Accenture and Big Four move downmarket in hunt for growth

{"text":[[{"start":6.336,"text":"The world’s largest consulting firms are moving downmarket in search of growth, targeting smaller companies as AI frees up staff and allows them to sell new services at lower prices."}],[{"start":17.572,"text":"The push by Accenture and the Big Four accounting firms is a bet that demand from middle-market companies will help buoy their business amid disruption in their core business serving blue-chip clients."}],[{"start":28.918,"text":"Accenture in June launched a new unit targeting companies with annual revenue between $300mn and $3bn, while KPMG said companies with revenue below $250mn represented one of its biggest market opportunities."}],[{"start":47.52,"text":"Christian Peo, KPMG’s US vice-chair for audit and assurance, said private companies were the fastest-growing segment of KPMG’s client base in all three of its service lines: audit, tax and advisory. Expansion into the middle market creates new employment opportunities even as AI makes the firm more efficient."}],[{"start":63.6,"text":"“We feel an obligation to be a big employer in the age of AI,” he said. “If we were not looking at new markets, all else being equal, we would have to shrink our workforce.”"}],[{"start":null,"text":"

"}],[{"start":76.32,"text":"The firm ran a US-wide advertising push this year aimed at attracting business from smaller, private companies. It has also developed a digital platform to make it easier for existing clients to access additional KPMG services."}],[{"start":86.8,"text":"Peo said that partners in the firm must now choose between working exclusively with public companies or private ones, so that smaller private clients get the full focus of dedicated teams of advisers."}],[{"start":98.662,"text":"KPMG’s Big Four rivals PwC and EY have also invested in expanding their longstanding middle-market businesses, in part by developing AI-powered offerings, the two firms told the FT."}],[{"start":110.629,"text":"Work for smaller companies was one of the factors behind EY’s accelerating revenue growth in the financial year ended June 30, according to Raj Sharma, the firm’s global managing partner for growth and innovation. EY was able to sell due diligence services, for example, at a lower cost than when the work required more EY staff and took more time."}],[{"start":131.76,"text":"“The technology now has enabled us to create a cost structure where we are able to offer those services to these clients on a much better basis — and we are in the early stages of this,” he said."}],[{"start":141.205,"text":"New players are also joining the fray, including AI specialists backed by venture capital and AI model developers that have built in-house consulting arms. Anthropic’s IPO prospectus this month highlighted “Ode with Anthropic”, its joint venture with private equity groups including Blackstone, which it said would “bring Claude’s capabilities to midsized companies across sectors”."}],[{"start":null,"text":""}],[{"start":163.599,"text":"The US consulting market is expected to grow about 8 per cent this year, according to research group Source Global, a modest acceleration from the past two years but lagging behind the double-digit percentage growth seen after the Covid-19 pandemic. Forecasters are split on whether, in the long term, AI will boost consulting firms or allow clients to replace them."}],[{"start":184.295,"text":"Industry veterans point out that large firms have targeted smaller clients after other periods of sluggish growth and must overcome scepticism from companies that suspect they will not get the same attention as bigger clients."}],[{"start":196.677,"text":"“Every time you get a downturn in consulting and big clients spend less, everybody rediscovers the middle market,” said Fiona Czerniawska, Source Global chief executive."}],[{"start":205.665,"text":"“The thing that attracts firms, and that they perhaps forget in between, is that mid-market companies have a lot to do, they want help doing it and they are quite innovative. They’ll take risks that big clients don’t.”"}],[{"start":216.96,"text":"Manish Sharma, Accenture’s chief strategy and services officer, said it launched Accenture Edge — its unit focused on mid-market clients — after two years in “stealth mode” while the company acquired eight specialist businesses to build the new platform."}],[{"start":231.04,"text":"The middle market already accounts for 8 per cent of Accenture’s revenues, the company says, but this is the first time it has made it a growth priority."}],[{"start":239.12,"text":"“My eyes opened when I started seeing the speed that I can deploy AI in a mid-market company as compared to a large enterprise,” Manish Sharma said. “I always talk about going from ‘AI to EPS [earnings per share]’, and I can see that quicker in the mid-market segment.”"}],[{"start":254.72,"text":"Midsized companies are small enough that they can adopt “enterprise-wide” AI, transforming their businesses in ways that are still impossible for much larger companies, he said. But because of their size, they are less likely to have the in-house skills to do so, opening the door to consultants."}],[{"start":271.452,"text":"The ability to build standardised products and services using AI “has changed the economics of delivery”, Manish Sharma added. “It’s about pre-built, tighter scope and more standard delivery.”"}],[{"start":283.422,"text":"Accounting and consulting firms just outside the Big Four, who specialise in serving middle-market clients, have taken note of the new competitive threat. While sceptical it will significantly disrupt their businesses, some have intensified efforts to invest in new AI services and products, according to several executives."}],[{"start":302.8,"text":"RSM has stepped up its hunt for acquisitions in recent months, the FT has reported, and its private equity-backed middle-market rival Grant Thornton has made three tech-focused acquisitions in the past year and a half."}],[{"start":315.615,"text":"“Any firm can decide to pursue the middle market. Serving it exceptionally well is different,” said Jim Peko, chief executive of Grant Thornton Advisors."}],[{"start":325.076,"text":"“These companies need sophisticated capabilities, but they also expect agility, access to senior leaders and advisers who deeply understand their businesses. That has been our model for decades.”"}],[{"start":339.68,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1793954765_6417.mp3"}