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The Morning Download: Death for the Billable Hour?
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By Isabelle Bousquette | WSJ Leadership Institute
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What's up: Meta makes Metaverse moves; HPE and Docusign report earnings; Microsoft raises the cost of Office bundles
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iStock Photo
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Good morning. Could the traditional “billable hour” become the latest casualty of generative AI’s bold tear through business and society?
Its death has been forecast again and again over the years, but now Rita Gunther McGrath, an academic director in executive education at Columbia Business School, is arguing the antiquated billing system is more absurd than ever.
“When an AI system can review thousands of contracts in minutes rather than weeks, draft complex documents in seconds rather than hours or generate strategic analyses near-instantaneously, the time component becomes almost meaningless,” she writes in WSJ this week.
She argues that this misalignment between value creation and revenue generation makes the billable hour’s demise inevitable.
But three years into the generative AI boom, the billable hour, which became prevalent in the 1960s and 70s, seems so entrenched that it’s hard to imagine dismantling it in favor of other pricing models. In some ways, it’s baked into everything lawyers, accountants, consultants and professional services do.
For better or worse, that puts the onus on CIOs and customers to make sure they’re being charged fairly. But important questions remain.
Should work done with the assistance of AI cost less, more or the same? How much of a say should customers have in terms of whether their lawyers or consultants use AI (and for what)? And if those firms do use AI, should the efficiencies translate into savings for the customer or go to their own bottom line? Or some combination?
There’s no consensus here. Some CIOs have told us they’d pay a premium for their partners to use AI, if it helps them yield better results faster. Others say they expect a discount if AI is used, since the work takes fewer dollars to generate.
Write to us and let us know what you think.
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Content from our sponsor: Deloitte
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How Agentic AI Is Transforming Commerce and Payments
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With agentic AI poised to stimulate exponential growth in commerce by 2030, payment networks can use the technology to deepen customer relationships and unlock new revenue streams. Read More
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Facebook’s Mark Zuckerberg with an avatar of himself during an event in 2021. Facebook/Reuters
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Meta Platforms is planning cuts to the metaverse, an arena Chief Executive Officer Mark Zuckerberg once called the future of the company, WSJ reports.
The proposed changes are part of Meta’s annual budget planning for 2026, and the company plans to shift spending from the metaverse to AI wearables, according to a person familiar with the matter. Several tech companies including Apple are working on wearable devices they believe might become the next major computing platform.
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Revenue for Hewlett Packard Enterprises rose 14% to $9.68 billion in its fourth quarter. Ian Maule/Bloomberg News
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Hewlett Packard Enterprises is trying to take on more big customers, but the complexity of those customers’ ambitious AI projects is weighing on sales, WSJ reports.
The server and cloud-software company logged lower-than-expected revenue in the fiscal fourth quarter because customers are hitting delays in the development of their AI products, Chief Financial Officer Marie Myers said.
Meanwhile, Docusign raised its full-year sales outlook after subscription growth boosted its third-quarter revenue, WSJ reports.
The digital document-signing company on Thursday raised its full-year outlook for revenue to around $3.21 billion, up from a range of $3.19 billion to $3.20 billion.
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Price hikes for commercial Office subscriptions have been infrequent. Eva Hambach/Agence France-Presse/Getty Images
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Microsoft said Thursday that it will increase the prices of Office productivity software subscriptions for commercial and government clients on July 1, CNBC reports. The company’s Office applications, which include Word, Excel, PowerPoint and Outlook, have been facing increased competition in recent years from Google.
Alphabet's Google Cloud announced Thursday a multiyear partnership with artificial intelligence coding startup Replit, giving the search giant fresh firepower against the coding products of rivals, including Anthropic and Cursor, CNBC reports.
Apple announced plans for two top executives to retire, adding to a wave of departures for top leaders at the iPhone maker, WSJ reports. Several top lieutenants have left in the past 12 months while dozens of others defect to rivals, pointing to challenges for the iPhone's dominance.
AI startup 7AI raised $130 million in a Series A funding round, an unusually high amount for early-stage financing as investors bet big on AI in cybersecurity, WSJ Pro Cybersecurity reports. The round was led by Index Ventures, with participation from all existing seed investors.
The Pentagon is getting serious about hypersonic weapons, a technology that has eluded the U.S. military for decades. It is looking to startups, with no experience but billions of dollars backing them, to fill an increasingly glaring hole in the national arsenal, WSJ reports.
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The WSJ Technology Council Summit
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This February 10–11, technology leaders will gather in Palo Alto for The WSJ Technology Council Summit to explore the realities of enterprise AI, the evolving role of tech leadership and the urgency behind building meaningful, business-driving AI strategies. Join the Technology Council and be part of the conversations shaping the future of corporate innovation.
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Everything Else You Need to Know
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Navy Adm. Frank “Mitch” Bradley in a closed-door briefing for lawmakers Thursday defended a controversial Sept. 2 attack on an alleged drug boat in the Caribbean. But Democrats found new grounds to question the legality of the strike after viewing a video of the attack. (WSJ)
Work permits issued to immigrants who have applied for asylum or a range of other humanitarian programs will now be valid for 18 months rather than five years, under a new policy announced Thursday by the Trump administration. (WSJ)
The Supreme Court will allow Texas to use a congressional map that adds as many as five Republican seats for next year’s midterm elections, boosting the GOP’s chances of retaining control of the House of Representatives. (WSJ)
Netflix has agreed to buy Warner Bros. in a $72 billion deal after the entertainment company splits its studios and HBO Max streaming business from its cable networks, a deal that would reshape the entertainment and media industry. (WSJ)
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