The firm charges a fixed fee to the client. The client doesn't see anything different from what they got before, the firm increased their gross margin overnight.
You seem hellbent on disproving me. Why?
Uhm, no. The OP makes specific claims wrt to AI and financial payoff; you offered up a case study, with incomplete data, as possible evidence that AI is generating these financial payoffs. I'm asking questions to uncover the data necessary to reconcile your case study against the actual claims from OP.
> Even if they were FTEs, it would mean the consultants could do ~3x the work.
Could. But again, are they? That's the whole point of Apollo's claims: people keep saying AI can or could increase capital efficiency, but it's not showing up in any actual financial results.
You're extrapolating a 3x increase in throughput from the optimization of a single process that exists in a whole business system. Given your background, I don't think I have to explain to you why that doesn't make sense.
Also, do we think the S&P 493 is so incompetent that they'd miss these optimizations? Or is it more likely that this firm you're referencing is a small inefficient player, and the S&P 493 already realized these efficiencies decades prior without AI?
Really? Not any results?
You're confusing the original article and the parent comment I replied to. I think the Apollo article is way off, BUT I have very intimate knowledge with very concrete numbers of a use case where AI has a very clear and definable ROI.
> Could. But again, are they?
YES. That's what I'm telling you. They just implemented the system. The contractors spend less time on each project which means they have more time to do another project. How is that so hard to understand?
> You're extrapolating a 3x increase in throughput from the optimization of a single process that exists in a whole business system.
Are you deliberately being obtuse? The company very clearly drives ~$5k additional profit per project. They do hundreds of similar projects.
> Also, do we think the S&P 493 is so incompetent that they'd miss these optimizations? Or is it more likely that this firm you're referencing is a small inefficient player, and the S&P 493 already realized these efficiencies decades prior without AI?
I never made any of these claims, why are you saying I did?
For non-technical clients that may well be the case for a while, but I suspect even the most non-technical clients will eventually realize they can claw back a good portion of the efficiency as discounts.
I'm negotiating some contracts where I could do the work in-house for about 1/20th of the previously-reasonable vendor cost. I'd rather not do it, so I'm happy to pay 1/20th plus a reasonable percentage above that, but that's the limit. The vendor can accept that, or goodbye.
Interesting times on vendor contract negotiations these days.
If the outcome is the same then the fees shouldn't matter to the client in the long run. Said differently, if the client who pays the management consulting fee gets the same return out of the service, why do they care?
Now, what may end up happening is that some other management consultant vendor in the market comes in an says "ya know what we're willing to do the same work for less" (which means their margin goes down). This could indeed drag their pricing down.
> Interesting times on vendor contract negotiations these days.
For sure.
At least at every company where I've been in charge of my vendor contracts, I am always grilled by management on how we can lower the cost of the contract and whether we are getting maximum efficiency from each vendor. There is huge pressure every year to find ways to lower the cost.