It is Thursday evening and a delivery plan is sitting in your inbox. Your team spent two weeks on it. Forty people, twelve months, a clean ramp-up chart and a rate card everybody in procurement knows by heart.
You sign it off. It looks like every plan you have signed for twenty plus years.
A few days later the client's CIO calls you. Very politely, he mentions that a small AI-native firm has offered to do the same work in a few weeks.
I have been hearing versions of this for months, in conversations and DMs with senior leaders across IT services. Each one ends with the same uneasy question. What exactly was that plan built on?
What the plan was built on
Every one of those plans is a headcount plan. Somebody counts the roles, multiplies by the months and applies the rate. That is how the IT software consulting industry has priced work for more than three decades. The people who build those plans are doing what they were trained and paid to do.
Now AI does a share of the work those forty people were counted for.
The CEO of one of the largest Indian IT firms said it plainly this year. His teams now need 25 to 30 percent more effort to earn the same revenue. Another CEO said his firm hands 10 to 15 percent of the productivity saving to the client at signing/renewal.
Think about what that does to a business that bills by the head (FTE - full time equivalent). The faster your people get, the less you get paid. Your client knows it. They read the same earnings calls you do.
I went too far, and I was corrected
A few weeks ago I posted a short video saying the FTE model is dead. I know, I know. For a video you have to be dramatic.
Some of the leaders I talk with set me straight. The model is dying, they said, and it is dying slowly. Clients still run short of people and still ask for them. Some of the biggest banks still buy almost everything by headcount. Old systems need hands on them for years yet.
What they see instead is a slow move toward “managed services”. The firm agrees the scope, owns the delivery and commits to a date and a price. How many people it took becomes the firm's own business.
Why good leaders hold on
For most senior leaders in our industry, headcount has been the scoreboard. You grew the account and the team grew. Your title grew with it. Twenty plus years of that.
So when AI shrinks the team, it gets personal. It can feel like someone is shrinking you.
I understand why a good leader defends the one-year estimate. He is protecting what he spent a career building, and nobody showed him another way to keep score.
The CEOs I talk with see it from the top floor. Their worry is speed. When a plan comes back at a year, they want to know what it would take to finish in a few months. Somewhere a competitor is already promising that to their best client.
What I would say to you
My only point here is this. The leader who walks in with the saving already on the table gets a very different meeting. The client stops haggling over rates and starts asking what else your team could take on.
That leader may end up running fewer people. She will also be running a bigger account, and she becomes very hard to replace. I would bet on that leader.
Three questions for this week
If an AI-native firm had bid against your last estimate, what number would they have put on it?
Which of your contracts could you own end to end, with a date and a price attached?
When did you last bring a client a saving before they asked for it?
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Raju Panjwani | Founder of Live Masterminds, Inc.
I was a Managing Director at Morgan Stanley for 18 years. I now work with senior leaders in IT services and technology consulting, on becoming the leader the business now needs.