It’s not just jobs on the line — AI threatens the Big Four’s dominance

The Big Four — Deloitte, PwC, EY, and KPMG — are a select and powerful few. They dominate the professional services industry and have done so for decades.

But all empires fall eventually. Large corporations tend to merge, transform, or get replaced by the latest wave of innovative upstarts.

It’s hard to see that time coming for the Big Four. With huge revenues, international reach, vast workforces, and numerous service offerings, they’re indispensable for many corporations.

Yet AI could be poised to disrupt their business models, organizational structure, and day-to-day roles, while driving opportunities for the mid-market.

Automation is coming

The Big Four advise companies on how to navigate change, but they could be among the most vulnerable to AI themselves, said Alan Paton, who until recently was a partner in PwC’s financial services division, specializing in AI and the cloud.

Paton, now the CEO of Qodea, a Google Cloud solutions consultancy, told Business Insider he’s a firm believer that AI-driven automation will bring major disruption to key service lines and drive “a huge reduction” in profits.

Most structured, data-heavy tasks in audit, tax, and strategic advisory will be automated within the next three to five years, eliminating about 50% of roles, Paton said. There are already examples of AI solutions capable of performing 90% of the audit process, he said.

Paton thinks automation means clients will increasingly question why they should pay consultants big money to “give me an answer I can get instantaneously from a tool.”

Unless they become far more specialized, the Big Four will be in trouble, he said.

Others are less convinced AI will make consultants and accountants obsolete, arguing instead that AI will free up time and drive productivity.

“AI frees up consultants, but it will never replace them,” said Casey Foss, chief commercial officer at midsize firm West Monroe.

Businesses will continue to require expertise as AI develops — it’s not a “set it and forget it” solution, she said. There will always be a need for the human in the loop who can understand problems holistically and has the “expertise of the gut feel.”

The Big Four’s vulnerabilities

The debate over how AI will disrupt job roles affects all consulting firms, but some industry insiders say the Big Four’s business model is also at risk.

“No one is more exposed to AI disruption than the Big Four,” said Foss. AI is bringing price points down, which will hit revenues, and creating demand for outcomes-based pricing models over traditional billable hours that the Big Four have always used, she said.

Firms have to be nimble to adapt to these changes at scale while simultaneously upskilling their staff and rethinking services, Foss said. Pivoting a huge organization like EY, KPMG, PwC, or Deloitte is “definitely harder,” she said.

Offshoring, a cornerstone of the Big Four’s business model, could also be a handicap.

The Big Four have built their healthy revenue streams on junior-heavy pyramids, with an increasing degree of labor arbitrage, offshoring work to cheaper labor markets, often in Asia.

“If work can be done using AI, where you don’t need to have an office in Indonesia, you can actually deliver it from the UK into those services, then I think these companies are going to be deeply challenged,” said Paton.

If the way you deliver a service is based on the number of people you have, “you’re really vulnerable,” he said.

Amid tight market conditions and slow attrition rates, Big Four employees are already suffering. A number of UK and US branches have laid off workers and slowed hiring in the past year. This May, PwC laid off roughly 2% of its US workforce, largely from its audit and tax lines.

Rise of mid-market firms

As disruption heads for the Big Four’s established order, AI is proving a boon to mid-market consulting firms.

“AI is a necessary enabler for these firms to proliferate and prosper,” said Alibek Dostiyarov, a former McKinsey consultant who is now CEO of Perceptis, a startup that provides AI solutions to smaller firms to streamline “mind-numbing” consulting tasks.

Automation diminishes smaller firms’ previous disadvantages, like lacking an army of talent or advanced internal tools, while empowering employees to be more productive, said Dostiyarov.

Perceptis’ clients say the tool allows them to reply to about 10 or 12 project inquiries rather than prioritizing two or three, he said.

West Monroe’s win rate is higher, and its pipeline is “bigger than it’s ever been,” Foss told BI. In the past six to 12 months, the firm, which has just over 2,000 employees, has also started to see a new talent set emerge in its recruiting pipeline — leadership candidates from the Big Four.

Foss said ex-Big Four candidates are “excited about how boutique firms can use this technology faster and more iteratively to serve clients differently.”

Too big not to adapt

Others say the Big Four’s size and expertise make it inevitable that they’ll overcome AI disruption.

The four firms have invested billions in artificial intelligence, far more than smaller firms could ever afford.

In 2023, KPMG said its plan to invest $2 billion in artificial intelligence and cloud services over the next five years would generate more than $12 billion in revenue over that period.

Innovation leaders at EY and KPMG told BI the scale and breadth of their offerings were an advantage and helped them deliver integrated AI solutions for clients.

“While small firms may move quickly, we are uniquely positioned to deliver enterprise-grade AI solutions, manage risk, and integrate technology across global operations,” said Cliff Justice, a key figure in KPMG’s global AI program.

Justice said that while it’s true AI is disrupting traditional business models, the assumption that it will break the dominance of the Big Four underestimates their structural advantages, strategic positioning, and ability to adapt at scale.

Raj Sharma, EY’s global managing partner for growth and innovation, told BI that the firm’s breadth of business made it the perfect “testbed for innovation.”

“Our strength is in our ability to bring to clients more than 100 years of deep sector experience and quality data sets, human-centered and supported by the collective knowledge of 400,000 skilled professionals,” Sharma said.

Both leaders also said their deep expertise was necessary for handling the increased ethical, security, and regulatory compliance challenges created by AI.

“Businesses need a partner that can do more than provide relevant tech capabilities,” said Sharma.

PwC’s chief technology officer, Umang Paw, said that his firm was “more than ready” for this “moment of reinvention.”

“We’re not coming at this cold — we’ve had an AI practice for more than 10 years and are working with our technology alliance partners to build AI-enabled solutions that embed our expertise and allow clients to access our support in new ways,” he said.

“Every industrial revolution has reshaped professional services and AI is no exception,” said Paw.

Deloitte did not respond to a request for comment.

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