DOGE impact on consulting industry: For decades, the US federal government has been a goldmine for consulting giants. From Booz Allen Hamilton’s deep-rooted ties with defence agencies to McKinsey’s strategic influence in shaping bureaucratic frameworks, consulting firms have thrived on the inefficiencies of government. However, the rise of Elon Musk’s Department of Government Efficiency (DOGE) is disrupting this lucrative relationship. What was once a consultant’s dream—an expansive bureaucracy desperate for reform—is now an existential threat, as Musk slashes billions from government contracts, leaving consulting firms scrambling for relevance.
Consultants have long positioned themselves as the indispensable fixers of bureaucratic inefficiency. Their fees skyrocketed as federal agencies, unable to attract top talent, outsourced critical modernisation efforts. The numbers tell the story: Booz Allen Hamilton raked in $9 billion from federal contracts last year, while Accenture, Deloitte, and BCG collectively earned over $18 billion, a near fourfold increase from a decade ago. Yet, as DOGE aggressively cuts spending, these firms now find themselves labelled as part of the problem rather than the solution.
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A new era of AI-powered consulting
While Musk views traditional consulting firms as bloated and ineffective, he is betting on a different breed of problem solvers—AI-powered companies like Palantir. Unlike traditional firms, which rely on expensive partners and strategy decks, Palantir embeds engineering teams directly within agencies, helping them harness artificial intelligence for decision-making. In the last quarter of 2024, Palantir’s revenue from U.S. government contracts surged by 45%, even as consulting behemoths saw their contracts slashed. If this trend continues, AI-driven consulting may become the new norm, dealing a fatal blow to traditional consulting firms.
DOGE’s cost-cutting has already claimed high-profile casualties. Deloitte alone has seen over $219 million in cancelled or renegotiated contracts, while smaller Washington-based firms—whose lifeblood is government work—face devastating losses. Some firms are now locked in legal battles with the administration, claiming that months of unpaid invoices have left them financially crippled. The case of Global Health Council v. Donald J. Trump underscores the broader crisis: consulting firms argue that the government is not just cutting future projects but also reneging on payments for work already completed.
The industry’s fork in the road
Beyond budget cuts, the political realignment under the Trump administration is also shaking up consulting firms. DOGE’s crackdown on government-backed Diversity, Equity, and Inclusion (DEI) initiatives has put consultancies in a difficult position. Historically vocal supporters of DEI, firms like McKinsey and Deloitte now face a stark choice—risk losing lucrative federal contracts or abandon their progressive commitments. Some have opted for quiet compliance; Accenture is phasing out diversity targets, while Deloitte has instructed staff to remove pronouns from their email signatures. These moves could alienate private-sector clients and employees, placing consulting firms in a precarious balancing act.
While the consulting industry reels from Musk’s onslaught, corporate America is watching with interest. If DOGE succeeds in delivering trillion-dollar savings, private enterprises may look to replicate the model. Stripping away high-cost consultants in favour of AI-powered efficiency tools could slash corporate expenses by up to 90%, a prospect that shareholders may find irresistible. If this shift gains momentum, the very foundations of traditional consulting could crumble.
As the dust settles, consulting firms must decide how to navigate this new reality. Simply put, the old playbook no longer works. Firms that integrate AI into their service models, focus on specialised high-value expertise, and prove their worth beyond PowerPoint presentations may survive. Others may not be so lucky. As one industry expert put it, “If DOGE delivers, the bell may truly have tolled for big consulting.”
With Musk’s wrecking ball still in motion, the consulting industry faces an unprecedented reckoning. Whether this marks the beginning of a leaner, tech-driven future or the end of an era, one thing is clear: the days of unchecked consulting fees and government largesse are over.
Big Consulting’s grip on Indian government
The influence of Big Consulting extends far beyond US borders, with India becoming a key battleground for Deloitte, PwC, EY, and KPMG. Former Infosys CFO Mohandas Pai recently sounded the alarm on their growing stranglehold over Indian government studies and policymaking, alleging that tender conditions are often manipulated in their favour. Critics argue that this raises serious concerns about transparency and national interest, as these firms not only draft policies but also benefit from their implementation.
Economist Sanjeev Sanyal, a member of the Prime Minister’s Economic Advisory Council, has also questioned the extent of foreign influence in India’s policymaking. He highlighted how USAID (United States Agency for International Development) played a major role in India’s National Family Health Survey (NFHS), shaping critical medical and social policies. According to Sanyal, such deep-rooted involvement by foreign agencies and consulting firms has often resulted in skewed methodologies that push a specific narrative rather than objective policy solutions.
The Big 4’s dominance in government projects has raised broader questions about whether they are serving India’s interests or their own. While these firms have contributed to governance reforms and digital transformation, their increasing hold on policy frameworks without sufficient oversight remains a contentious issue. As calls grow to open up the system and reduce dependency on external consultants, the Indian government may soon face a dilemma over reliance on these firms.