Accenture juggernaut sets pace in sector ripe for disruption

When Sir Martin Sorrell presented WPP’s results in October, he took the unusual step of listing 11 of the group’s recent pitches against consulting firms.

WPP came up against Accenture, the most active of the consultants in marketing services, in six of those pitches and won five of them. Importantly, the value of each of those accounts was under $10 million in revenue.

Sorrell’s message was that the threat from the consulting giants has been overstated.

However, the share prices of the agency groups in 2017 tell their own story in a year when many of their clients struggled with digital transformation, demanded greater media transparency, and insisted on change.

WPP’s share price slumped 26%. Omnicom, Interpublic and Publicis Groupe each saw drops of about 14%.

By contrast, Accenture’s share price rose 30% and its valuation passed $100 billion, making it four times larger than WPP, the world’s biggest ad group.

Investors have bought into the strategy of Accenture’s chief executive, Pierre Nanterme, who has bet on digital services or what he calls "The New".

He stepped up the pace of expansion by buying a dozen agencies last year—more than any other group except WPP and Dentsu.

Accenture’s annual report, published in October, mentioned for the first time that its competitors now include "advertising agencies" and Nanterme went on to claim in December that its digital marketing services division, Accenture Interactive, is "the darling of Accenture" and has "amazing momentum".

Accenture argues that as the world becomes more digitised, marketing can no longer be treated in isolation and every step of the customer experience must be connected.

What’s more, the consulting giant believes its expertise in systems integration means it can manage that experience better than traditional agency groups with their narrower focus on only communications.

So Accenture Interactive has positioned itself as the customer experience agency of record that can help clients with the whole customer experience—from innovation and new product development to design, branding and advertising and then sales and distribution.

So far, only a couple of brands have appointed Accenture Interactive as experience agency of record.

Maserati, Fiat Chrysler’s luxury car brand, is using Accenture Interactive for a broad range of services: creative, content, analytics, programmatic and after-sales.

The Vatican has also become a client. It is a niche account but it won’t hurt Accenture Interactive’s profile in South American and Latin countries.

What’s more, the chatter is that Accenture Interactive has bigger clients in the pipeline and that some of these accounts are being won from the big ad groups.

Helping brands to "in-house" programmatic, customer relationship management, content creation and media strategy are four areas to watch.

Adam & Eve/DDB’s James Murphy and The & Partnership’s Johnny Hornby, two of the smartest entrepreneurs in UK agencies, both raised the threat of the consultants when they spoke at Campaign’s "Year Ahead" breakfast briefing in London on 12 January.

What will Accenture do next?

The falling share prices of the agency groups have prompted M&A speculation but Nanterme ruled out an acquisition on his last earnings call, insisting that is "not our game".

Instead, he is sticking to a strategy of cherry-picking "very specific companies with very specific and differentiated capabilities" and then driving organic growth through global expansion, as Accenture Interactive has done with the UK design agency Fjord, which has quadrupled in size since being acquired five years ago.

Despite all the talk about "amazing momentum", some observers still wonder how creative businesses fit into Accenture, a group that employs over 425,000.

Some staff at The Monkeys in Australia and Karmarama in the UK are said to have found it challenging to adjust to being part of a corporate beast.

There are also fiefdoms within Accenture. Its Operations division has launched Intelligent Marketing Services, which oversees clients’ marketing as a "managed service".

It is separate from Accenture Interactive, although the parent company says the divisions collaborate.

Then there’s the fact that Accenture is a media auditor and runs pitches—its Accenture Media Management arm audits $40 billion of adspend a year—at the same time that Accenture Interactive is busy moving into advertising and marketing.

Critics believe that is a potential conflict of interest but Accenture insists media auditing is run separately with strict governance rules.

For now, the Accenture juggernaut continues to roll on.

Some say that if Accenture, which has $35 billion a year in net revenues, is going to turn the dial in marketing services, it needs to start winning $50 million and $100 million fee accounts, rather than sub-$10 million bits of business.

And there just aren’t that many accounts in advertising and marketing which are that big.

However, Accenture likes to say it doesn’t need more clients. It just needs to win new clients within existing clients. Seen in that context, marketing services is just one of many services to sell to clients.

Given that the chief marketing officer’s spend on digital might now be larger than the chief technology officer’s budget, its move into marketing services looks shrewd.

Accenture starts 2018 with the confidence of a challenger that knows it is in a sector ripe for disruption.

Gideon Spanier is head of media at Campaign.