Written in collaboration with Simon-Kucher.

For decades, pricing in professional services has been largely determined by a simple formula: an hourly billing rate, multiplied by the number of hours worked, equals the fee for services. This methodology, known as time and materials billing, provided firms with a neat, traceable equation to calculate and justify their prices to their clients.

The infusion of AI into professional services, however, “is changing the game” for pricing, says Molly Williams, Vice President of Marketing & Communications at CrossCountry Consulting. AI solutions are performing certain tasks on projects in a fraction of the time and more reliably, delivering better services to clients more quickly while also saving firms hundreds of man-hours.

This new phenomenon is forcing firms to wrestle with how to price their AI-powered services. At the same time, clients, equating firms’ use of AI with automation and efficiency gains, are expecting lower fees from firms deploying AI solutions.

These dynamics necessitate that firms do a fundamental rethink of how they price their services – and will likely require firms to move away from time and materials billing.

Moving from hours to outcomes 

Jason Delles, Chief Growth Officer at Eide Bailly, effectively summarizes the state of pricing in professional services today: “For years we’ve kept talking about value-based billing… we’re getting to the point where we have to do it.”

Now more than ever, it is critical that firms be able to draw a clear line between their fees and the value and outcomes that they are delivering to their clients. This does not mean that time and materials billing is dead. While “the billable hour is waning,” as CrossCountry Consulting co-CEOs Amy Bjarnason and Neil Smith recognize, specific engagements may still warrant time and materials billing¹. Some professional services firms, for example, still use hourly billing when the scope of a project is uncertain.  

But with increasing frequency, leaders want their firms to price services under all-encompassing, value-based fixed fees. Relatedly, leaders want their professionals to better communicate the value that clients gain through the firms’ services and deliverables. “What are clients really buying?” Cindy Hannafey, Managing Director at UHY Consulting, posits. “They’re buying the outcome. They’re not buying hours.”

That said, professional services firms today ironically still use expected work hours to dictate their value-based pricing for an engagement. In other instances, deciding value-based prices for a project is done by “gut feel” or on the “back of the envelope.” Leaders recognize that firms need to increase the sophistication and “formality” with which value-based prices are determined.

There are several criteria that can be used to create a value-based fee. Target margin for an engagement is important to consider, as is the nature of the work itself. With AI becoming more pervasive, there are certain services that inevitably will become commoditized, and firms may have to accept charging less in these areas. This reality makes it essential for firms to understand, defend, and sell their value in more bespoke and complex engagements. Firms need to know what their work is worth in real terms for clients – what does the client expect to gain in terms of revenue, efficiency, speed, credibility, strategic alignment, etc.? Knowing and communicating that to clients – “This is a $200K investment to address a $40M problem” – repositions the cost of an engagement from “expensive” to “necessary.”

The relationship between clients and firms is a critical factor in pricing. Lower initial fees may be more acceptable for a new client if there is high potential for future cross-selling. Counterintuitively, longer-tenured clients can be better targets for higher value-based fees, as the level of trust in the relationship, as well as clients’ general aversion to switching vendors, creates a more permissive environment for bigger prices.

More sophisticated firms are using AI tools that account for the above factors and help leaders come up with well-grounded value-based fixed fees. The more robust a pricing mechanism is, the easier it is for firms to communicate and advocate for their fees to clients.

Talking about AI and pricing with clients 

Today, AI is the elephant in the room for pricing conversations. When professional services firms share that they use AI, Suzanne Reed, Chief Marketing Officer at LBMC, says “clients come back and say, ‘How’s that going to affect my bill?’” A firm’s use of AI gives buyers an easy reason to think that prices are inflated and expensive, and anchoring pricing on inputs becomes a losing battle because clients believe that “if it was taking you 12 hours, with AI, it’s probably taking you 10 now.”

Therefore, in pricing conversations, reframe AI not as a more efficient input, but as an enabler of better outcomes. The message to clients, Reed shares, is that “The experts are still in the room. They are using AI for the rote tasks so that they can spend more of their time and expertise on helping your business be faster and better.”

The fundamental disconnect, as Hannafey shares, is that “procurement departments of clients are really trying hard to get cheaper prices because they think AI is free. And it is not free.” In fact, leaders share that their firms are making “massive investments” in AI, and in some cases need to offset the increased cost of AI with higher fees.

This leads us to the topic of technology fees. Both professional services firms and clients are divided on the use of incremental fees to recover AI costs. Some firms advocate for the technology fee – it can be a good way to add margin to an engagement and can serve as a negotiating chip to protect base fees if buyers are adamantly opposed to paying it. Some leaders say that their clients, except for the occasional pushback, pay technology fees without issue. Elsewhere, however, leaders have met vocal rejection when presenting technology fees, with clients accusing firms of “nickel-and-diming” them instead of presenting a larger base fee from the outset. If firms want to impose a technology fee, one leader shares, they will have to be prepared to answer, “What better technology do you have that’s going to make my life better and help me get service faster, better, and easier?”

Ultimately, any pricing conversation is rooted in relationships and trust – if clients trust that a firm is going to generate the value and outcomes that it promises, clients will pay the price.

Making value-based pricing work 

Some firms are finding that to promote value-based pricing, they need to overcome not only client resistance, but also their own organizational hurdles. “At the end of the day,” Reed says, implementing value-based pricing as a firm is “a true operational shift.” At many firms, for example, professionals are measured by their billable hours or utilization rate to determine their productivity (and value). These time-based concepts, which can determine compensation, pose a challenge if some professionals work predominantly on time and materials projects while others work on value-based engagements. If professional services firms are pushing their clients to remove the perceived link between hours worked and value provided, they will have to look internally as well to institute that change.

Moreover, at many firms today, pricing decisions sit with individual partners and service lines – these partners, wanting to keep their client relationships and boost revenue for their service lines, may feel more pressure to keep time and materials billing or reduce prices to secure a deal. Moving pricing decisions to a more centralized function can remove that pressure from individual partners, while simultaneously enabling more bundling of cross-service-line offerings that will provide clients with the highest value.

Firms have to transform alongside their clients to make value-based pricing work, and change management will be required. But the mandate is there. For pricing, AI has made it so that, as Williams states, “you better change or you’re obsolete.” Firms that are willing to rebuild how they measure, reward, price, and communicate the value of their work will thrive in this new environment.

Jeb Wilson is a Partner with Simon-Kucher & Partners, a leading pricing and growth strategy firm. Wilson leads the firm’s Professional Services work in North America. 

Jacob Parks is the President and a Partner of PIE, a growth-focused consulting firm. Parks leads the firm’s strategy. 

Dylan Hannes is the Director of Content at PIE and leads the firm’s Client and Market Insights service line. 

1.  Zaki, A. (2026, July 28). CrossCountry Consulting’s new co-CEOs say billable hour is “waning.” CFO.com. CrossCountry Consulting’s new co-CEOs say billable hour is ‘waning’ | CFO.com