The AI consulting market in Australia looked crowded twelve months ago. Every software house added “AI transformation” to their website. Every digital agency suddenly had an AI practice. Every Big Four firm launched an AI centre of excellence.

Fast forward to February 2026, and the landscape looks different. Not because of a dramatic market crash or technology failure, but because of something more mundane: most clients realized they didn’t actually need consultants.

The Great Unbundling

What happened was straightforward. Companies that hired AI consultants in 2024 and early 2025 expected transformation roadmaps, proof of concepts, and strategic frameworks. What many of them got was expensive PowerPoint decks and implementations that never made it to production.

The pattern repeated across industries. A manufacturing company would pay $200K for an AI strategy, get a 100-page document, then realize they still needed to hire engineers to actually build anything. A retail chain would run a three-month pilot that showed promising results, only to discover the vendor’s solution wouldn’t scale to their actual data volumes.

The consultants who survived this shakeout were the ones who could actually ship working systems. Not just strategy, not just proof of concepts, but production-grade implementations that handled real workloads.

What Clients Actually Want Now

The conversation has shifted. In 2024, companies were asking “What’s our AI strategy?” In 2026, they’re asking “Can you make this specific process faster and cheaper?”

The questions are more concrete:

• Can you reduce the time our support team spends on routine inquiries?
• Can you automate our document processing workflow?
• Can you help us find patterns in our customer data that our current analytics tools miss?

These aren’t strategy questions. They’re engineering problems with business constraints.

The consulting firms that adapted to this shift are the ones still getting work. They lead with capability demonstrations, not frameworks. They price projects based on outcomes, not day rates. They bring technical depth, not just business advisory experience.

The Talent Problem

Here’s what’s interesting: even as the number of AI consulting firms has contracted, demand for good technical talent has increased. The companies that survived the consolidation are hiring aggressively.

The challenge is finding people who can bridge business context and technical implementation. You need someone who understands why a finance team’s reconciliation process takes three days, and who can architect a system to reduce that to three hours. That’s a rare combination.

Some firms have built this capability internally. Team400, for instance, focused on this intersection from the start - not just AI strategy, but engineering teams that could actually deliver production systems. That positioning looks prescient now, but in 2024 it probably seemed limiting.

Others are partnering with universities or acquiring smaller technical shops to fill the skills gap. The Big Four are still in the market, but they’re increasingly competing on implementation capability rather than just strategic advice.

What’s Next

The consolidation probably isn’t finished. There are still firms operating on the old model: sell a strategy engagement, deliver a report, hope the client hires you for implementation. That playbook is running out of road.

The market is splitting into two tiers. At the top end, you have firms that can handle complex, multi-system integrations for large enterprises. At the lower end, you have specialists who do one thing very well - maybe document processing, maybe customer service automation, maybe predictive maintenance for manufacturing.

The middle tier - general-purpose AI consultancies that do a bit of everything but don’t excel at anything specific - is where the pressure is highest. These are the firms most likely to exit the market or get acquired in the next twelve months.

Reality Check

For Australian businesses looking at AI projects in 2026, the advice is simpler than it was two years ago: start with the problem, not the technology. Find vendors who can demonstrate working solutions to similar problems. Ask for customer references and actually call them.

The gold rush phase is over. The market that’s emerging is more practical, more focused on outcomes, and frankly more useful for companies trying to get actual work done. The consulting firms that survive will be the ones that can deliver on that promise.

The industry needed this consolidation. It’s created space for the firms that can actually build things to grow, and it’s made life harder for the ones that were just riding the hype cycle. That’s a healthier market for everyone except the PowerPoint consultancies.