AI-Native Services: The $100B Disruption of Professional Services

**Ray Rike** (0:08)
Welcome to AI to ROI, the Big Story. I'm Ray Rike, CEO of Benchmarkit, where we track B2B software, AI and SaaS, performance metrics and benchmarks across thousands of companies.

**Peter Buchanan** (0:22)
And I'm Peter Buchanan. I'm the managing partner of NewPlan and Ray. Before we get into the content today, I want to frame what we're actually looking at, because I think the numbers, the shift in the market in terms of billions, tens of billions of dollars that could occur based on the type of companies we're talking about today, it's going to be truly mind-boggling.

**Ray Rike** (0:47)
Well, I think I want to hear this, especially when it comes to numbers. But speaking of numbers, let's first hear a word from our sponsor. Okay, Peter, let's dive in and get started.

**Peter Buchanan** (0:59)
All right.
Professional services firms have been selling time for over 200 years. Lawyers go by the hour, accountants go by the engagement, insurance brokers earn commissions tied to manual placement of insurance policies. Now, the model is under attack. You have companies that are doing the attacking that are not traditional competitors. They are AI native services companies. They're built from the ground up around AI. They have no legacy cost structure to protect. They have no billable hours to defend.

**Ray Rike** (1:40)
Yeah.
I think about we've used technology to disintermediate or disrupt other industries like e-commerce to retail. But I think one of the things that's so different about this time in AI is the scope. We're not talking about software making lawyers faster, right? We're talking about companies absorbing that entire service delivery infrastructure and actually own the outcome, actually deploying AI to do 80, 90 percent of the work that humans used to do. I think this fundamentally changes the scope in the unit economics of B2B service companies.

**Peter Buchanan** (2:23)
I think that's absolutely right. Today, we're going to walk through what AI Native Services companies actually are, how their operating model works. We'll look at four companies that are off to an absolutely awesome start in the category, and we'll look at the critical success factors that will separate the companies that came before, and frankly, from the traditional models that came before, but also, what makes a really great AI Native Services company. So Ray, take it away.

**Ray Rike** (2:57)
Yeah, I think definition is really important. You know, I was the founder of the SAS Metrics Standards Board, and definitions really matter. But I think when you're creating this new category, AI Native Services, let's talk about the definition. And the clearest framework and definition I've seen came from Emergence Capital, because they recently published their AI Native Services Playbook. And honestly, it's helped them define their thesis, their investment thesis for seven companies. And their definition is an AI Native Services company uses AI to deliver services, human, professional services, faster, better, and or cheaper than incumbents. And that the customer is buying a result, an outcome.
And they're a little bit indifferent to how it is performed. And the provider is accountable as that single point of responsibility to deliver the outcome.

**Peter Buchanan** (3:59)
Right. And that accountability piece is really, really new in professional services. So let's lay out the three categories of companies that provide these technology services here. So the first is you have the AI Native Services Company, that we just went through the definition of that company. And that company uses AI to perform most of the service work. There's always a human expert who reviews and is accountable for the result. The provider bills for the outcomes, AI executes most of the delivery.
The second is an AI Augmented Services Company. It still has humans doing most of the work. AI is a productivity layer.
The economics improve at the margin.
The business model maybe is better, more buzzy, faster, but it fundamentally isn't changing much from today. And then you have the SaaS company with AI features included that sold as a tool. The customer's team does the work, not the tool, not the SaaS company. And the provider takes absolutely no accountability for the outcome.

**Ray Rike** (5:09)
You know, Peter, I was listening really carefully. And the first kind of category to me is really important. So what you're saying is AI Native Services companies still have a human in the loop. And that human, typically a subject matter, domain, knowledgeable resource, is reviewing and is accountable for the outcome. Is that correct?

**Peter Buchanan** (5:34)
They are absolutely, they're licensed in whatever their profession is. So they're, they are, they've passed the bar. They're a lawyer. They're expert in that type of law. They have all their insurance credentials. They have all their healthcare credentials, whatever is necessary for the type of AI network, native services company it is.