The Future of Consulting: Why IT Consulting and Management Consulting Firms Are Becoming One

Over the past five to ten years, the management consulting and IT consulting industries have undergone significant changes. We are witnessing a convergence between the two industries—what were once standalone management consulting firms are now beginning to adopt digital transformation capabilities, particularly in artificial intelligence, data and analytics, and cloud consulting. Conversely, while not as pervasive, many IT services and IT consulting firms are enhancing their strategic advisory capabilities.

This strategic shift is driven by the fact that technology has become a major component of nearly every business process across most all industries. Great strategic advisory and well-thought-out roadmaps are no longer sufficient on their own. Likewise, software development, systems implementation and integration, and cloud consulting are far less impactful without strategic advisory that directly ties them to real-world strategic initiatives and business outcomes. The now-ubiquitous digital transformation initiative is fostering a new breed of consulting firm—one that successfully marries traditional management consulting skills with technology capabilities.

However, to understand what the consulting firm of the future will look like, it is essential to first understand how management and IT consulting firms are evolving and, more importantly, which capabilities will be most relevant in the future and which ones are becoming obsolete.

How IT Consulting & IT Services Firms Are Changing:

The IT consulting industry is projected to reach $78 billion this year, with a projected CAGR of 4%–5% over the next four to five years. The majority of that growth is being driven by several key sectors. At least half a dozen practice areas are prevalent across the industry, with some firms offering a mix of these services and others operating as standalone firms.

• Managed service providers

• Cloud consulting

• Data and analytics

• Software and mobile app development

• Cybersecurity services (including both implementation and managed cybersecurity services)

• Systems implementation and integration (CRM, ERP, etc.)

• IT staffing

At their core, companies in these categories are largely technology-focused. While they excel within these domains, many (though not all) struggle to connect their work to real-world business outcomes and strategic initiatives. Furthermore, the proliferation of AI and automation is rendering some of these service lines obsolete or significantly less valuable.

Some lower-value, more repetitive work is facing a very real threat. AI and automation are creating an environment where the work of several developers can effectively be executed by one. The mix of resources providing advisory work around business process optimization and technology alignment with strategic initiatives is growing, while the number of pure technical resources required is shrinking.

Growing Sectors:

AI and Automation: This is unquestionably the fastest-growing and most disruptive area within the IT consulting and IT services ecosystem. Integration and software development timelines are shrinking due to AI-driven technologies like low-code/no-code platforms.

Cloud Services and Consulting: High demand for migration and managed services is driving growth and increasing M&A activity.

Cybersecurity: A steady increase in cyber threats, combined with regulatory requirements, is further increasing demand for cybersecurity services.

Data and Analytics: Data is not only foundational to a sound AI strategy but is also becoming the primary method by which organizations make tactical and strategic decisions.

Declining Sectors:

Traditional IT Staffing: No other sector within IT consulting is in greater danger of becoming obsolete than traditional IT staffing and staff augmentation services. AI is the primary driver of this decline, as lower-value development tasks that were traditionally sent offshore can now be completed in a fraction of the time with artificial intelligence.

Legacy System Maintenance and Integration: Large, complex legacy systems like ERP and CRM are becoming far less common, with an obvious shift toward cloud-based alternatives. The days of years-long, seven-figure implementations and integrations are quickly ending.

Manual Software Testing Services: AI-driven testing tools are eliminating the need for manual testing.

These shifts mean that AI and automation tools will continue to take over routine and repetitive tasks, while locally hosted legacy systems and the service segments built around them will become obsolete.

Despite significant headwinds in the global M&A market, the IT consulting industry has demonstrated resilience in terms of M&A activity and valuations. Over the next five to ten years, the majority of acquisition and investment activity will likely center on acquiring companies with strong capabilities in growing sectors, largely driven by large strategic acquirers and the continued convergence of management consulting and IT consulting.

How Management Consulting Is Changing:

With a projected CAGR of 5% over the next several years, management consulting is expected to grow in near lockstep with IT consulting. Just as IT consulting is experiencing disruption, so too is management consulting, though the disruption in management consulting may be less severe. Unlike IT services, management consulting has always been centered around strategic thinking and high-value work, making it far more insulated from AI and automation-driven replacement. However, certain practice areas and roles within management consulting firms will inevitably be displaced by artificial intelligence.

Growing Sectors:

Operations and Business Process Optimization: Effective implementation of emerging technologies requires a well-thought-out strategy for positively impacting an organization, particularly in operational and process optimization.

Financial and Risk Management Advisory: The migration of sensitive data to the cloud, combined with rising cyber risks, has increased regulatory scrutiny and financial complexity, fueling demand for risk management consulting.

Supply Chain Consulting: Increasing supply chain complexity, coupled with a rapidly growing e-commerce sector and sustainability initiatives, is driving strong demand for supply chain and procurement consulting services.

Digital Transformation and IT Strategy: This is perhaps the fastest-growing sector within management consulting. Firms that fail to build out their digital transformation practice will quickly fall behind their peers.

Declining Sectors:

Corporate Strategy: Traditional corporate strategy engagements, such as go-to-market strategy and roadmaps, are becoming commoditized.

Sales and Marketing Consulting: AI-powered marketing automation tools are reducing the need for outsourced sales and marketing support.

Beyond declining sectors, perhaps the biggest threat to management consulting, and more specifically, to those who work within it is the way AI and data will replace the need for manual research. Tasks that previously required weeks of work from a large team of analysts can now be completed in a fraction of the time. As a result, management consulting firms will inevitably become leaner, leveraging technology to enhance both efficiency and effectiveness.

M&A activity in management consulting has remained steady in recent years, with the United States and EMEA being the most active regions. Many expect acquisition activity to accelerate, driven by firms looking to expand their digital transformation capabilities, as well as private equity firms seeking opportunities in high-growth consulting areas, such as ESG consulting.

The Impact on M&A Activity:

The impact these shifts are having on M&A activity is meaningful. There is a significant push by large management consulting firms to acquire companies that will enhance their digital transformation capabilities. At times, this doesn't just include the acquisition of IT consulting and IT services firms but also software companies.

What should also be noted is that the M&A activity driving this convergence is more centered around management consulting firms acquiring IT consulting firms, and much less the opposite. This trend clearly indicates a strategic move across the consulting industry to integrate digital capabilities and enhance their overall offerings.

Some acquisitions over the past several years that highlight the push management consulting firms are making to enhance their digital transformation capabilities include:

Accenture’s Acquisition of Camelot Management Consultants (2024):

• Camelot brought a strong focus on data, analytics, and AI within supply chain and logistics.

• This was a clear move to enhance Accenture’s supply chain and logistics consulting practice but, more importantly, to strengthen its digital transformation capabilities in that industry.

Deloitte’s Acquisition of Giant Machines (2024):

• Giant Machines is an end-to-end software and product development firm with clients and case studies spanning a wide range of industries.

• This was a clear push by Deloitte to further build out its software engineering capabilities and expand its roster of engineering talent.

• This acquisition was also one of several Deloitte has made in the software engineering space over the past several years.

McKinsey’s Acquisition of Iguazio (2023):

• Iguazio is a provider of an AI platform designed to help enterprises deploy AI and ML applications.

• This is an excellent example of the effort many firms are making to acquire product and platform-based solutions to enhance their digital capabilities.

• Not only does acquiring Iguazio enhance McKinsey’s AI practice, but it also gives the firm the ability to deliver a more productized offering.

The Consulting Firm of the Future:

We are entering an era where an organization's technology strategy is its business and growth strategy. The consulting firm of the future will recognize this and will have assembled a team and service mix to support it. The firm of the future will be a hybrid between traditional IT consulting and management consulting, combining high-level strategic advisory and business process optimization with deep technology expertise. These firms will not only make sound technology recommendations but will also develop, implement, and support these technologies to ensure a cohesive, technology-driven strategy that delivers meaningful business outcomes.

Armed with AI-driven tools and advanced data analytics, consultants will become even more impactful. Projects will be delivered in shorter timeframes, and systems will be developed to monitor and measure the impacts of technology-backed business initiatives. Firms that embrace AI, automation, and cloud-native consulting models—especially with an industry-specific focus will dominate.

M&A will undoubtedly play a significant role in this convergence, with increasing interest from private equity firms serving as a catalyst. The future of consulting is here.