ForresterReportcopypreparedexclusivelyfor###fullName###with###organization###.DistributionandreproductionFormoreinformation,seetheTermsOfUsePolicyandWaysToShareResearch.Forrester Report Copy Prepared Exclusively For Cathie Smith With Forrester. Distribution and reproduction are prohibited. T R E N D SR E P O R TGenAI IsDisruptingProfessionalServices LeadersShouldAnticipateAndBenefitFromProviders’InvestmentsInGenAI-PoweredDelivery December11,2024 ByTedSchadler,FredericGironwithAshutoshSharma,JayPattisall,HaydenWeatherall,IanMcPherson Summary ServiceprovidersareonthefrontlinesofgenerativeAI(genAI)-powereddisruption.Aspure“knowledge-plus-experience”businesses,fueledbyknowledgeandrewardedbybillablehours,theyareimmenselyexposedtogenAI-powereddisruption.Insomecases,enterpriseprocurementisexpectingandreceiving30%pricereductionsinthetotalcosttocompleteaproject.ProvidersarerespondingbybuildinggenAI-powereddeliveryplatforms,revisitingtheircorebusinessmodels,anddrawingdowncostsinadvanceofslowedordecliningrevenues. ForresterReportcopypreparedexclusivelyfor###fullName###with###organization###.DistributionandreproductionFormoreinformation,seetheTermsOfUsePolicyandWaysToShareResearch.Forrester Report Copy Prepared Exclusively For Cathie Smith With Forrester. Distribution and reproduction are prohibited. GenAISetsTheTableForServiceProviderDisruption Aspureknowledgebusinessesthatmakemoneyinbillablehoursworked,serviceprovidersareonthefrontlinesofgenAI-powereddisruption.GenAI-powereddigitalassistantssupplementpeople’swork,augmentingtheirknowledge,skills,andexperienceaswellasautomatingtheirtasks.Theimpactismoreworkcompletedinlesstimewithfewerpeople(seeFigure1).Overthenextfiveyears,serviceprovidersofallkinds—systemsintegrators,businessprocessoutsourcers,managementconsultancies,marketingagencies,taxadvisors,financialauditors,lawyers,andmore—mustrespond. Previouswavesofserviceindustrydisruption—offshorelaborandcloudcomputing—loweredcostsandunlockedmoredemandfortechnologyandforservices.Willthesamehappenagain?Onlyifserviceprovidersreinventtheirbusinessmodelsasasset-based,solution-driven,andoutcome-oriented.Tocompeteandestablishanewlong-termvalueproposition,providersmustcannibalizetheirexistingtime-and-materialscommercialmodels,ridingthecostcurvedownandreskillingtheirworkforcewhilereinventingtheirofferingsandbusinessmodelsfortheeraofAIcomputing.Providerswithscaleandstrongbalancesheetswillthriveandreinventthemselvesaspost-AIserviceproviders,reconstructedtothriveintheAIcomputingera;smallerorless-nimbleproviderswillstruggle. GenAIIsDisruptingProfessionalServices ForresterReportcopypreparedexclusivelyfor###fullName###with###organization###.DistributionandreproductionFormoreinformation,seetheTermsOfUsePolicyandWaysToShareResearch.Forrester Report Copy Prepared Exclusively For Cathie Smith With Forrester. Distribution and reproduction are prohibited. TheEconomicImpactOfAIInServices FourAI-FueledFactorsDriveThePlightAndPotentialForServiceProviders Thechangesarewellunderwayasenterpriseclientexpectationsforlowercostssurpassproviders’abilityorwillingnesstorespond.Overthenextfiveyears,fourAI-fueledfactorswilldisrupttheserviceproviderstatusquoandforcethemtoreconsiderthefundamentalsoftheirbusinesses(seeFigure2): 1.Clientsalreadyexpectmorework,faster,atlowercost.Insoftwaredevelopment,enterprisesareaskingfor30%pricecutsinsoftwaredevelopmentandevendeepercutsthroughself-serviceautomationandlowerdeliverycostsinhelpdeskservices.Thisforceacceleratesthedeclineoftimeandmaterialspricingandmotivatesvalue-basedpricingmodels. 2.Providers’abilitytodeliverwillcontinuallylagclients’expectations.Providerswithsufficientscalearebuildingplatformstoautomatemassiveswathsofwork.Evenso,mostproviderscan’tcomfortablymeetthedeepdiscountsthatclientsaskforinmorecomplexscenarios.ProviderswithouttheresourcestoautomateworkwithAIwillstruggletocompete. 3.ClientdemandfornewAIcomputingserviceswilltakeyearstomaterialize.Enterprisesarebeginningtomovebeyondpilotsintorealapplicationsatscale.Butthisisstillearlydays,andmostproviders’reportedgenAIservicesrevenues GenAIIsDisruptingProfessionalServices ForresterReportcopypreparedexclusivelyfor###fullName###with###organization###.DistributionandreproductionFormoreinformation,seetheTermsOfUsePolicyandWaysToShareResearch.Forrester Report Copy Prepared Exclusively For Cathie Smith With Forrester. Distribution and reproduction are prohibited. areactuallydata-relatedservicesaimedatmakingclients’businesscapabilitiesgenAI-ready.Accenture,forexample,reported$3billioningenAI-poweredservices—asmallsliceoftheirbusinesstoday.GenAI-poweredserviceswillgrowasclientusecasessoarby2027. 4.AIcomputingserviceswillanchorproviders’futurebusinessmodels.ThecomplexityofgenAI-poweredapplicationsandagentsandtheproliferation(millions)ofdomain-andenterprise-specificgenAImodelinstanceswilloffersignificantopportunitiesfornewAIstrategyandtechnologyservices,includingnewmanagedservices-as-softwarebusinessmodels. ProvidersAreMakingBillion-DollarBetsTo