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When Deloitte launched a digital division five years ago, competitors looked on nervously.
The unit, which aimed to combine the “best aspects of a small creative agency” with Deloitte’s global infrastructure, immediately set the consultancy apart in the eyes of clients as a leading provider of digital expertise.
“When a new area emerges in the marketplace, clients want to know which firms are specialising and investing in this area. Deloitte had an early advantage because it created Deloitte Digital,” says Fiona Czerniawska, director of Source Global Research, which analyses data from the consulting industry.
Such digital consultancy can include advising clients how technology can identify new opportunities, improve performance or cut costs. (See the digital transformation and IT categories in the UK’s Leading Management Consultants 2018, compiled by the FT and Statista.) The work is broad-ranging, from helping sports teams predict injuries to using data mining to identify locations for retailers to open new stores.
Source Global estimates that helping companies with digital transformation is worth $23bn globally and grew 17 per cent last year, far outstripping the 5 per cent growth rate of traditional consulting services.
Some of Deloitte’s competitors moved quickly to establish their own digital divisions, including Accenture, which launched Accenture Digital in 2013, and Boston Consulting Group, which set up a standalone firm, BCG Digital Ventures in 2014. Others have held back. Big firms have grappled with the dilemma of how best to showcase their digital capabilities without implying that they lack these skills elsewhere in their businesses.
“The most important question has been whether firms treat digital as a separate business, or whether it is part of everything they do,” says Ms Czerniawska. “As clients become more familiar with digital, they expect it to be part of everything a firm does. There is a huge debate . . . about how best to organise all of this.”
Several consultancies have since responded by establishing digital teams that work across divisions, rather than as standalone units. These include Oliver Wyman, which three years ago pulled its digital technology and analytics team out of its consumer practice to become a “cross-cutting horizontal” that works across health and life sciences, financial services, consumer goods and corporate and industrial services.
“We were a bit later off the block than some,” admits Rebecca Emerson, UK head at Oliver Wyman, when describing the firm’s approach to structuring its digital services. “We saw what some competitors had done and didn’t feel it was the right way to go — we felt our core consultants need to be able to support clients on the digital side. It is not an added extra. Digital is not something separate.”
KPMG similarly held off on big decisions about how best to structure its digital teams. Six months ago the professional services firm set up a new global team of digital specialists called Lighthouse, which provides consultants across the company with a one-stop shop for advice on areas from advanced analytics to machine learning and artificial intelligence. “We wanted one place where consultants could go to get access to the right tech skills,” says Shamus Rae, partner in KPMG’s digital transformation team.
PwC, which initially established a separate digital unit in 2014, similarly formed a new team called Intelligent Digital last November. Marco Amitrano, UK head of consulting at PwC, says this is a way “of telling the market that we have a digital capability that sits across our firm”.
He adds: “It is not a separate business unit. We know there is a problem in that if you say one part of your business is structurally digital, it implies the rest is not. We are very careful about how we manage that.”
Although consultancies’ approach to structuring their digital teams has been varied, they have been united in their push to hire large numbers of technology specialists. This reflects a growing recognition that consulting on and helping implement digital transformation is very lucrative.
McKinsey’s analytics team has 1,700 people and this is due to rise to 3,000 by the end of 2018, says Nicolaus Henke, senior partner. “The combination of data, technology and analytics is profoundly changing our profession,” he says.
PwC has doubled the size of its technology consulting team in the UK over the past five years, and expects to do so again in the next five years. The firm has 2,100 people working in technology roles in the UK, up from 700 two years ago, and plans to hire another 500 technology-focused graduates over the next four years.
Oliver Wyman has also doubled the size of its digital practice over the past three years, and Ms Emerson says the firm is “increasingly hiring people that have those skills”.
Mr Rae adds: “[KPMG is] out hiring data scientists and IT people for our consulting group more than we have before. If we were not doing digital, we would be losing huge amounts of market share.”
As the battle to emerge as the top provider of digital expertise intensifies, many consultancies are seeking to bring in talent through acquisitions. McKinsey has made 14 acquisitions focused on digital and analytics over the past six years, including data analytics and design firm QuantumBlack in 2015 and Risk Dynamics, a Brussels-based risk analytics firm, in 2016.
Oliver Wyman bought LShift, a software developer, in 2016 and Ms Emerson says the firm is “continuing to look at acquisitions in the technological delivery space”.
Accenture bought digital design agency Fjord in 2013, while KPMG has acquired 12 digital-focused businesses in recent years, including tech-focused Nunwood in 2015.
Ms Czerniawska at Source Global says that while acquisitions have helped consultancies improve their digital know-how, the next big dilemma will be how best to integrate this expertise into these organisations. Some have chosen to keep the target company separate, whereas others have attempted to integrate them. “I don’t think anyone has the right solution, and there are a thousand different versions,” she says.