The consultancy group is embarking on what is being hailed as the biggest corporate restructuring in decades. What does this mean for the marketing department, Deloitte Digital?
Deloitte is planning an overhaul of its corporate structure this year aimed at changing the way its marketing arm, Deloitte Digital, approaches customers.
Deloitte is primarily known as a consulting group that provides audit services and strategic advice to private companies, but it is also one of the largest companies in the marketing sector. The company's corporate transformation, led by global chief executive Joe Ukuzoglu and expected to take a year to complete, will see Deloitte Digital split into a broader “technology and transformation” division.
The Financial Times reported earlier this week that the company aims to consolidate parts of its global business units into four main areas, including technology and digital transformation services. Despite reports that the plan includes cost-cutting measures, Drum understands that the plan is primarily aimed at refreshing the consultancy group's approach to the market.
Deloitte's global revenues rose 15% to $65 billion in 2023, but growth is expected to slow next year. The UK consulting market will not grow at all in 2024, according to one report.
“We recently completed a thoughtful process to modernize and simplify Deloitte’s storefront and go-to-market strategy,” a Deloitte Global spokesperson told The Drum.
“We believe this will further enhance the exceptional quality and value we provide to our clients and communities, and further strengthen the vibrant career paths we offer our employees,” the companies added.
Deloitte has previously been a significant acquirer of digital transformation, product and marketing services agencies. Since launching Deloitte Digital in 2012, dozens of companies have joined Deloitte Digital, including Madras Global, Blended Digital and Australia's New His Republique. In January, it signed a deal to acquire New York-based digital products and CX agency Giant Machines, and earlier this month it acquired Dutch marketing automation company CloseContact.
Deloitte Digital's business is at the top end of the transformation market, with a focus on Western Europe and the United States. According to a recent Gartner Magic Quadrant report, most of the company's private sector customers are in the healthcare, professional services, or manufacturing industries.
Although the company does not release financial information, reports suggest that Deloitte Digital's revenue in 2021 was $16 billion, with 60-70% of that coming from IT services. But since then, the company has likely been unable to escape the pressures facing its entire advertising and marketing department over the past 18 months.
Matt Lacy, a partner at M&A consultancy Waypoint Partners, said it was no surprise that Deloitte's reorganization would prioritize more resilient areas of the business. Incidentally, that's the area most likely to be driven by customer demand for AI and UX expertise. design.
If that happens, the company's “basic technology consulting” services may take priority over marketing.
“They're not known for being a very creative agency, so product design services make a lot of sense and they'll probably be integrated into their technology operations,” Lacey said. says. This leaves a “question mark” on the company's marketing services division, which has typically been presented as part of a broader digital transformation proposal, in line with the practice of other consulting groups and digitally oriented agency groups such as S4. , he added.
Lacey added: What people traditionally thought of as marketing services has expanded to include the entire consulting industry. Where do you draw the line? ”
While Accenture is its closest rival among consultancies trading in the marketing services space, Deloitte's main competitors are the same “big four” Ernst & Young, KPMG, and PwC, which are among the largest in the FTSE 100 index. Accounts for 99% of audits.
Unlike Accenture, which trades on the New York Stock Exchange, each of the four companies is comprised of a network of separate companies owned by partners in each country. The individual companies are members of Deloitte Global, which is a privately held company with no share capital (we refer to it as a “Limited Company by Guarantee'').
“That makes it pretty difficult to integrate things,” Lacey explains.
The Drum understands that the reorganization is the result of a long-standing plan to modernize Deloitte's go-to-market approach and offer clients a simpler range of services. With this plan, Ukuzoglu aims to help the company grow and scale more effectively, and allow different regional units to collaborate with less friction.
A spokesperson denied plans to downsize, but a sale remains a possibility. The group has completed at least 15 separate acquisitions since 2019, according to Waypoint data. For example, IPG sold two creative agencies earlier this year, and Deloitte realized that its more marketing-focused acquisitions (or Deloitte's entire digital division) were not assimilated to the new system and sold them. I couldn't put it out there. It's not uncommon.
“Can I have a look?” [Deloitte Digital] Was it spun out as a non-core asset? Perhaps someone like Stagwell could come and pick it up if they wanted to scale it? “Maybe,” Lacey says.
“Some of the things they’ve acquired over the years could come out of the group.”
