What will Deloitte restructure mean for digital marketing arm?
The consultancy group is embarking on what is being touted as its biggest corporate restructure in decades. What could that mean for its marketing arm, Deloitte Digital?
Deloitte has embarked on a major corporate restructuring excercise / Adobe Stock
Deloitte is planning to shake up its corporate structure this year in an overhaul that is set to change the way its marketing arm, Deloitte Digital, reaches clients.
Though Deloitte is primarily known as a consultancy group that provides private firms with auditing services and strategic advice, it’s also one of the largest players in the marketing sector. Its corporate overhaul, led by global chief executive Joe Ucuzoglu and estimated to take a year to complete, will see Deloitte Digital parcelled into a broad ‘technology and transformation’ unit.
The Financial Times reported earlier this week that the firm aimed to merge some of its global business units into four key areas, one including technology and digital transformation services. Despite reports that the plan would involve cost-cutting measures, The Drum understands the scheme is primarily directed at refreshing the consultancy group’s market approach.
Though Deloitte’s global revenues grew 15%, to $65bn, in 2023, slower growth is expected over the next year; according to one report the UK consulting market will not grow at all in 2024.
“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 are confident this will further enhance the exceptional quality and value we deliver to our clients and communities, as well as the vibrant career paths we provide our people,” they added.
In previous years, Deloitte has been a significant acquirer of digital transformation, product and marketing services agencies. It’s added dozens of firms to Deloitte Digital since launching it in 2012, including Madras Global, Blended Digital and New Republique in Australia. In January, it struck a deal to buy Giant Machines, a digital product and CX agency based in New York, and earlier this month, it acquired a Dutch marketing automation firm, CloseContact.
Deloitte Digital’s business – priced at the premium end of the transformation market – is heavily weighted towards Western Europe and the US; most of its private sector clients are in the healthcare, professional services or manufacturing industries, according to a recent Gartner Magic Quadrant report.
The company does not publicly report financial information – but reports placed its 2021 Deloitte Digital revenue at $16bn, with 60-70% coming from IT services. Since then, though, the firm is unlikely to have been immune from the pressures facing the advertising and marketing sector at large over the past 18 months.
Matt Lacey, partner at M&A consultancy Waypoint Partners, says it would be unsurprising to see Deloitte’s reorganization prioritize the more resilient areas of its business – which are, incidentally, the ones most likely to be buoyed by demand among clients for expertise in AI and UX design.
That could put its “bread and butter technology consulting” services ahead of marketing in the pecking order.
“It’s not known for being a hugely creative agency… the product design services make a lot of sense, and maybe we’ll see those merge into its technology practice,” Lacey says. That, he adds, leaves a “question mark” over its marketing services unit, which has typically been presented as part of a broader digital transformation offer, in line with the practices of other consulting groups and digitally oriented agency groups such as S4.
Lacey adds: “Marketing as a sector has transitioned quite a lot; what people traditionally saw as marketing services has expanded across the consulting landscape. Where do you draw the line?“
Though Accenture is its closest rival among consultancies trading in the marketing services space, Deloitte’s primary competitors are its fellow ‘Big Four’ – Ernst & Young, KPMG and PwC – which account for 99% of the audits in the FTSE 100 Index.
Unlike Accenture, which is traded on the New York Stock Exchange, each of the four is made up of a network of separate companies owned by the partners in each country; each individual firm is a member of Deloitte Global, a private company that does not hold share capital (this is called a company ‘limited by guarantee’).
“That makes it reasonably difficult to integrate things,” explains Lacey.
The reorganization, The Drum understands, is the result of a long-standing plan to modernize Deloitte’s go-to-market approach, providing clients with a simpler range of services. Ucuzoglu aims for the plan to enable the company to grow and scale more effectively, and for its disparate territorial units to collaborate with less friction.
Though spokespeople denied the business planned to downsize, divestments are not outside the realm of possibility. The group has completed at least 15 separate acquisitions since 2019, Waypoint data shows. IPG sold two of its creative agencies at the beginning of the year, for example, and were Deloitte to find its more marketing-focused acquisitions (or the entire Deloitte Digital division) fitting uncomfortably in a new system, putting them up for sale wouldn’t be unusual.
“Could we see [Deloitte Digital] spun out as a non-core asset? Maybe someone like Stagwell could come along and pick it up if they wanted to expand it? Possibly,” says Lacey.
“A couple of the things they’ve acquired over the years might find their way out of the group.”