Recent layoffs at the freelance platform Fiverr signal a significant shift in the global services market, as artificial intelligence begins to automate white-collar professions from graphic design to high-level consulting. This transformation is creating a new category of technology known as “Service as Software,” with experts suggesting the disruption is only just beginning in a market valued at $4 trillion.
Key Takeaways
- Fiverr laid off 250 employees, about 25% of its staff, due to a decline in freelance work being replaced by AI.
- The trend is impacting high-end consulting, with firms like McKinsey and EY integrating thousands of AI agents into their workflows.
- A new market, “Service as Software,” is emerging, with Israeli startups raising over $1.5 billion in two years to automate professional services.
- While AI excels at routine tasks, roles requiring emotional intelligence and complex human interaction remain less vulnerable to automation.
- Startups in this space face challenges in branding, business models, and building trust compared to established human-led firms.
Fiverr Layoffs Signal Broader Industry Shift
Two weeks ago, the Israeli company Fiverr announced it was reducing its workforce by 250 employees, representing approximately a quarter of its staff. The company attributed the decision to a significant downturn in activity on its platform, which connects businesses with freelancers.
Jobs traditionally offered on the site, including translation, graphic design, and basic programming, are increasingly being performed by generative AI tools. This development highlights a major trend where tasks once outsourced to humans are now being automated by software.
According to Lotan Levkowitz, a partner at the venture capital firm Grove Ventures, this is a clear indicator of a larger economic change. He believes the impact of AI will extend far beyond freelance marketplaces.
“The layoffs at Fiverr are just the beginning. We are seeing the transition from service companies, people who sold hours of work, to software that replaces them. This will affect even the most prestigious professions.”
Consulting Giants Embrace AI Automation
The disruption is not limited to low-cost freelance work. The world's most prominent consulting firms are also undergoing a profound transformation driven by artificial intelligence. These companies, which employ thousands of highly educated professionals, are actively integrating AI into their core operations.
A recent report from The Wall Street Journal revealed that consulting firm McKinsey has deployed 12,000 AI agents to assist with tax and auditing processes. The report noted that some partners within the firm view the technology as an “existential threat” to their traditional business model, which relies on billable hours from junior consultants performing analytical work.
AI Adoption in Top Firms
- McKinsey: 70% of employees now use the company's internal AI search system, Lilli, on a daily basis.
- EY: The firm has launched an AI platform for tax management and committed $1.4 billion to AI development over five years.
- Deloitte: The company is deploying Microsoft’s Copilot throughout its consulting practice.
- KPMG: It uses an AI tool named Clara for audits and other AI systems to enhance decision-making.
AI is fundamentally altering the structure of consulting work. Instead of a hierarchical team of partners, managers, and junior analysts, AI now handles much of the data collection, simulation, and comparative analysis. This allows senior experts to work more directly with software, leading to flatter and more efficient organizational structures.
The Rise of 'Service as Software'
This widespread shift from human labor to automated systems is creating a new technology sector that Levkowitz and Grove Ventures call “Service as Software.” The concept involves replacing entire service departments or functions with specialized software solutions.
“We’ve had two decades where everything has become SaaS,” Levkowitz explained. “Yet consulting remained one of the last multi-trillion-dollar industries untouched by software because every client required unique solutions. But generative AI now enables personalization at scale.”
This new model allows customers to select from a menu of software-driven options rather than hiring consultants by the hour. According to Levkowitz, this applies to the entire services economy.
“The entire services world, from the cheapest to the most expensive, can now be turned into software.”
A New Investment Category
Grove Ventures has identified seven key areas for “Service as Software” investment:
- Financial Operations: Collections, payments, and reporting.
- Customer Service: Automated call centers and support systems.
- IT and Security: Management of systems and data.
- Compliance and Risk Management: Monitoring regulatory changes.
- Workforce Management: HR automation and payroll.
- Go-to-Market: Sales and marketing platforms.
- Business Operations: Improving organizational processes.
This emerging market presents a significant opportunity for startups. Israeli entrepreneurs have been particularly active, with 40 companies in the field raising over $1.5 billion in the last two years alone. Examples include ActiveFence, which uses AI for content moderation, and REAL, which offers an AI platform for corporate real estate management.
Challenges and Opportunities Ahead
Despite the rapid technological advancements, companies building “Service as Software” solutions face several significant hurdles. One of the primary challenges is branding and trust. Established consulting firms like McKinsey have built decades-long relationships with executives, making them a safe and familiar choice.
“If I hire McKinsey, no one fires me,” Levkowitz noted, highlighting the psychological barrier new technology companies must overcome.
Another challenge is the business model. Clients accustomed to paying for projects based on hours worked may be hesitant to adopt a recurring SaaS subscription model, especially if a problem is solved quickly. Companies like Palantir have encountered this resistance.
Furthermore, these new companies must develop different organizational structures. Palantir created hybrid roles like “Forward Deployed Engineers” to help clients implement its complex software. Startups will likely need to invent similar roles that blend technical expertise with client-facing skills.
However, for companies that successfully overcome these obstacles, the rewards are substantial. By replacing a core business function like customer service with an AI system, a “Service as Software” provider can become deeply embedded in a client's operations. “It creates immense dependency,” Levkowitz concluded, as all institutional knowledge becomes stored within that system, making it indispensable.
