Tag: Deloitte

Sizing Up PwC’s Acquisition of Booz | Sherpas in Blue Shirts

PwC announced last Friday that it completed its acquisition of Booz & Company — now named “Strategy&.” Why did Booz agree to be acquired and why did PwC want Booz? And what does this mean for the services industry? My opinion: It’s a bold move that has the signs of being a game-changer in the global services world.

Booz had a trouble spot. I’ve blogged before about this phenomenon — the growing power of large consultancy groups and service providers’ ability to utilize access to their existing customer base to increase their revenue. It enables the rich to get richer. The champions of this strategy are the Big Four (Deloitte, E&Y, KPMG and PwC in the consultancy arena) and Accenture, Cognizant and TCS, to mention a few in the provider landscape.

Even though Booz had one of the most venerable, respected brands in strategic consulting for the past 100 years, it became increasingly difficult to drive consistent customer access. Booz believes it will be easier to succeed in this strategy of radiating to advantage by meeting client needs within the PwC family rather than having to blaze its own trail.

Using existing customers to grow a services business is a proven model that Deloitte certainly demonstrates in today’s marketplace, and PwC enjoyed the advantages of this model before the SEC asked it to divest services years ago.

PwC perspective

Bringing Booz into the PwC network is a bold commitment signaling that PwC intends to join Accenture and Deloitte as a major transformational player. PwC has been studiously building back its consulting and advisory services since its divestiture, and the Booz acquisition adds the high-end strategy capability that will enable PwC to be a strong value player in advising and driving major transformation deals.

What it means for the services industry

The arrival of PwC Strategy& in the marketplace changes the provider landscape significantly. It adds another true power with a broad set of capabilities stretching from the boardroom and strategy to implementation. And it will contest the market for large-scale transformational work.

In that contest, it will prove interesting to see which providers lose some market share to PwC Strategy&.  Will this new power inhibit Deloitte’s growth? Will it affect Accenture and IBM? Will it affect the aspirations of Cognizant, TCS and Wipro as they look to join the transformational party?

One thing is for sure: The transformational dance floor is getting crowded.

Who’s Trying to Crash the Party for Accenture, Deloitte and IBM? | Sherpas in Blue Shirts

In the worlds of sports and business, there are many examples of teams coming from behind and winning big. Oracle Team USA’s exciting win over Team New Zealand in the 2013 America’s Cup yacht races last week is certainly a big one.

There’s also a race happening among the global services providers in the tier-one transformation services space. I’ve blogged before about the big three currently in the lead in this space: Accenture, Deloitte and IBM. But other service providers are trying to crash the party for the big three because increasingly transformation is the lucrative differentiated space in a commoditizing marketplace.

Transformation is the axis upon which higher-value services are delivered today. It drives profitability and growth in the services marketplace and is the most desirable of capabilities in a maturing market where high growth at profitable margins is increasingly difficult to come by.

Providers coming around the curve in the tier-one transformation space are not new kids on the block and not trying to reinvent themselves. They’re just strengthening their existing capabilities and strategies so they can cross the border and be invited to opportunities to compete against Accenture, Deloitte and IBM.

So who are the potential party crashers? Here are the ones we’re watching.

Cognizant and TCS. Clearly these two strong players are making big strides in the transformation area, particularly where they are already embedded in an account. Both have above-industry growth rates and very strong profitability, and increasingly they are in the mix in large transformation plays. Both are leveraging their large existing client portfolios and capitalizing on the permission and reputation that they have built with those clients to be considered for more expensive and larger-scale transformation opportunities. Often this comes on the back of significant investments in industry capability.

Most Indian firms aspire to achieve a spot at the table; but with the exception of Cognizant and TCS, most of them are somewhat off pace in their ability to regularly get in the mix for consideration for large transformation opportunities.

E&Y, KPMG and PwC. Deloitte’s sister audit firms and consulting companies also are working hard to build capabilities to join the leaders in the tier-one transformation services space. Each is capitalizing on the strengths they already possess.

E&Y’s formula is to search for transformational opportunities in its top 50 accounts and invest in a depth of understanding of the relationship and capabilities needed by these clients. It is rare to see them venture away from these top 50.

The strategy for both PwC and KPMG is to add capabilities and grow inorganically, and both have been on the acquisition trail. They continue to build out their systems integration and consulting activities to become more transformational partners.

Who’s buying transformation?

It’s important to note that the growing influence of business stakeholders in provider selection is fundamental to all attempts to participate in the transformation marketplace. Their increasing influence (at the expense of the CIO and shared services groups) is evident by the fact that the CFO, business unit heads or CMO often now drive the funding as well as the project management in new deals.

Which of the above providers are most likely to join Accenture, Deloitte and IBM at the tier-one transformation space party? We believe it will be the companies that are most adept at addressing the new business stakeholder groups’ issues.

Deloitte: The Global Services Dark Horse Challenging Accenture | Sherpas in Blue Shirts

Accenture has beautifully moved into the number-one spot among transformational service providers. They snatched it from IBM, their biggest competitor for that spot.

How did they do it? Accenture created a significant gap between itself and IBM in two game-changing aspects: customer access and talent.

Accenture gained a leg up on IBM in customer access because it was better able to access the emerging business stakeholder groups outside of the IT organization. They were better able to communicate with the CFOs or business heads and leads, which helped increase Accenture’s credibility around transformation services. Discussions with the business stakeholders also gave Accenture visibility into large transformational opportunities.

In the second aspect, Accenture built a larger and deeper bench for consulting and systems integration (SI) talent than IBM.

Accenture has taken transformation services to a level that’s hard to beat.

But IBM has taken the challenge seriously and has been busily recruiting consulting talent. They started in the ERP arena and are now extending it to other areas. We’re seeing a lot of ex-strategy consultants showing up at IBM from Booz Allen and other firms.

So IBM is closing the gap created by Accenture in consulting. As they do that, they are starting to win back market share.

But then along came the dark horse, Deloitte.

Deloitte is contesting both Accenture and IBM for large transformation deals. But it’s able to be more disruptive to Accenture — in fact, the disruption is right along the same lines as Accenture followed to beat IBM.

Access to boards of directors and senior management suites has been a defining differentiator of Accenture and IBM compared to other providers in the transformational services landscape. But Deloitte is able to match them in this customer access aspect. And the dark horse provider has even better access than Accenture to the business stakeholder groups, particularly the office of the CFO, which is becoming increasingly important on large transformational agendas.

Deloitte also brings similar consulting and SI talent as Accenture, plus it has deep industry knowledge and industry practices; thus Deloitte is highly relevant on industry and domain topics, not just on technology.

But far more interesting is the central difference in the way Deloitte and Accenture approach transformational problems. Accenture tends to carve out the attractive outsourcing pieces and leave the asset-heavy risk-shifting pieces for others. Deloitte takes a much lighter touch and agile approach. The dark horse tends to reconfigure transformation agendas to be more of a consulting and SI effort and less of an outsourcing effort. This doesn’t work well with every client, as some prefer an outsourcing approach; but this lighter, more agile approach makes Deloitte’s offering more complete and distinct.

IBM is starting to narrow the gap that Accenture created. But Accenture is still the reigning king among transformational service providers. Both need to watch out for the dark horse as Deloitte has emerged as a tier-one transformational provider in the same category and same quadrant as Accenture and IBM.

There are other providers trying to get into the tier-one group. But that’s another story. Stay tuned for a future blog post on who they are and how they’re trying to compete.

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