Will AI Reduce Software Services Growth or Create More Demand for AI Consulting

There is a growing belief that AI will reduce the size of the software services industry because it is making software development faster, easier, and cheaper.

At first look, this sounds logical. If software can now be built in less time, with smaller teams, and lower effort, then one may assume that the industry built around software development services will see slower growth.

But I think the actual impact may be very different.

My view is that AI may reduce the cost of building software, but that does not necessarily mean negative impact on the growth of the software services industry. In fact, it may do the opposite. As software development becomes faster and more accessible, more businesses will start adopting software, automation, and AI-led systems across their operations. This can significantly increase the overall demand for software services and AI consulting.

Earlier, custom software was often a high-investment decision. Many businesses avoided it because it was expensive, took too long, and involved too much uncertainty. In many cases, companies could justify software only for large business problems. Smaller workflows, niche use cases, internal tools, or department-level automation projects were often ignored because the effort was too high compared to the expected return.

AI is changing this equation.

Today, teams can prototype faster, build faster, test faster, and iterate faster. A large part of software development is becoming easier. This reduces the barrier to entry for businesses that earlier could not afford or justify custom software. It also allows companies to experiment more. Instead of asking whether software is worth building at all, many businesses can now ask how quickly they can implement it and what business value it can unlock.

This is where I believe the market expands.

If the cost of software building goes down, adoption is likely to go up. More small businesses may start using software where they earlier relied on manual work. Mid-sized companies may build internal tools that they previously postponed. Large enterprises may increase the number of transformation initiatives because cost and turnaround time are improving. So while the cost per project may reduce, the number of projects may increase significantly.

This is an important distinction.

Lower unit cost does not always mean lower industry growth. In some markets, lower cost leads to wider adoption, higher usage, and expansion of the total market. Software services may follow the same pattern, especially now that AI is accelerating delivery.

That said, the impact will not be equal across all parts of the industry.

Low-value repetitive development work may come under pressure. Commodity coding, simple app development, and work that depends purely on manual effort may see pricing pressure. Businesses will increasingly expect faster turnaround, leaner teams, and better output.

But this does not mean demand disappears. It means value shifts.

As AI handles more of the basic development work, the importance of higher-value services will increase. Businesses will still need help in identifying the right problems, defining the right solution, integrating with existing systems, preparing data, ensuring governance, managing security, and making sure the final solution works in real business environments. This is where software services firms and AI consulting companies can create even more value.

In fact, the next phase of growth may not come from selling coding effort alone. It may come from selling business outcomes.

Clients may pay less for raw development hours, but they may pay more for speed, architecture, consulting, AI implementation, workflow redesign, domain understanding, integration, and reliable execution. This is why I believe the industry is not shrinking. It is evolving.

The role of an AI consulting partner will also become more important in this shift. Many companies do not just need software. They need clarity on where AI should be used, what should be automated, how existing systems should connect, what risks need to be managed, and how value should be measured. That means AI consulting will not be limited to strategy decks. It will increasingly connect strategy, implementation, and continuous optimization.

This creates a much bigger opportunity for firms that can combine software services with AI consulting.

So in my view, AI is not reducing the opportunity in the software services industry. It is expanding the market by making software viable for many more businesses and many more use cases. The nature of demand is changing. The value is moving upward. The industry may sell less effort per project, but it may serve far more projects, far more clients, and far more transformation needs.

That is why I believe AI may reduce the cost of software development, but still increase the overall growth of the software services industry.

The winners in this shift may not be the firms that only build software. They may be the firms that understand business deeply, use AI effectively, and deliver meaningful outcomes faster.