Category: AI & Service Businesses

How artificial intelligence is reshaping service businesses, from pricing pressure to competitive positioning.

  • This Is the Cheapest Year of AI You Will Ever See

    This Is the Cheapest Year of AI You Will Ever See

    I gave a talk recently at South Coast Technology Leaders called “Stop Chasing AI: Start Solving Problems.” One slide got more reaction than the rest combined. It made a simple point: the AI subscriptions you’re paying for right now are heavily subsidised, and that won’t last.

    If you’re experimenting with AI in your business, this matters. Not because you should stop, but because the assumptions you make today about cost are almost certainly wrong.

    The economics nobody is talking about

    OpenAI generated around $13 billion in revenue in 2025. In the same year, it spent close to $22 billion. That’s $1.69 spent for every $1 earned. Internal documents reported by the Wall Street Journal show the company expects operating losses of roughly $74 billion in 2028 alone, before turning profitable somewhere around 2030.

    Anthropic, which makes Claude, spent around $6.8 billion on compute in 2025 against total spending of $9.7 billion. That’s around 70% of every pound going on the infrastructure to train and run the models. The company is still running at a loss.

    These are the two biggest names in AI, and they’re both spending far more than they earn. That money has to come from somewhere, and right now it’s coming from investors prepared to bet that scale today equals dominance tomorrow.

    What that means for your monthly subscription

    Your £20 ChatGPT Plus, your £20 Claude Pro, your Copilot, your Cursor account. None of them reflect the real cost of running the models behind them.

    Take Claude Code, which a lot of developers use for writing software. A heavy user can easily generate $60,000 to $90,000 of actual compute cost in a year, against a subscription that costs around $2,400. The provider is absorbing that gap because they want you locked in. Once your workflows depend on the tool, switching becomes painful. That’s the bet.

    It’s the same playbook Uber ran with cheap rides, WeWork ran with cheap office space, and Amazon Prime ran with free shipping. Subsidise growth, build dependency, raise prices later.

    The signs are already there

    Anthropic has changed how it bills business customers, moving toward charging based on actual usage rather than flat fees. Rate limits have tightened across the major providers in 2026. Claude Code users have publicly complained about quotas running out faster than expected, and Anthropic’s own CEO has said the company is compute-constrained.

    OpenAI doubled the price of GPT-5.5 earlier this year. None of this is a crisis. It’s a slow recalibration toward something closer to real cost.

    Within 12 to 18 months, expect three things: free tiers will tighten, paid tiers will get more expensive, and pricing models will shift from flat subscriptions toward metered usage. The cheap, all-you-can-eat era is ending.

    What this means if you’re using AI in your business

    Two things matter.

    First, experiment now. This is the cheapest these tools will ever be, and the gap between what you pay and what you get is genuinely extraordinary right now. If you’ve been hesitating about trying AI in your business, hesitate less. You will never get more capability per pound than you do today.

    Second, design with cost in mind. The application of AI you build today might work commercially because the cost is artificially low. Ask yourself the harder question: would it still work if your AI bills doubled? Trebled? Went up tenfold? Because that’s not a hypothetical. That’s the trajectory.

    This is where most businesses are getting it wrong. They’re sprinkling AI on everything, often where it isn’t even the right tool.

    The RPA problem

    RPA stands for Robotic Process Automation. It’s been around for years. It’s the sort of automation that handles structured, repetitive tasks: copying data between systems, processing invoices, moving information through known workflows. It’s deterministic, which means it does the same thing every time. It’s auditable. It’s cheap to run.

    There’s a lot of business activity that genuinely doesn’t need AI. It needs RPA, or a script, or a rules engine. Things where the logic is stable and the inputs are predictable. AI is the wrong tool for those jobs. It’s slower, more expensive, and less reliable. You don’t need a language model to move a number from column A to column B.

    Where AI genuinely earns its place is the messy stuff. Reading unstructured information at scale, like contracts or support tickets. Letting non-technical staff query data in plain English. Spotting patterns in chaotic inputs. Summarising long documents. Drafting content that a human will review.

    The smart move is to use AI to build your automations, not to be your automations. Get Claude or ChatGPT to help you write the script, design the RPA workflow, or build the rules engine. Then let cheap, deterministic infrastructure run it day to day.

    McDonald’s learned this expensively. They ran a three-year partnership with IBM to put AI in the drive-thru, taking voice orders. It was a mess. Customers got 200 chicken nuggets they didn’t ask for. Bacon ended up on ice cream. Water turned into Coke. They quietly shut the whole thing down in July 2024. The truth is, that problem didn’t need AI. Better menu design and standard speech recognition would have done most of the job at a fraction of the cost.

    The opportunity that’s hiding in plain sight

    Here’s the part most people are missing. Because AI tooling is cheap right now, something has shifted underneath the surface.

    Three of my own clients are currently building things that wouldn’t have been viable two years ago. One is replacing a CRM that never quite fit the business. Another is cutting expensive licensing costs by building a custom platform from existing intellectual property. A third is building a multi-tenant system to sell their own approach to other businesses.

    None of these projects would have made commercial sense before. They’d have needed a £200,000 consultancy engagement and a year of build time. Now they’re being done by small in-house teams with help from Claude Code, Cursor, and GitHub Copilot, in weeks rather than months, at a fraction of the historic cost.

    This is the genuinely interesting consequence of cheap AI. It’s not that AI is going to replace your developers, or your service business, or your job. It’s that the things you previously couldn’t afford to build are now within reach.

    If you run a service business, the bigger risk isn’t AI itself, it’s having an offer AI can easily copy. I dug into that in AI isn’t killing agencies, it’s exposing weak offers.

    If you’ve been quietly fed up with software that doesn’t fit how your business actually works, this is your window. Build the thing that does fit. Just design it knowing that the underlying AI costs will rise.

    What to do this week

    Three practical actions if any of this lands.

    One: look at where you’re using AI today and ask whether it would still be viable if your AI costs went up significantly. If the answer is no, you’ve got an economics problem coming.

    Two: look at where you’re using AI for things that RPA, scripts, or rules engines could handle better and cheaper. Move those off AI now.

    Three: look at the things you’ve wanted to build for years but couldn’t afford to. The maths might have changed.

    If you want to find out where your business sits on the spectrum from AI-vulnerable to AI-resilient, the assessment below takes about three minutes and gives you a personalised report.

    Could AI Replace Your Service Business?

  • AI Isn’t Killing Web Design Agencies. It’s Exposing the Ones With Weak Offers.

    AI Isn’t Killing Web Design Agencies. It’s Exposing the Ones With Weak Offers.

    I recently posted on LinkedIn about the pressure AI is putting on web design agencies. It generated a lot of discussion, and some of the responses were more interesting than the original post. So I wanted to go deeper on this, because there’s a bigger point here that matters well beyond web design.

    Let’s start with what prompted it.

    The £299 WordPress site is already under pressure

    There are web design agencies across the UK right now selling WordPress brochure websites from around £299. Some charge more, some less, but the point is that there’s a huge market of agencies whose core offering is: give us some money, we’ll build you a website.

    The problem is that AI website builders like Wix, Squarespace, Webflow, and a growing number of newer tools can now generate a complete, responsive site from a text description. In many cases, the result is perfectly adequate for a small business that just needs a functional online presence. The cost? Somewhere between free and £30 a month.

    That’s not a future scenario. That’s now.

    When I shared this observation on LinkedIn, the responses fell into some predictable patterns, and a few that were genuinely useful.

    The defensive response: “AI websites are terrible”

    Several web developers pushed back hard. The argument was essentially that AI-built websites are poor quality, have no real UX thinking behind them, and that the whole “agencies are doomed” narrative is overblown.

    There’s some truth in that. AI-generated sites can be generic. They don’t understand your brand the way a human designer does. The code isn’t always clean.

    But here’s what that argument misses: the quality bar for a basic brochure site is lower than most web professionals think. A local plumber doesn’t need a custom design system. They need a site that loads fast, looks professional enough, shows their phone number clearly, and has some decent reviews on it. AI can do that already, and it’s getting better fast.

    The defensive response is understandable. Nobody likes being told that what they sell is becoming commoditised. But denial isn’t a strategy.

    The people who confirmed it’s already happening

    More telling were the comments from people in the industry who shared real examples. One commenter described quoting against agencies selling basic websites for $500 to $800, only to find the same clients asking why they’d pay that when AI tools can generate something in 30 seconds.

    Another pointed out that hiring a developer for a brochure website will soon be a thing of the past, and that the focus needs to shift to outcomes, problem solving, expertise, and personal relationships.

    These aren’t predictions. They’re observations from people watching it happen in their own businesses right now.

    The real point: AI isn’t replacing agencies. It’s exposing weak offers.

    One comment summed it up better than I could: “This isn’t about AI replacing agencies. It’s about AI exposing weak offers. That’s a very different problem.”

    And that’s exactly right.

    If your web design agency sells “a WordPress website” as the product, you’re selling a deliverable. A thing. And when AI can produce a comparable version of that thing for a fraction of the cost, your pricing collapses. It doesn’t matter how good your code is, how clean your CSS is, or how many years of experience you have. If the client can’t tell the difference between your output and what AI produces, you have a positioning problem, not a quality problem.

    The agencies that will thrive are the ones selling something AI genuinely can’t replicate: strategic thinking about what the website needs to achieve, deep understanding of the client’s customers and market, conversion expertise, ongoing optimisation based on real data, and a trusted advisory relationship where the agency is a partner rather than a supplier.

    That’s the difference between selling ingredients and selling the meal. You can check out a service I provide called the Value Transformation Assessment that goes into this in more detail.

    The harder question: what about AI doing strategy too?

    One of the more challenging responses raised an interesting point. What happens when AI can plug into heatmaps and analytics, advise on why visitors aren’t converting, build strategy around commercial goals, and proactively adapt based on performance data?

    It’s a fair question, and the honest answer is that AI is already doing some of this. Tools exist that can analyse conversion paths, suggest layout changes, and run multivariate tests automatically.

    But there’s a distinction between analysis and judgment. AI can tell you that your contact page has a 90% bounce rate. It can even suggest changes. What it can’t do is sit across the table from your client, understand that their real problem is that they’re targeting the wrong customer segment entirely, and help them rethink their go-to-market strategy.

    The client doesn’t necessarily care whether you’re using AI tools in the background. They care about results. If you’re the person who helps them understand why their business isn’t growing and what to do about it, you’re a trusted partner. If you’re the person who builds them a website and sends an invoice, you’re a supplier who’s about to be replaced by software.

    The analogy that landed: Premier Inn vs The Dorchester

    Another commenter drew a useful comparison between functional purchases and emotional ones. A Premier Inn room does the job. It’s clean, consistent, and reasonably priced. The Dorchester is a different product entirely. You’re not just paying for a bed; you’re paying for the experience, the status, and the relationship.

    AI website builders are the Premier Inn of web design. They’ll do the functional job well enough for most basic needs. The question for agencies is: are you selling Premier Inn rooms and trying to charge Dorchester prices? Or have you genuinely built a Dorchester-level service?

    Most agencies are somewhere in between, and that’s the uncomfortable bit. They’re charging more than the AI tools but not offering enough differentiation to justify it. That middle ground is exactly where margins get squeezed the hardest.

    What this means if you run a web design agency

    If you’re reading this and recognising some of these patterns in your own business, here are a few things worth considering.

    First, look honestly at what you’re actually selling. If your proposals are structured around deliverables (homepage design, 5 inner pages, contact form, SEO setup), you’re selling ingredients. That’s the offer AI can undercut. Restructuring your proposals around business outcomes (increased lead generation, improved conversion rates, measurable revenue impact) changes the conversation entirely.

    Second, think about your client relationships. Are you a supplier who gets a brief, builds a thing, and moves on? Or are you a partner who understands the client’s business, tracks what’s working, and proactively advises on improvements? The first role is replaceable. The second isn’t.

    Third, consider your pricing model. If you’re still charging fixed project fees for website builds, every improvement in AI tools puts downward pressure on what you can charge. Retainer-based pricing tied to ongoing value, where you’re paid for the outcomes you deliver rather than the hours you work, creates a much more defensible business.

    And finally, stop seeing AI as the enemy. The agencies that will do best are the ones using AI to speed up the commodity parts of their work (initial layouts, first-draft copy, code scaffolding) while investing more time in the strategic, relationship-driven work that AI can’t do.

    It’s the same problem across all service businesses

    Web design agencies are just the most visible example right now because the AI tools are so tangible. You can literally watch an AI build a website in real time. It’s dramatic and it gets attention.

    But the same dynamic is playing out across every service business where the core offering can be described as a deliverable. IT support, bookkeeping, marketing, recruitment, consulting. If you can reduce what you do to a checklist of tasks, AI will eventually do those tasks cheaper and faster.

    The businesses that survive and grow will be the ones that have moved beyond deliverables to outcomes, beyond supplier relationships to trusted partnerships, and beyond cost-based pricing to value-based pricing.

    That’s not a comfortable message, but it’s an honest one.

    Want to know where your business stands?

    I’ve built a free assessment specifically for service businesses that want to understand how defensible they are against AI disruption. It takes about five minutes, and you’ll get an immediate score across four areas: replaceability, pricing resilience, supplier vs trusted partner positioning, and adaptability.

    No fluff, no sales pitch in disguise. Just an honest look at where you’re strong and where the gaps are.

    Take the AI-Proof Assessment here.