uncertainty, and reduce government spending.“Companies are spending a ton of money [to] figure out how to build this up,” he added.Ali predicted that companies will increasingly need consulting firms to implement AI strategies, citing an MIT study that shows 95% of generative AI projects have failed to deliver financial returns.However, some corporate leaders question whether consultants add value compared to in-house development, and investors remain concerned about this issue. Accenture shares have dropped 30% this year due to concerns about AI’s impact on its managed services business, prompting CEO Julie Sweet to announce workforce changes and staff reductions for those who cannot acquire the necessary AI skills.Ali, who rejoined IBM in 2023 after previous stints at HP, and other tech firms, now leads IBM Consulting. He’s promoting agentic AI as a transformative efficiency tool, pointing to IBM’s own $3.5 billion in savings over two years through automation across nearly 500 corporate functions. Ali noted that large language models themselves are becoming commoditised.“It’s less about the LLMs and now about the applications that you’re building on top,” he noted.