Consulting firms are cutting projections and tightening their belts as demand for their work slows

• Major consulting firms are seeing demand for their services slow.
• The consulting firm Accenture cut its projected revenue growth for 2024.

Times are tough for the consulting business.

The professional services firm Accenture has cut its revenue forecast for 2024, according to its quarterly report. The firm previously said it was expecting revenues to grow between 2% and 5% this year but is now expecting a growth rate of about 1% to 3%.

In a call, Accenture's chief executive, Julie Sweet, told analysts that clients continue to cut back.

"We get visibility into our clients' budgets in January. So as we turned the page [into the new year] what we saw was a further tightening of spending [by] our clients and that affects our services," she said, the Financial Times reported.

Accenture said in its quarterly report that consulting revenue for the second fiscal quarter, which ended on February 29, fell by about 3% compared to 2023.

Major consulting firms across the board are facing waning client demand. That trend has hit especially hard because some firms swelled their ranks in recent years as companies flocked to them for advice on navigating the pandemic. Now, amid tough macroeconomic conditions, there's not enough work for those new hires. Some firms now offer new hires stipends to start their jobs months later than planned. Accenture offered new hires out of college up to $25,000 to push their start dates back.

Some consulting firms are surviving the slowdown by reorganizing. Earlier this week, the Financial Times reported that Deloitte has launched "the biggest overhaul of its global operations in a decade."

As part of the reorganization, Deloitte's main business units will be divided into four units — down from five — which will help reduce costs across the firm, the Financial Times said. Deloitte's global chief executive, Joe Ucuzoglu, told the firm's partners by email that the reorganization will tamp down on the firm's "complexity" and "free up" more partners for client work instead of internally managing staff. "We recently completed a thoughtful process to modernize and simplify Deloitte's storefront and go-to-market strategy. We are confident this will further enhance the exceptional quality and value we deliver to our clients and communities, as well as the vibrant career paths we provide our people," a spokesperson for Deloitte told Business Insider in a statement.

Despite all the doom and gloom, one bright spot for consulting firms is the promise of AI. The need to understand the new technology and how to implement it appears to be revving up demand for new projects at several firms.

Accenture reported that new bookings in generative AI brought in over $600 million in the most recent quarter and $1.1 billion through the first half of the fiscal year.

McKinsey said it's also seeing significant revenue related to generative AI, The Wall Street Journal reported. Sven Smit, a senior partner at McKinsey, told The Journal that there is demand for using generative AI for both productivity and restructuring workforces.